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
A recent survey found that the chief concern among retirees is having the ability to maintain their lifestyles in retirement. In addition, investors in retirement want to be assured of asset growth 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 January 1, 2022).
*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.
Portfolios1
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.
- 2.75%–3.25% 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.
- 3.00%–3.75% 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.
- 3.25%–4.00% 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 30 years of investment industry experience, as of January 1, 2022.
- 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.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
The Retirement Income Portfolio Series' investment allocations may not achieve fund objectives, and adequate income through retirement is not guaranteed. The portfolios' risks are directly related to the risks of the underlying funds. Payments consisting of return of capital will result in a decrease in an investor's fund share balance. Higher rates of withdrawal and withdrawals during declining markets may result in a more rapid decrease in an investor's fund share balance. Persistent returns of capital could ultimately result in a zero account balance.
The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional securities, such as stocks and bonds.
Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government.
Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.
While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations.
American Funds Strategic Bond Fund may engage in frequent and active trading of its portfolio securities, which may involve correspondingly greater transaction costs, adversely affecting the fund's results.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries.
This material does not constitute legal or tax advice. Investors should consult with their legal or tax advisors.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
- Portfolio series funds are monitored; allocations and funds may change. Allocations and underlying funds are subject to the oversight committee's discretion and will evolve over time. Underlying funds may be added or removed at any time. Visit capitalgroup.com for current allocations.
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American Funds Distributors, Inc., member FINRA.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
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