THE MUTUAL-FUND INDUSTRY

is rolling out yet another series of products to attract the deep pockets of retiring baby boomers. But some of them will find these new offerings aren't a good fit.

The federal government estimates 78 million boomers have socked away a whopping $7.6 trillion in various investments and accounts. Nevertheless, many of them still worry their individual savings won't last as long as they do. The mutual-fund industry has tried to calm those fears and make some profits at the same time by launching so-called "asset allocation" and "target date" funds that free investors from making potentially bad portfolio decisions that could cost them thousands of dollars.

Now, several fund families are taking that idea a step further. Last August Fidelity launched a series of "income replacement" funds and later this year Vanguard will come out with competing "managed payout" offerings. (Schwab and John Hancock are also in the mix.) These products, which will pay out monthly income for a set period of time, borrow from the principles behind a range of familiar investments, including annuities, traditional pension plans and existing mutual funds. That makes them reasonably easy to understand. However, any time the industry's major players pile into the same niche, investors need to first determine if their products are a good buy or just the latest fad.

At the heart of these new-fangled retirement funds is an old, needling question for many retirees: How long will my money last? The problem with answering it is that there are too many fluctuating variables. There's considerable uncertainty surrounding Social Security. Fidelity estimates a couple retiring today will need around $215,000 just to cover health-care costs during their golden years. According to consultancy firm Hewitt, that amount exceeds what most 60-year-olds making under $100,000 a year have in their accounts. This year, in particular, is a bad one for retirees. Rising inflation fears and a downturn in the market means many investing accounts have lost value. Even an investor who has smartly saved his entire career risks shaving off years of potential income down the road by tapping a nest egg at its lowest point.

Financial planners suggest retirees withdraw 4% a year from their accounts to pay for living expenses, health care and the occasional vacation. Ideally, their accounts generate a return of at least 7% a year so that they cover those withdrawals and inflation. That would also prevent account owners from eating into their principal.

The industry has plenty of options to accomplish that task, each containing both pros and cons. Retirees could purchase an annuity that would generate a guaranteed flow of income. But these products can be costly and complicated. So-called asset allocation funds those labeled conservative, moderate and aggressive allow investors to adjust their risk tolerance as they grow older. However, investors need to do homework to know when to switch out of one fund and into another. Target-date funds automatically rebalance between stocks and bonds the closer they get to a specified year, typically the year a fund owner retires. Since the companies that run target-date offerings do the decision making, they alleviate investors from making potential costly mistakes. The funds, though, wedge investors of every stripe into the same model portfolio. That means an ultraconservative investor and one who isn't afraid to play the market are treated in the same fashion.

Enter Fidelity's 14

, billed as a kind of a best-of-all-worlds option. Investors pony up at least $25,000 to start and then pick a date ranging from 2016 to 2042. The money is invested in a series of 15 underlying Fidelity funds, including

Equity Income

Small Cap Opportunities

100 Index

Total Bond

2016 fund

2042 fund

Every year the fund withdraws a percentage of your assets and divvies that amount up into 12 equal payments. Ideally, that money is coming from dividends, bond income and the overall growth of the fund. A hypothetical $250,000 in the firm's 2042 fund would kick off $1,049 a month this year. But since the portfolio will fluctuate with the stock and bond markets, that monthly payment will change every year. In boom years the amount will rise. In down markets fund owners could actually eat into their principal. The fund is ultimately liquidated during its target year. Whatever balance is left is returned to the fund owner. If the person happens to pass away before that time, heirs receive the cash.

The fluctuating payments are both a blessing and potential curse. It's smart to adjust withdrawal rates depending on market returns. That's a good way to stretch out the life of an account, an especially important point since nobody can predict how long they will live. However, that means investors will have to do some belt-tightening in lean years. One added benefit: Investors can buy and sell shares whenever they want without penalty. (They can also leave the payments sitting in the fund if they don't need the money.)

Later this year, Vanguard will launch three "managed payout" funds. Like the Fidelity offerings, these funds invest in a set of underlying mutual funds. That set includes Vanguard's Total Stock Market, European Stock, Emerging Markets Stock and Total Bond Market index funds. The three funds Growth Focus, Growth & Distribution and Distribution Focus will have annual distributions rates of 3%, 5% and 7%, respectively. Those percentages won't change. But the monthly payments will as account balances rise and fall with the market. It appears in most cases these funds will be slightly cheaper than their competitors at Fidelity.

Since these funds are brand new we couldn't find a lot of advisors who were willing to put their stamp of approval on them. "I think they are a good choice for somebody with a limited amount of money," says Ray Benton, a financial planner in Denver. (Advisors usually don't bother will accounts smaller than $250,000.) Of course, Benton and some of his industry colleagues feel that instead of a one-size-fits-all option investors would be better served by a customized plan designed by them. "Not that these funds are a bad thing," says Michael Kitces, director of financial planning at Pinnacle Advisory Group in Columbia, Md. "But when you customize a client's needs it's a better fit." Time may be the deciding factor. If these funds deliver on their hype and do it for a cheaper price they will certainly attract a lot of fans.