American Funds Retirement Income Portfolio Series
The American Funds Retirement Income Portfolio Series consists of three managed portfolios — Conservative, Moderate and Enhanced — that can help retirees address their income and longevity needs.
Made up of American Funds, these portfolios:
- Were created by the Portfolio Oversight Committee, the predecessor to the Portfolio Solutions Committee — a seven-member team of seasoned investment professionals — based on extensive research and their in-depth knowledge of the underlying funds.
- Seek to support varying withdrawal rate ranges and risk tolerances while maintaining as much of a retiree’s initial investment as possible.
- Were designed to be a part of a broadly diversified retirement income portfolio.
Overview
Retirees may be concerned with maintaining their lifestyles in retirement as they take withdrawals from their investments. The American Funds Retirement Income Portfolio Series strives to:
- Be a withdrawal source for a retiree’s lifestyle (or discretionary) spending needs as a complement to other investments and sources of income in their portfolios.
- Preserve as much of the initial investment as possible, even as retirees take regular withdrawals.
Translating need and risk into withdrawal rate ranges
The Portfolio Solutions Committee used extensive research and modeling to determine the suggested annual withdrawal rate ranges for each of the three portfolios (as of April 25, 2024).
*Risk of loss, in this case, is defined as an increased exposure to equities, which can lead to greater volatility in the portfolio and potentially impact both withdrawal rates and whether overall assets invested will decline over time.
Each retirement income portfolio is designed to address varying income needs and risk tolerances, and each has a suggested annual withdrawal rate range.
These suggested withdrawal rate ranges:
- Were determined by the Portfolio Oversight Committee, the predecessor to the Portfolio Solutions Committee, based on their experience and in-depth knowledge of the underlying funds, as well as the extensive research and computer simulations used to create each portfolio.
- Were based on income and capital gain expectations — taken from both historical data as well as market projections — for each of the portfolios.
- Are suggestions only, and should be evaluated over time. These ranges are a starting point; the actual rate should be determined on an individual basis by the financial professional and retiree, and should be adjusted to maintain sustainability in various market conditions. In addition, differences in the portfolio returns, inflation (or deflation) and interest rates over time may prompt the Portfolio Solutions Committee to change the suggested withdrawal rate ranges.
- May include part of the investor’s principal, to the extent the income earned by the portfolio (in dividends and bond income) is less than the withdrawal amount. The portfolios are designed to accommodate this, and will seek to grow assets over time as well as provide withdrawals, though there is no guarantee the portfolios will support a given withdrawal rate in all market environments.
- Should be determined by individual investors as one part of their total retirement income picture, including Social Security or other sources of guaranteed or interest income. These portfolios are designed to address lifestyle, or discretionary, expenses in retirement — not necessarily basic living expenses.
Portfolios
American Funds Retirement Income Portfolio — Conservative
Strives for the accomplishment of three investment objectives: current income, long-term growth of capital and conservation of capital, with an emphasis on income and conservation of capital.
- 3.00%–3.75% Suggested annual withdrawal rate range*
American Funds Retirement Income Portfolio — Moderate
Strives for the balanced accomplishment of three investment objectives: current income, long-term growth of capital and conservation of capital.
- 3.25%–4.00% Suggested annual withdrawal rate range*
American Funds Retirement Income Portfolio — Enhanced
Strives for the accomplishment of three investment objectives: current income, long-term growth of capital and conservation of capital, with an emphasis on income and growth of capital.
- 3.50%–4.25% Suggested annual withdrawal rate range*
Features and benefits
We built the American Funds Retirement Income Portfolio Series to help address the needs of investors nearing or in retirement.
These funds of funds are:
- Focused on withdrawals and longevity. They seek to support different withdrawal rate ranges while maintaining as much of a retiree’s initial investment as possible.
- Flexible. They’re made up of different mixes of equities and bonds, allowing for variation in withdrawal rates and risk tolerances.
- Actively monitored. They benefit from the ongoing research and attention of the Portfolio Solutions Committee.
Portfolio oversight
The Portfolio Solutions Committee — investment professionals who have a long history of successfully managing funds to pursue investor objectives — monitor the American Funds Retirement Income Portfolio Series.
Retirement income portfolios are complex. At times the need to take withdrawals can conflict with the desire for capital preservation. The historical roles of stocks and bonds have shifted in recent years, making the interplay between markets more difficult to navigate.
That’s why the Portfolio Oversight Committee, the predecessor to the Portfolio Solutions Committee:
- Performed exhaustive proprietary research, analyzing both historical data and likely future scenarios.
- Deployed data that reflects both even and extreme market conditions.
- Relied on their deep experience in managing the underlying American Funds.
The seven seasoned investment professionals in the Portfolio Solutions Committee offer:
- Experience. The committee averages 32 years of investment industry experience, as of December 31, 2023.
- Familiarity. They know the underlying funds well; many have experience managing the underlying funds in the portfolios.
- Oversight. They continually monitor the portfolios — more intensely in times of volatility.
The order of the underlying funds is based on the Capital Solutions Group's assessment of each fund's volatility, based on the fund's historical standard deviation, objective and other factors.