3 of the best mutual funds for stingy retirees

Don't get lured into paying steep fees. These top picks have rock-bottom expenses.

By InvestorPlace Oct 25, 2013 2:17PM

Image: Man counting money (© Flying Colours Ltd/Getty Images/Getty Images)By Dan Burrows

iplogoEvery penny counts in this life, and that's doubly true in retirement -- so please don't waste your hard-earned money on fees.

Interest rates are at historically depressed levels, making it harder than ever to generate a decent stream of income. That makes it all the more imperative to husband your resources and not overpay for performance.

Consider that the average actively managed mutual fund fee comes to 1.07%. That's $107 for every $10,000 invested.

If you give $100,000 to an active manager, your expenses come to $1,070 a year just for the privilege of investing in the fund. That's over $89 a month!

In a time when the average monthly Social Security benefit is only $1,230 a month and one-year CDs pay 0.75%, well, $89 a month is a material amount of money to a retiree.

At what do you get for your $89 a month? About an 80% chance that your mutual fund manager will fail even to keep up with the performance of the market.

When it comes to retirees choosing the best mutual funds, it's a no-brainer to look for as much income as possible with the least amount of risk. Too often, however, investors forget about those fees.

That's why we looked for first-rate mutual funds for retirees that also have rock-bottom expenses. Spoiler alert: They're all from Vanguard, because it's essentially impossible to beat them on pricing.

Here are some of the best mutual funds for stingy retirees that we found:

Vanguard Managed Payout Growth and Distribution Fund

Ticker: VPGDX
Morningstar Rating: 4 Stars
Minimum Investment: $25,000
Expenses: 0.43% ($43 for every $10,000 invested)
Load: None
Yield: 4.43%

Performance Summary: VPGDX's three-year total return of 9.5% outperformed the retirement income mutual fund category by 3.5 percentage points, according to data from Morningstar.

Notes: Designed to generate retirement income, VPGDX invests in other Vanguard stock, bond and commodities funds. VPGDX automatically makes regular monthly payments, which adjust each January depending on the performance of the fund. In early January, VPGDX will be merged with two other Vanguard managed payout funds. This new fund, known simply as the Vanguard Managed Payout Fund, will have an annual distribution target rate of 4%.

Vanguard Target Retirement Income Fund

Ticker: VTINX
Morningstar Rating: 4 Stars
Minimum Investment: $1,000
Expenses: 0.16% ($16 for every $10,000 invested)
Load: None
Yield: 1.98%

Performance Summary: VTINX's three-year total return of 6.4% outperformed the retirement income mutual fund category by 0.3 percentage point, according to data from Morningstar.

Notes: The most conservative of Vanguard's target retirement funds, VTINX automatically rebalances to maintain a steady asset allocation of 65% bonds, 30% stocks and 5% short-term reserves by investing in five other Vanguard index funds. Unlike a managed payout fund, VTINX allows you to set an automatic withdrawal schedule to set your own payout amount.

Vanguard Target Retirement 2015 Fund

Ticker: VTXVX
Morningstar Rating: 4 Stars
Minimum Investment: $1,000
Expenses: 0.16% ($16 for every $10,000 invested)
Load: None
Yield: 2.05%

Performance Summary: VTXVX's three-year total return of 9.1% outperformed the target date mutual fund category by 1.7 percentage points, according to data from Morningstar.

Notes: Don't let then name fool you -- this fund is designed for anyone retiring between 2013 and 2017. VTXVX currently invests in five Vanguard index funds that give it a mix of 55% stocks and 45% bonds. But, as a target-date retirement fund, it will become more conservative over time, automatically increasing its exposure to bonds and decreasing its exposure to stocks. After about seven years, VTXVX's allocation will match that of VTINX.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

More from InvestorPlace

Oct 26, 2013 10:23PM
I like Vanguard a lot.  Use their index funds as my core funds.   Have nothing bad to say about Vanguard or their funds.
Oct 26, 2013 10:47PM
We've been with Vanguard enough decades to have tens of thousands of additional dollars in our accounts, as opposed to having had those dollars siphoned off by financial intermediaries. A big THANKS to 'The Boogie Woogie Bogle Boy of Company V'
Oct 26, 2013 9:59AM
Maybe rename the article "Best Vanguard Funds For Retirees".
Oct 27, 2013 4:11PM
I'm making about 7-8% on my private investments. My pension is with Vanguard, however. 
Oct 27, 2013 8:29PM
Interesting but not sure if Vanguard is that great. 
Oct 27, 2013 4:45PM

Roadhouse and others I laid out a couple scenarios, but it didn't/wouldn't post..

But we haven't been in Mutual Funds for over a dozen years now...

Vanguard, Fidelity and T-Rowe do have some decent funds, but we do not partake.

Back later after finishing something...

Oct 27, 2013 8:59PM

I'll stick with the 25-35% average per year over the last 3...But actually it is closer to 3.5-3.75 years from the second bottom in early 2009....'09 was not a bottom for us we/I had already re-allocated, and re-aligned for a different pursuit of recovery...

That why I'm not fond of Funds or how Mgrs, will push the pencils from year to year or multi-years appearing that you are doing well.. When in fact, I believe most are mediocre..

Occasionally, some will hit home runs but most are base hits.

Like I've stated, we haven't been in any Funds since 2000-2001 ??


Yes we lost like most anyone else in the downturn, we just didn't lose as much..

And we were fully recovered by July 24-26th 2009....Name me ONE (1) Fund that accomplished that if they were diversified in very many stocks or otherwise. Some Sector or Index funds may have came close ??

We have "doubled" since sometime in 2007-2008 before meltdown...And "tripled" since our bottom in late 2008... I will let anyone do the math.


With diversity in about 10 Sectors including commodities...

And an overall average of about 6% in dividends per year...

I can adjust for a much higher div rate average, BUT would not have the diversification over the sectors and possibly face higher risk of depreciation in only 3-4 sectors...Or a downturn.

With varying positions from 22-26 and about 110-130 trades per year...

During the recovery, trades ranged close to 150 per..

Trading in 4 Ports, now 3 ( 1-brokerage 1-IRA an 1-ROTH) 

It does take some time and can be learned, but I like it as a hobby, of about 2 hours a day.

Oct 27, 2013 10:52PM

I do agree that most retirees should be in fairly safe investments, mixes of Stocks, Bonds and safe cash are recommended by conventional wisdom..

Risk adverse or well managed Portfolios, by a reasonable cost FA, would probably fit the needs of way better then 70% of most investors....You can learn or dabble or pay someone else to do the work.

And I believe everyone should shop for the best deal with tenure and a track record.


And as with most investments, you shouldn't be betting the whole farm or all the grocery money..

The amounts that are laid out, should depend on the capability and risk/reward tolerance.

Oct 26, 2013 10:41PM

I've been with Vanguard long enough to be able to report a portfolio with m

Oct 27, 2013 1:15PM
I get over 4% so I will stay where I am .
Oct 26, 2013 1:10PM

I find these Funds to be nothing but safe, no-load, fairly cheap expense ratio and ALSO not a very good return for your investment dollar...3 year returns ???

Tell me what the 5-6 year returns are....If they have been around that long?

Any decent fund with returns since 2009-2010 should be in the 25-35% av range at least.


I know we have done much better than that with selected stocks....

And dropped about 20-22% in the meltdown of 2008, beating I believe well over 95% of Mutual's.

Oct 26, 2013 3:38PM

WOW - Another Blatant Advertisement disguised as Financial Advice ! '



Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124 rated 1
266 rated 2
452 rated 3
702 rated 4
671 rated 5
604 rated 6
640 rated 7
495 rated 8
267 rated 9
158 rated 10

Top Picks




Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.