1. No Guarantees
There is no guarantee the size or longevity of monthly income payouts, even though it's the retirement income fund's objective to do so. Furthermore, the funds may lose money, especially in a bear market. This means such retirement income funds are best for retirees who have the flexibility to adjust their monthly income needs - in a bad year, cut back the spend.
2. Requires Large Investment
Because these funds will provide your retirement income, it means bulk of your retirement assets will be invested in such funds. Some retirees might find it uncomfortable to cash out their preretirement portfolios and put everything into one fund. But committing a small portion of your retirement assets into such funds defeats its purpose and forces you to have to manage multiple investments.
If you decide retirement income funds are for you, we will discuss how to use it in our next blog post.