AssetBuilder Inc. Registered Investment Advisor - Simple Investing. Smart Future.

I read this article about managed payout funds which were a pretty hot topic the last year or go--since they promised a "guaranteed" monthly payout without the restraints that annuities do...

But with the market fall it seems that all that glitters is not gold... the article refers to three investment firms' offerings....Schwab's funds seem to avoid the problem of raiding principal to cover the monthly payouts since they have lower guaranteed return...Vanguard's have already gone into principal to provide returns saying that market upturn/profitability will replace principal in the future. Fidelity's funds also could have some variety in their monthly amounts from year to year so that each year's monthly payouts can vary...

Don't know if anyone who reads here has invested in them--and guess an investor's opinion depends on many factors ...but that article makes me think of the old adage what seems too good to be true, just might be...even from a quality firm such as Vanguard.

http://www.marketwatch.com/news/story/market-decline-reveals-flaws-new/story.aspx?guid=%7B36762F61%2DACDC%2D484C%2DB912%2D4016E52E517D%7D

Managed payout funds, like target retirement funds, are really nothing but gimmicks. You have a collection of other mutual funds bundled by a certain set of criteria.  This isn't any different than creating a couch potato portfolio and adjusting fixed income based on risk and timing.  The managed payout funds simply simulate a safe withdrawl rate the buyer feels comfortable.

 Next month when the market begins a major bull rally sending it up 45% by the end of the year (yeah, right) the withdrawl rate of the managed payout fund might look pretty puny.

I hate to say it; but if the goal is to simulate a SPIA, buy an SPIA.