The Best Mutual Funds for Retirement Income Right Now (& How to Get Started Investing)

Of all the ways you can invest for supplemental income during retirement, few boast the benefits of mutual funds. The income is stable and has the potential for growth as well. However, to reap the benefits these investment vehicles have to offer, you need to strategically select the right funds.

This begs the question – what are the best mutual funds for retirement income right now? As you can probably imagine, the answer is not one size fits all – it depends on your unique situation. How much income do you need to generate? What is your risk tolerance? Where else do you have money invested?

Today, we’ll unveil some of the best mutual funds for retirement income so you can start generating supplemental income to support your retired lifestyle stress-free. But more importantly, we’re going to discuss how to choose your own mutual funds to invest in for retirement income – and how you can get started investing today.

First, allow us to provide a brief overview of why mutual funds are such a great investment vehicle for retirees such as yourself.

Why are Mutual Funds a Great Choice for Retirement Income?

Of all the different types of investments for retirement, mutual funds are among the best. They offer retirees a number of significant advantages, making them an attractive option for those seeking supplemental income in retirement.

For starters, mutual funds are incredibly diverse. Instead of investing your money into one single stock or bond, you can purchase shares in a variety of different holdings all within one fund. This helps diversify and reduce risk – making your money more secure and ensuring you’re not putting all your eggs in one basket.

Mutual funds are also generally easier to understand than other investments, like stocks. They often provide valuable and detailed information on the holdings of the fund so you can make an informed decision. With that said, mutual funds are made of individual stocks – so we still encourage you to learn how the stock market works and develop an understanding of stock analysis.

Plus, mutual funds are typically managed by professional investors or money managers who evaluate securities on a regular basis in order to best meet the goals of the fund and its shareholders. This means that you don’t have to take time out of your retirement if you don’t want to – just let the pros do their job.

Finally, when investing in mutual funds for retirement income, there are multiple options available including target-date funds, balanced funds, and sector-specific funds. As such, this is a very versatile way to go about generating retirement income. While they are quite different from mutual funds, you can even make the best index funds for retirement a part of your investment strategy.

The point is, you can easily find a fund that best suits your goals and risk tolerance – allowing you to find stability and potential growth.

How to Choose the Best Mutual Funds for Retirement Income Based on Your Unique Situation

When it comes to choosing the best mutual fund for retirement income, there is no one-size fits all approach – it depends on your unique situation. To help you determine what type of mutual fund best fits your goals, read our article on how to invest during retirement. Here are some key questions you need to ask yourself before selecting a fund:

What is Your Goal With Mutual Funds?

Are you looking for a steady income stream or potential long-term growth? If you’re after on in your retirement, your goal is more so on steady returns. Thus, the funds you invest in should have a higher allocation of bonds than stocks.

On the other hand, if you are just beginning retirement and need to ensure your capital continues growing to support the next 20+ years of retirement, you need to invest in funds that carry a higher allocation of stocks instead of bonds. You can learn more about this in our discussion on the best asset allocation in retirement.

How Much Risk are You Comfortable Taking on?

While no investment is risk-free, mutual funds that carry a higher allocation of bonds are seen as safer than those that consist more of stocks. That being said, you can still find mutual funds that offer a balance of risk and reward depending on your individual needs.

We’ll touch on the average annual performance of each fund we discuss below to give you an idea of what you can expect in terms of performance.

What Other Investments Do You Have?

It’s important to consider all of the investments in your portfolio and how they work together. What kind of stocks do you currently own? How much risk do you already have in your portfolio? If you already have a diversified retirement portfolio of stocks, perhaps a fund that carries more bonds would be best for your retirement income

What About Fees?

Investment fees can have a significant effect on your overall returns, so be sure to pay attention to the fee structure of any mutual fund you’re considering. What you want to look for here when evaluating a mutual fund is the expense ratio – that’s what you can expect to pay to have your capital managed within the fund.

What are the Best Mutual Funds for Retirement Income Right Now?

It’s the moment you’ve been waiting for – we’re going to highlight some of the best mutual funds for retirement income right now.

Keep in mind that these recommendations are for someone who has already reached retirement. If you want to learn about building your retirement portfolio while you’re still working, our article on the best way to invest money for retirement is a great starting point. We also have a similar article covering the best retirement investment strategies by age along with a discussion on personal retirement planning.

But now, let’s get into the topic at hand – the best mutual funds for retirement income right now.

Vanguard Wellesley Income Fund (VWINX):

This fund is best suited for conservative investors who seek a steady income stream in retirement. It’s regarded as one of the most dependable mutual funds for retirees – and this comes down to the conservative allocation of 65% of its assets in bonds and 35% invested in stocks. It’s also one of the best mutual funds with low fees, at just 0.16%.

However, you won’t see massive returns from this fund – as the average 10-year trailing return is just over 5%. If you just are focused on capital preservation and need minimal income generation, this is a great choice. With that said, you’ll need to contribute a minimum initial investment of $50,000.

Vanguard Wellington Fund Investor Shares (VWENX):

The oldest mutual fund in the US, the VWENX has been around since shortly before the stock market crash of 1929. Over the years, it’s delivered impressive returns of 8.45% annually on average. This is the result of a more aggressive allocation of stocks to bonds – about two-thirds (66%) to 1/3 (33%). The expense ratio of 0.16% helps maximize the returns you generate.

Like the Wellesley Fund, however, this one has a high minimum investment required of $50,000. This may deter you from investigating further as you don’t want to withdraw that much from other accounts you have your cash in. If so, you’ll definitely be interested in the next mutual fund on our list…

American Balanced Fund (ABALX):

This is best suited for those looking to have a balanced portfolio that offers both capital growth and income. It carries a 60/40 mix of stocks to bonds, making it best for those seeking moderate returns yet with some safety.

Since its inception in 1975, this fund has delivered an annual turn of 10.5%. We also love the ultra-low minimum investment requirement of just $250 – coupled with a modest expense ratio of 0.56%.

Fidelity Strategic Dividend and Income Fund (FSDIX):

This mutual fund features essentially the opposite allocation of the VWINX – with a 65/35 mix of stocks to bonds – making it best suited for those seeking higher potential returns while still maintaining some level of safety.

Because this is a newer mutual fund, we just have the past 4 years of data to go off – and the 3-year trailing return on this fund is -0.59% – obviously not great. What does make this fund attractive, though, is that no minimum investment is required.

Dodge & Cox Income Fund (DODIX)

Last but not least, we have the DODIX – a very conservative mutual fund for those who have ample cash on hand to generate sizable income from the low returns. Just how low of returns are we talking about, though? The 10-year trailing return of this mutual fund is merely 1.72%.

However, what you lack in profitability you make up for in safety with this fund – as it’s comprised of 90% investment-grade bonds. It also has a fair expense ratio of 0.41%.

Are These Mutual Funds the Right Choice for You?

The five options we’ve just discussed are revered as the best mutual funds for retirement income right now – and they run the gamut in terms of returns, safety, and cost. With that said – are these the right investment vehicles for you? Surely you could find a way to generate more than an 8-10% return on your money…right? In the case of most of these mutual funds, that type of return is the best-case scenario. Others deliver less than 5% while some lose money.

Think about what mutual funds are – they’re an allocation of stocks and bonds, with stocks being the investment vehicle that actually moves the needle in terms of return. With that said, retirees who are looking to generate higher returns should invest directly in the individual stocks that these mutual funds are made up of.

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Final Thoughts on the Best Mutual Funds for Retirement Income

There you have it – the best mutual funds for retirement income. 

While the 5 funds we’ve shared today are great choices for certain types of situations, it may make more sense to take matters into your own hands – and invest directly in the stocks and bonds that these funds are made up of. You’ll generate higher returns and avoid costly fees. And with VectorVest in your arsenal, it’s easier than you ever could have imagined.

Looking for more retirement planning advice – such as how to retire early, or the advantage of investing early for retirement? Our blog is filled with resources to help you make your dream retirement a reality. explore all we have to offer here at VectorVest. Get started today!