NEW YORK (TheStreet) -- Saving for retirement is hard enough, but devising an income strategy so that you don’t run out of money may be even harder. The 4% withdrawal method is the most common rule of thumb. But complicating the scenario is a low-interest rate environment, stock market volatility and the potential impact of inflation.
However, a few alternatives have surfaced to replace the 4% solution. For investors seeking an automated answer, money managers have devised "payout" funds. These funds-of-funds are allocated to stocks, bonds and alternative investments to a widely varying degree. For example, the Fidelity Income Replacement Fund series operates as a target-date fund in reverse: Designed to deplete its assets by a certain year (2030, 2040 and so on), the fund draws earnings and principal over a set amount of time -- the longer the maturity, the less you receive. Each fund in the Income Replacement family has a different allocation that automatically transitions to a more conservative investment mix as the target date approaches.
Charles Schwab (SCHW) also offers a "Monthly Income Fund," but with target-percent payouts, rather than target-dates. For "moderate," "enhanced" or "maximum" incomes, each fund adjusts its risk, according to its payout and growth potential.
Despite the industry’s attempt to provide a tailored solution to a complicated problem, the mutual fund "payout" category has seen meager interest from investors. The largest fund in the group is offered by Vanguard, but with just $1.6 billion invested, it's still a toddler at seven years old.