The Best Mutual Funds for Your Retirement Portfolio

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Contributor, Benzinga
June 27, 2023

The purpose of investing is to create a higher future value for your capital. One of the reasons to pursue this goal is to ensure financially your years of retirement. You can do this by investing in special mutual funds suitable for your retirement plan.

Today, Benzinga will share with you how the mutual fund market works for retirees and what to look for when approaching alternatives. We will share with you three of the best mutual funds for retirement and will tell you where you can buy them.

Quick Look at the Best Mutual Funds for Retirement

Best Mutual Funds for Retirement

Our survey focuses on low-cost and low-risk mutual funds, which will be a suitable choice for a retirement mutual fund. This is why we approach some of Vanguard’s mutual funds as they have some of the lowest possible expense ratios in this industry. Your retirement plan could change, and you are well within your rights to change your investments to match the current situation.

This is why Benzinga has such a wide array of information on a range of retirement investments. Your retirement savings can do more, but you want to pair these mutual funds with a retirement calculator and additional information from Benzinga.

1. Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX)

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  • Expense ratio: 0.09%
  • Minimum investment: $10,000
  • Risk: intermediate (3 of 5)
  • Total net assets: $4.4 billion
  • Assets in the 10 largest stocks: 9.7%
  • Average annual returns since inception: 7.25%
  • Benchmark annual returns since inception: 7.44%

This is a very diversified mutual fund that is suitable for retirement planning. 50% of the fund consists of mid-cap and large-cap stocks, and the other 50% go among some federally tax-exempt municipal bonds. The goal of this fund is to track the industry benchmark while at the same time reducing the taxable income.

This is an extremely low-cost fund. The expense ratio it has is only 0.09%, which equals $9 per year for a $10,000 investment. The minimum investment in the fund is $10,000, which might be a bit high.

Since the fund gives you exposure to the stock market, it comes with a certain dose of volatility and risk. However, the other 50% of the assets that go in the bond market balance the risk.

Compared to the extremely low cost and the intermediate risk, the average yearly returns are relatively high of 7.25%.

The left figure of the image shows that there is a high correlation between the benchmark index and the VTMFX fund. Although the mutual fund has not outperformed the benchmark, it is strictly going after its back.

2. Vanguard Short Term Investment-Grade Fund Investor Shares (VFSTX)

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  • Expense ratio: 0.2%
  • Minimum investment: $3,000
  • Risk: very low (1 of 5)
  • Total net assets: $57.8 billion
  • Asset allocation: 23.1% in Aaa, 15% in A3, 9.7% in U.S. government
  • Average annual returns since inception: 5.89%
  • Benchmark annual returns since inception: 6.54%

The Vanguard short term investment-grade fund unites bonds with high and medium quality. Although the maturity of this fund consists of short term maturity bonds, its data shows that it is a suitable choice for retirees.

The VFSTX fund las a very low risk of 1 out of 5. The minimum investment is only $3,000, which makes it widely accessible. Its expense ratio is higher compared to the VTMFX fund, but the low risk might be a good excuse for it. After all, a 0.2% expense ratio is still among the lowest in the mutual fund market.

The best thing is that the returns of the fund are relatively good compared to the low risk of 5.89%.

The figures above show a correlation with the benchmark index. It is not as high as with the VTMFX fund, but it is there showing that the fund is broadly affected by general market conditions.

3. Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

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  • Expense ratio: 0.15%
  • Minimum investment: $3,000
  • Risk: low (2 of 5)
  • Total net assets: $204 billion
  • Asset allocation: 65% in U.S. government bonds
  • Average annual returns since inception: 5.75%
  • Benchmark annual returns since inception: 6.02%

The Vanguard total bond market index fund investor shares give broad exposure to the United States bond market. About 65% of the assets are allocated with U.S. government bonds, which keeps the risk of the fund relatively low - not as good as with VFSTX but still as low as 2 out of 5

The expense ratio of the VBMFX fund is in the middle compared to the other two funds of our choice - 0.15%. Yet, this is one of the lowest expense ratios on the market.

Considering the low risk, the returns from the fund are decent, 5.75% per year on average since inception.

On the left figure, we see a high correlation of the fund with the benchmark index. The fund's relation to the market speaks of higher reliability and dependence on the global market conditions.

4. Vanguard Wellesley Income Admiral Shares Fund (VWIAX)

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The Vanguard Wellesley Income Admiral Shares Fund is a 40-year old financial instrument that dedicated a third of its assets to to stocks and twice that to bonds.

Overview: What are Mutual Funds for Retirement?

Mutual funds for retirement are generally standard mutual funds. They act the same way as regular mutual funds. The difference is that retirement mutual funds provide a better financial environment for people, whose goal is to take care of their retirement. Remember, before you reach retirement

Mutual funds that are suitable for retirement are likely to have a lower risk. After all, you don’t need to invest aggressively when your goal is to take care of your future. At the same time, you need to help you money land in the best spots. This is why it helps to invest with wisdom instead of letting your money just sit there.

This is a bit more advanced than collecting Social Security or withdrawing routinely from your retirement account. Remember, too, that retirement benefits can change. You want to build your retirement savings as much as you can, capitalize on that cash and build retirement income for the foreseeable future.

When investing in mutual funds for retirement, people expect a certain yearly interest that gets accumulated over the years. Then, at the end of the maturity people can either get their earnings as a lump sum or on even periodic payments.

Notice that the second choice still leaves money in the fund, which accumulates even more gains. This might be better for those who wish to take a more conservative approach to their investments, irrespective of their holdings or how long they will be living on their retirement income.

Choosing a proper brokerage account will help you monitor your funds, and you can even open different types of accounts like an IRA account if you want to spread out this money even further, often still investing in mutual funds.

Benefits of Mutual Funds

When you invest in mutual funds, you’re giving yourself a steady and conservative investment that will, more than likely, produce quality returns. However, what specifically makes mutual funds a good idea? The biggest benefits of mutual fund investing include:

  • Low fees: When you invest in mutual funds, the fees tied to each trade are generally low. Check with your broker to understand exactly how much you’ll spend when trading or investing in mutual funds. Paying less helps you reach your retirement goals, and you can even turn to an investment advisor if you would like to expand your horizons.
  • Diversification: Mutual funds will help you diversify your portfolio. Yes, you might have quite a robust portfolio, but adding more unique assets is always a good idea, especailly as you get closer to retirement.
  • Automatically reinvest dividends: You can set up a mutual fund to automatically reinvest dividends and grow the account without even thinking about it. This is a “set and forget it” dream for retirees or those who are close to retirement.
  • Professionaly managed: A mutual fund is managed by a professional who is trying to make money, too. Everyone wins when they do well, and you’re not left in charge of how that fund operates. Mutual funds use best practices, invest in items like consumer defensive stocks, ETFs and other assets that can help protect your investment and theirs. If you’re part of a retirement system, remember that you can still reallocate those funds, even if you worked for a government organization. You simply need to speak with a professional and/or research with Benzinga to learn how a fund transfer would work.
  • Future income: Mutual funds are definitely a good way to plan for future income. While you shouldn’t put your entire nest egg in mutual funds, you can create an income stream here that you can generally rely on in the future. Layering these investments can increase you future income and allow you to feel more comfortable in your golden years.

What to Look for in Mutual Funds for Retirement

Retirement mutual funds are not that suitable for investments with profit goals. The goal of most retirees is to approach a conservative way that keeps funds safe for the future. At the same time, these funds should generate some income or dividends.

The thing here is that the growth and the returns are not the main focus. They need to exist, but they are not the main goal. The main characteristics of a good retirement mutual fund are the low costs and high security.

Fees. A mutual fund that is suitable for retirement planning should have as lower fees as possible. Since retirement planning is a conservative way of investing, the best retirement mutual funds are likely to have low-cost fees.

Risk. Another indication of a good mutual fund for retirement is a low risk. People that are looking to save money for retirement are not likely to take a higher risk as this will be a more aggressive strategy that will suit better a profit investor. Instead, they seek the conservative alternatives with low risk and low fees.

Returns. Since the low risk and low costs are the main focus of the good retirement mutual funds, the high earnings are secondary. The best retirement funds are conservative and do not focus on high earnings. At the same time, funds that make very big interest are not likely to have low cost and low risk.

Anyway, you should never underestimate interest and dividends. Whenever you settle your risk and costs, look for the highest returns possible.

Where You Can Buy Mutual Funds for Retirement

You can invest in your retirement by using the providers of the respective mutual funds. For example, if you want to buy some of the Vanguard’s mutual funds for your retirement plan, you need to approach Vanguard to purchase this fund.

You can simply go to the official website of Vanguard and follow the account opening directions. Or you can go to their contacts section and call them for information or schedule a meeting.

In case you are approaching other mutual funds you can purchase them through an online broker.

Final Thoughts

The years of retirement are the most sensitive period in one’s life. The reason for this is old people can hardly take care of themselves. This is why a lot of people decide to ensure their retirement living by taking a retirement investment plan. One of these alternatives is retirement mutual funds, which we have discussed in this material.

The three mutual funds that we provided are among the best for your retirement plan. The reason for this is that they focus on your financial security, and not wealth. Putting your money in a safe environment is likely to provide you with a consistent income in the future. A lot of retirees use this income to cover their bills and even to put some extra money in their monthly budgets.

In any of the cases, the retirement mutual funds are a reasonable step to make when approaching a way to secure the last years of your life. This way you will concern less for financials and will spend more time with the people you love.

Remember, as economic uncertainty grows, you may consider retiring simply to exit the job market and (potentially) expand your horizons. If that’s the case, you must look into the best mutual funds and look at how much money you’ll have invested when you choose to retire, especially if you might retire in the next year.

Looking for more ways to save up to retirement? Check out Benzinga's guide on the best retirement planning books, the best individual retirement accounts (IRAs), the best socially responsible mutual funds and how to plan for retirement.


Are mutual funds good for retirement?


Yes, standard mutual funds can be an excellent investment for retirement.


Should retirees focus on wealth or stability?


Most retirees should focus on stability instead of wealth.


Which retirement investment funds should I invest in?


Look at the list above to find Benzinga’s recommendations for retirement mutual funds.