Most mutual funds are designed to help you prepare for retirement, with the goal being to set aside money each month in order to build up your savings. Fidelity Income Replacement FundsSM are very different. Instead of saving for retirement, these funds are managed to help you live in retirement. Instead of putting money away each month, you take money out. And instead of trying to build your savings up, the goal is to take your account down to $0.
If you’re like most people, when it’s time to retire you will not have saved enough money to live entirely off the interest and dividend income generated by your savings. That means you’ll have to withdraw a portion of your total savings each month in order to have enough money to cover your living expenses. For many investors, calculating the right withdrawal amount can be difficult. Withdraw too much each month and you run the risk of your savings running out. Withdraw too little and you may not have enough to cover your expenses. Then there’s the question of how you invest the remaining money in your account.
The goal of Fidelity Income Replacement Funds is to eliminate all those questions. You dedicate a portion of your savings to a fund, then choose either a monthly withdrawal amount or a set number of years that you’d like to receive regular withdrawals and an initial amount to invest.