NEW YORK — Investors who reach retirement face the difficult task of estimating how long they will live — and how long their nest eggs should last.

A new type of mutual fund introduced by Boston-based Fidelity Investments and Vanguard Group of Valley Forge, Pa., seeks to make that task easier. The funds try to maintain a payout that can be sustained for many years.

Perforce, the new funds must make a tradeoff between expense and payout, one that poses risks and rewards for investors.

With millions of Baby Boomers set to retire, mutual fund companies, insurance companies and financial advisors are battling over retirement savings, estimated at $16.4 trillion at the end of 2006. Fidelity last week launched 11 Income Replacement funds and the Vanguard plans to launch three Managed Payout funds, each of which are meant to help retirees receive a regular payment while they remain invested.

Traditionally, the role of maintaining a steady income has been taken by fixed annuities. The new funds don’t have the higher expenses of annuities — but also, significantly, offer no guarantee that investors won’t outlive their assets, the heart of an annuity.

“In general, the fact that they’re launching these products is great,” said Brad Levin, a certified financial planner and president and founder of Legacy Wealth Partners in Encino, Calif. “Retirees are just not prepared for what they’re going to be facing as they go into retirement.” But he worries that investors in the funds “could make mistakes that cause them to run out of money.”

An insurance industry executive, who wished to remain anonymous — and whose industry competes with fund companies — said mutual fund companies should be applauded for trying to address sustained retirement income, but “without the presence of a guarantee” as in an annuity, “I don’t think they’ve gone far enough.”

Fidelity and others say the new funds weren’t meant to be annuity clones.

“This is just another arrow in the quiver for investors to use,” said Boyce Greer, president of fixed income and asset allocation at Fidelity Investments. “We wanted to provide an income vehicle that had very different characteristics than an annuity.”

Fidelity’s Income Replacement Funds are a series of 11 funds of funds combining an asset allocation strategy with an optional monthly payment program, which is offered at no cost. The funds carry “horizon dates” from 2016 to 2036, meaning the income stream from the funds are expected to end on those dates. The funds begin with a more aggressive asset allocation weighted toward equity funds and gradually shift to a more conservative allocation emphasizing fixed-income and short-term income funds.

Each of Vanguard’s Managed Payout funds is a fund of funds that will invest primarily in other Vanguard funds, including domestic and international stock index funds, bond and REIT index funds and inflation-protected securities and money-market instruments. The funds will also invest in commodity-linked investments and market-neutral or other “absolute-return” strategies, and are expected to sustain annual distribution rates from 3% to 7%.

The Vanguard Managed Payout Capital Preservation Fund offers an annual distribution rate of 7%, but no guarantee that the fund won’t eat into principle to make that distribution.

Dan Culloton, a senior analyst at Chicago investment-research firm Morningstar Inc. who covers Vanguard, said that while the funds don’t offer annuity-like guarantees, they offer more control over capital, he said.

Ellen Rinaldi, a principal in Vanguard Group’s investment counseling and research group, said, “many people are heading into retirement without any structure and withdrawing without any idea” what makes a sustainable income stream.

Greer of Fidelity said that if the funds came with a guarantee, they would not be able to offer the heightened liquidity — as mutual funds, they can be sold at net asset value and have no lock-up period — or low cost they currently offer.

Product Evolution Expected

Levin, the financial planner, said the new funds require that investors choose the appropriate income stream, but it’s not uncommon for investors to underestimate their lifespans. It’s generally understood that a 4% or 5% retirement account withdrawal rate is sustainable, he said, but an unsophisticated investor would likely choose an option offering 7%. “But can they really deliver that kind of payout over the long term?” Moreover, he said market volatility also puts a premium on advice to investors making these types of decisions.

Greer said Fidelity tells investors to be conservative and plan on living into the top quartile of life expectancies — age 92 for a man and 94 for a woman — and that the firm’s online tools prompt investors to do so.

Fidelity views the funds as building blocks, not necessarily as a place for an entire nest egg, and envisions several uses for the funds, Greer said. For example, an investor who wants to retire early or who wants income before he retires could time the Income Replacement stream to end when his defined-benefit plan or Social Security payments kick in, Greer said. Or because many retirees spend more in the first few years of retirement, they could use the payment stream for discretionary expenses, such as travel or sports club memberships, during that period, he said.

“My guess is that we’re going to find that they will be used in situations that we never foresaw,” said Greer.

As for the importance of an advisor, Culloton said, you could say the same for selecting mutual funds. Rinaldi of Vanguard said that while seeing an advisor is a great thing to do, there should be solutions for those who choose not to. “That’s one of the things we’re doing here.”

Morningstar’s Culloton said that these income distribution mutual funds are intriguing, yet imperfect options, that will evolve. “The whole idea is kind of a sea change in how people are thinking about their investments,” he said, with a shift from a focus solely on accumulation to a focus on whether or not investors are in a portfolio that will meet their retirement needs. “Financial institutions like Fidelity and Vanguard are going to figure out how this works, where it can be improved upon and how they can do that.”

Greer said Fidelity will take lessons from the market and apply them. “New products will be striking the balance between guarantees for life, liquidity and flexibility and cost,” he said.