It s the retirement dream for boomers: Turn all that money you diligently saved over the years into a steady income stream while you golf and bask by the pool. Traditionally, people turned to annuities, which saw a sales boom right after the crash, to help make this dream come true. But now mutual fund firms are counterpunching with their own breed of paycheck producer.

In recent months big firms like Vanguard and Charles Schwab have attracted a lot of new money to so-called retirement-income funds. In all, investors now hold $824 million in these funds a speck, compared with the annuity business, but 41 percent more than they had in the funds a year ago. Like annuities, the funds promise to turn a shareholder s savings into a stream of payments. And that monthly income has fewer strings attached: Unlike plain-vanilla annuities, retirement-income funds let customers move their money elsewhere without penalty, and the payments can rise if markets do. One other plus: They re relatively cheap, with fees averaging $53 per year per $10,000 invested. Variable annuities, which offer similar flexibility, are typically four times as expensive.

But income funds present one hurdle that annuities don t the potential for investment losses. Bottom line, they aren t guaranteed, and the income can change, says Bill Smith, president of Great Lakes Retirement Group in Sandusky, Ohio. Most of them are funds of funds, with some exposure to stocks, and if shareholder assets drop, payments drop too. Several funds proved this point by launching just before markets tanked a bit of timing that Jeff Tjornehoj, senior research analyst at Lipper, compares to stepping out onto a newly waxed floor. Vanguard s Managed Payout Growth and Distribution fund, which launched in May 2008, cut its payouts to investors by 16 percent at the beginning of 2009 and by another 10 percent in 2010.

The fund companies say that retirement-income products aren t designed to eliminate losses and that investors shouldn t use them to cover their essential expenses. You ve got to be comfortable with investment risk, says Vanguard principal John Ameriks. For investors who aren t comfortable with that? Well, that s what plain-vanilla annuities are for.

Funds That Cut You a Check

These funds are designed to pay out all the money invested in them by their end date. Fees of $70 per $10,000 invested are at the category s high end.

Unlike most competitors, Pimco s offering invests chiefly in Treasury Inflation-Protected Securities.

These funds aim for a steady annual pay rate (5 percent for this fund). But payments can dip when the market falls.