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Mutual funds with R-class shares are meant for retirement-minded investors or those nearing the end of their career. For this reason, they are often referred to as retirement shares. They are specifically designed to help retirement savers incorporate relevant mutual funds into their portfolios for the purpose of long-term value investing. In other words, R-class shares are intended to provide income in future years rather than short-term lump sum payments.
Learn here about choosing the right commodity mutual fund.
The basis of an R-class share mutual fund also includes benefits like profit sharing, healthcare benefit funding and money purchase pension.
Workers with an employer-sponsored retirement account can also take advantage of matching contributions to purchase more R-class shares. They can also open up their own retirement accounts to access these assets.
Click here to learn more about the different mutual fund share classes.
Unlike A- and B-class shares available to all investors, R-class shares do not carry an initial or deferred sales cost. However, they do carry annual expenses that could make them more expensive than their counterparts, especially if held for several years. Basically, the fees associated with R-class shares are based on the cost of maintaining your retirement account. Things like marketing and management costs incurred by the broker or intermediary are covered by the fees.
R shares still have fairly low expense ratios but tend to be costlier than index funds. As an example, the American Funds Growth Fund of America R1 (RGAXX) has a higher expense ratio than an actively managed growth fund. American Funds is a common R-share fund family for 401(k) plans.
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