Also known as managed payout funds, these are a relatively new type of actively managed mutual fund, with a choice of maturity dates (e.g., 2048) that investors select to match their projected life expectancy. The further away the maturity date, the less money investors will receive annually as a percentage of their account balance because their account has to last longer.
Targeted toward retirees, managed payout funds pay a monthly income that is adjusted annually for inflation and economic conditions, and monthly payments continue until assets are exhausted. They contain a diverse portfolio of securities and are similar in operation to target date mutual funds except the time deadline is based on investors’ life expectancy instead of their anticipated year of retirement.
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