Once you retire, the purpose of your investment portfolio often changes. Instead of concentrating primarily on growth, many retirees focus on generating reliable income to supplement Social Security, pensions or other sources of income. Choosing the right investments to add income after retiring can help support day-to-day expenses while managing risk in a portfolio that may need to last for decades. Income-focused investing involves trade-offs between yield, stability, liquidity and long-term sustainability.
A financial advisor can help you build an income strategy that lines up with your needs, goals and risk tolerance.
Investing After Retirement: Income Goals and Time Horizon
Investing after retirement differs significantly from investing earlier in life, in part because portfolio withdrawals often replace a regular paycheck. As a result, retiree portfolios often emphasize income generation, preservation of principal, and protection against inflation. Many retirees maintain a diversified mix of income-oriented investments alongside a smaller allocation to growth.
A targeted investment plan at this stage typically prioritizes dependable cash flow over aggressive appreciation, but it rarely eliminates growth entirely. Maintaining some exposure to equities can help offset inflation and reduce the risk of outliving retirement savings, particularly for longer retirements.
For example, a retiree’s portfolio might follow the below allocation:
- 35%–45% fixed income (such as bonds and bond funds) to provide income and stability
- 30%–40% equities to support growth and help keep pace with inflation
- 10%–15% cash or cash equivalents for liquidity and near-term expenses
- 5%–15% alternative or income-focused assets (such as REITs or annuity income streams) to diversify income sources
Diversification plays a central role in investments to add income after retiring. Relying too heavily on a single asset class or income source can increase vulnerability to market downturns, interest-rate shifts, or inflation. Spreading income across multiple asset types helps retirees manage volatility while supporting ongoing withdrawal needs throughout retirement.
1. Dividend-Paying Stocks and Funds
Dividend-paying stocks and funds invest in companies that regularly distribute a portion of their earnings to shareholders. These investments allow you to generate income while maintaining exposure to equity markets. Dividend-focused funds typically emphasize financially established companies with consistent cash flow.
Opportunities: Dividends can provide ongoing income that may supplement other retirement sources. Historically, dividend-paying stocks have contributed a meaningful share of total equity market returns, especially when you reinvest dividends. Retirees may use dividends as cash income rather than reinvest them, offering flexibility in managing withdrawals.
Risks: Dividends are not guaranteed and can be reduced or eliminated, particularly during economic downturns. Dividend-focused portfolios may focus heavily on certain market sectors, which can increase risk. Stock prices remain subject to market volatility even when dividend payments continue.
2. Bonds and Bond Funds
Bonds and bond funds generate income through interest payments. These investments represent loans to governments, municipalities, or corporations and often support retirement income strategies. Bond funds offer diversification across issuers and maturities.
Opportunities: Bonds can provide predictable income and help stabilize a retirement portfolio. Historically, broad bond markets have delivered average annual returns in the range of 4%–6% over long periods (averaging 4.79% from 1928 to 2024), though returns vary by interest rate environment. This steady income can help offset market volatility in other parts of a portfolio.
Risks: Interest rate changes can reduce bond values, especially for longer-duration bonds. Inflation may erode purchasing power if yields fail to keep pace with rising costs. Lower-quality bonds also carry credit risk, including the possibility of default.
3. Annuities
Annuities are insurance products designed to provide income, often for life. Immediate annuities begin payments shortly after purchase, while deferred annuities delay income until a future date. Many retirees use annuities to supplement guaranteed income sources.
Opportunities: Annuities can provide predictable, contractually guaranteed income streams. This feature can help manage longevity risk by ensuring income continues regardless of market conditions or lifespan. For some retirees, annuities add stability to an overall income plan.
Risks: Annuities often involve trade-offs, including reduced liquidity and potential fees. Once funds are annuitized, access to principal may be limited. Income guarantees depend on the financial strength of the issuing insurer.
4. Treasury Securities and Certificates of Deposit (CDs)
Treasury securities and CDs are conservative investments that generate income through interest payments. The U.S. government backs treasuries while banks issue CDs. These instruments have fixed terms and are often used to preserve capital.
Opportunities: Treasuries and CDs offer predictable returns and low credit risk. Historically, yields have varied significantly based on interest rate environments, with returns typically lower than stocks or corporate bonds. These investments can help cover near-term income needs while limiting volatility.
Risks: Lower yields may not keep pace with inflation over time. Locking into long-term CDs or bonds can reduce flexibility if interest rates rise. Overreliance on conservative instruments may limit long-term income growth.
5. Income-Focused Mutual Funds and ETFs
Income-focused mutual funds and ETFs prioritize income generation. They can simplify portfolio management while distributing regular income from multiple sources, such as bonds, dividend stocks and preferred securities. These funds may invest in a mix of dividend-paying stocks, bonds, preferred securities or other income-producing assets. Professional management can also help coordinate income sources.
Opportunities: These funds provide diversified income streams and simplify portfolio management. Distributions can be taken as regular income, supporting retirement cash flow. Some funds aim to balance income with modest growth potential.
Risks: Income-focused funds remain subject to market risk, and distributions may vary over time. Higher-yield strategies can involve greater credit or interest rate risk. Fees may also reduce net income.
How a Financial Advisor Can Help You Create an Investment Plan
Building an investment plan can feel overwhelming, especially when you’re trying to balance growth, income, and risk at the same time. This is where a financial advisor can add real value, helping you move from a general sense of your goals to a concrete, personalized strategy.
The decisions involved in creating an investment plan go beyond simply picking stocks or funds. You need to determine how much risk you can tolerate, how to allocate assets across different account types, and how to structure your portfolio to meet both short and long-term needs. Without a clear framework, it’s easy to make choices that don’t work together or that leave important gaps.
A financial advisor helps evaluate where you stand today and what your portfolio needs to accomplish. They can assess your timeline, income needs, and risk tolerance, then recommend an allocation that reflects all three. They also help identify whether your current holdings are working toward your goals or creating unnecessary exposure.
Some useful questions to bring to an advisor include: Does my current portfolio reflect my actual risk tolerance? Am I diversified across the right asset classes for my timeline? Are there gaps in my plan that could leave me short of my goals?
The value of working with an advisor on this process comes down to coordination and clarity. Investment planning involves enough moving parts that small misalignments, such as taking on too much risk too late or holding too much cash too early, can have a meaningful impact over time. An advisor helps you build a plan where each piece has a purpose, and revisits that plan as your life and the market change.
Bottom Line
Investments to add income after retiring play a central role in supporting financial security during retirement. Dividend-paying stocks, bonds, annuities, real estate, conservative instruments, and income-focused funds can all contribute to a diversified income strategy. Each option comes with unique opportunities and risks you must balance carefully.
Retirement Planning Tips
- Because retirement income planning spans many years and changing circumstances, working with a financial advisor can support the creation and maintenance of an investment plan focused on income needs and long-term stability. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to diversify your portfolio, here’s a roundup of 13 investments to consider.
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