Income Replacement Funds for Retirees

Came across some new funds by Fidelity and Vanguard. They are in-effect Income Replacement Funds.

Here is the idea behind the funds. Once retirees give up their regular paycheck, they need to decide where the money will come for daily expenses.Also making sure their nest egg does not run out during their life time.

Fidelity is offering 14 of such funds. These funds "liquidate money" over certain schedule. Basically our savings and gain return back to us over the lifetime of the fund. There is not guarantee about how much monthly income we will receive. It would depend on performance of the portfolio in which Fidelity invests.

Here is Fidelity's page with more information on "Income Replacement Funds". They also provide a simple calculator which tells you for given investment what would be approximate monthly income.

http://personal.fidelity.com/products/funds/content/WhatYouCanBuy/income_replacement_funds_overview.shtml.cvsr

Vanguard has also come up with similar funds with little different approach. They are quite new though and at this time there is no telling how they would perform. More on them at some other time.