Mutual fund families offer many different types of shares each designed to meet the needs and requirements of investors. These shares are grouped into classes that identify the expenses and fees incurred when the share is selected by the investor. The mutual fund class known as Class R, or R shares, is used only for retirement accounts.
R-class shares refer to a class of shares offered by a mutual fund and do not identify a specific mutual fund. Each type of mutual fund has its own purchase terms, fees and expenses regarding each type of class or share. Some financial companies may limit the number of shares purchased or require a minimum investment amount when purchasing Class R shares.
Purpose of R-Class
R-class shares were created for the retirement focused investor. Some mutual fund families may refer to R-class shares as retirement shares. Retirement minded individuals often search for mutual funds and other investments with long-term growth and lower fees. R-class shares typically waive front and back-end fees. However, just like other types of class shares, annual expenses are charged for R shares to help offset the cost of operating the fund. These expenses might include fees for portfolio management, shareholder services and fund administration and distribution charges known as 12b-1 fees.
Availability of R-Class
R-class shares are not offered directly to an investor but are sold through third parties. These third parties are financial intermediaries who offer R-class shares through employer-sponsored retirement plans. Third parties cannot enroll non-employees in a company offered retirement plan. Therefore, R-shares must be obtained through a person's existing employer's plan. The intermediary manages the sales, purchases, exchanges and administration of the R-class shares and the mutual fund as a whole.
The types of plans that offer R-class shares include 401(k), 457 and 403(b) plans offered by an employer. R-class shares may also be offered through other plans, such as a money purchase and profit sharing pension, non-qualified deferred compensation and health benefit funding. Class R shares are not offered for individual retirement plans.
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