Income funds are an effective way to earn interest on capital that may not receive a very high rate of return. With today's interest rates at a low level investors, especially retirees, are looking for alternatives to savings accounts. Income accounts that invest in dividend paying stocks that pay out regular dividends to their stockholders. These funds do involve some risk but investors that are looking to realize a higher level of return believe that the trade-off is worth it. Income funds fit into an entire portfolio as a complement to other funds that provide guaranteed income. Income accounts can either pay-out their dividends or reinvest them in an accumulation program. It is important to know how much income will be needed to be withdrawn from the account and how often. Keep in mind that the underlying equities can fluctuate based on the company's performance and the overall market.