As I approached retirement, I stopped chasing returns and started thinking more seriously about income, preservation, and predictability. Like many older Americans, I turned to trusted institutions for help. Among them, AARP stood out—not for selling funds themselves, but for offering practical guidance that aligns with the needs of people over 50.
AARP doesn’t publish a branded list of mutual funds, but it often partners with financial experts, surveys the mutual fund landscape, and produces accessible, vetted educational material to help retirees and pre-retirees choose wisely. Over the years, I’ve used that advice to construct a more stable, tax-aware, and income-generating portfolio.
Table of Contents
What AARP Looks for in Mutual Funds
Based on AARP guidance, retirement experts, and financial planner interviews published on AARP.org, here’s what I’ve learned to prioritize when selecting mutual funds in retirement:
- Low fees (expense ratios under 0.50%)
- Consistent performance—not necessarily market-beating, but reliable
- Focus on income or balanced allocation
- Inflation protection through diversified holdings
- Simplicity—no complex derivatives or exotic strategies
Many of the AARP-aligned mutual fund choices fall into the following categories:
| Fund Type | Primary Use for Retirees |
|---|---|
| Target-Date Funds | All-in-one retirement option based on age |
| Balanced Funds | Income + moderate growth |
| Bond Mutual Funds | Steady income with lower risk |
| Dividend Equity Funds | Income through stocks |
| TIPS Mutual Funds | Inflation protection |
| Index Funds | Broad market exposure with ultra-low fees |
Let me break down each category with examples and explain why they work well for someone like me, and potentially for you.
1. Target-Date Mutual Funds (for Set-It-and-Forget-It Investing)
AARP often references target-date funds as a simple choice, especially if you’re rolling over a 401(k) or starting a Roth IRA. These funds automatically shift from stocks to bonds as you age.
A typical fund for someone retiring in 2030 might be Vanguard Target Retirement 2030 Fund (VTHRX).
| Feature | Value |
|---|---|
| Expense Ratio | 0.08% |
| 10-Year Return | 6.70% |
| Stock Allocation | ~60% |
| Bond Allocation | ~40% |
| Rebalancing | Automatic |
Suppose I invest $50,000 in VTHRX:
\text{Future Value} = 50,000 \times (1 + 0.067)^10 \approx 94,700That’s nearly a doubling in a decade—without adjusting the portfolio manually. The fund slowly shifts to bonds as 2030 nears, reducing risk just when I’ll need more stability.
2. Balanced Funds (Steady Income + Modest Growth)
Balanced funds hold both stocks and bonds in a fixed ratio, often 60/40 or 50/50. These funds fit retirees who want income and some growth.
AARP experts have frequently cited:
- Vanguard Wellesley Income Fund (VWINX)
- Fidelity Balanced Fund (FBALX)
Here’s how they compare:
| Fund | Expense Ratio | 10-Year Return | Allocation (Stocks/Bonds) |
|---|---|---|---|
| VWINX | 0.23% | 6.00% | 35% / 65% |
| FBALX | 0.50% | 8.60% | 65% / 35% |
If I invest $30,000 in VWINX:
\text{Annual Income Estimate} = 30,000 \times 0.027 = 810That’s about $810 per year in income, with less volatility than stocks alone.
3. Bond Mutual Funds (Income-Focused)
For steady income, I lean heavily on bond mutual funds. AARP recommends keeping some money in high-quality investment-grade or government bond funds.
Top AARP-compatible options include:
- Vanguard Intermediate-Term Bond Index (VBILX)
- Fidelity U.S. Bond Index Fund (FXNAX)
| Metric | VBILX | FXNAX |
|---|---|---|
| Expense Ratio | 0.05% | 0.025% |
| 30-Day SEC Yield | 3.84% | 3.72% |
| Duration (Interest Rate Sensitivity) | 6.4 years | 6.2 years |
Let’s say I put $40,000 in VBILX:
\text{Expected Annual Income} = 40,000 \times 0.0384 = 1,536The downside? These funds are sensitive to rising interest rates. I balance that with TIPS funds.
4. TIPS Funds (Inflation-Protected)
AARP articles often highlight Treasury Inflation-Protected Securities (TIPS) for inflation-sensitive retirees.
- Vanguard Inflation-Protected Securities Fund (VIPSX)
- Schwab U.S. TIPS ETF (SCHP)
With inflation averaging 3%, I use TIPS to protect my real income. If inflation rises to 5%, the principal adjusts upward, and so does the interest.
Suppose I invest $25,000 in VIPSX:
\text{Inflation Adjusted Value in 5 Years} = 25,000 \times (1 + 0.05)^5 \approx 31,907It’s not a huge growth engine, but it preserves purchasing power.
5. Dividend Equity Funds (Reliable Income with Stock Growth)
Retirees often fear stocks, but AARP advisors suggest dividend-paying equity funds for those who want income without cashing out shares.
Examples:
- Schwab Dividend Equity Fund (SWDSX)
- T. Rowe Price Dividend Growth Fund (PRDGX)
| Fund | Expense Ratio | Dividend Yield | 10-Year Return |
|---|---|---|---|
| SWDSX | 0.49% | 2.47% | 9.70% |
| PRDGX | 0.63% | 1.95% | 10.10% |
If I invest $20,000 in PRDGX:
\text{Dividend Income} = 20,000 \times 0.0195 = 390Not a huge payout, but I get potential capital growth and a cushion against inflation.
Final Portfolio Example Using AARP-Friendly Mutual Funds
Let’s say I want to create a diversified $100,000 retirement portfolio using the best mutual funds mentioned above.
| Fund Type | Fund Name | Allocation | Estimated Yield |
|---|---|---|---|
| Target-Date | VTHRX | 20% | 2.2% |
| Balanced Fund | VWINX | 20% | 2.7% |
| Bond Fund | VBILX | 25% | 3.8% |
| TIPS Fund | VIPSX | 15% | 2.0% |
| Dividend Equity | PRDGX | 20% | 2.0% |
Blended Income Estimate:
\text{Income} = 100,000 \times (0.2 \times 0.022 + 0.2 \times 0.027 + 0.25 \times 0.038 + 0.15 \times 0.02 + 0.2 \times 0.02) = 2,728So I can expect about $2,728 annually in income—plus capital appreciation.
Final Thoughts
AARP doesn’t endorse specific funds, but its guidance has helped me build a lower-risk, income-focused portfolio. By sticking to low-cost, balanced, and inflation-aware mutual funds, I’ve created a plan that offers income now and preserves principal later.
