6 Low-Risk Investments With Steady Returns for Retirees


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For many of today's retirees, volatile markets, uncertain geopolitical realities and new worries about recent bank failures can add to concerns about running out of money.

Here are some investments retirees and those approaching retirement might consider when allocating the low-risk side of their portfolio. The focus of these instruments is capital preservation and income more than growth.

  • Bonds
  • Certificates of deposit (CDs)
  • Dividend-paying stocks
  • Preferred shares
  • High-yield savings accounts
  • Annuities



Bonds serve two functions: mitigating the volatility of stocks and generating income. There are several ways to accomplish this, with credit quality and bond duration being important considerations in portfolio allocation.

"We favor U.S.-based, high-income, short-duration ETFs for fixed income in this environment," says Matthew Essmann, managing partner and investment advisor representative at Cornerstone Financial Services in Southfield, Michigan.

"You will receive less income from higher-quality bonds, but you're taking less risk of losing the principal. Bond ETFs can add even more diversification benefits." - Matt Ahrens, partner at MN Wealth Advisors in Overland Park, Kansas

The bond portion of the ETF allocation is evenly split between government, corporate and mortgage/asset-backed positions, he says, with 35% of the bonds having an ultra-short duration of three to 12 months.

Bond ladders can also be an easy way to generate dependable income, while regularly offering the opportunity to reset the interest rate as bonds come due, says Matt Ahrens, partner and chief investment officer at MN Wealth Advisors in Overland Park, Kansas.

"Given this income is used for retirement, it is a good idea to have higher-credit-quality bonds. You will receive less income from higher-quality bonds, but you're taking less risk of losing the principal. Bond ETFs can add even more diversification benefits," Ahrens says.

Certificates of Deposit (CDs)

Certificates of deposit are savings accounts that require the money to be held for a fixed period of time, to avoid an early withdrawal penalty. In exchange, the bank pays the account holder a higher rate of interest than in a traditional savings account. CDs are generally considered to be low-risk investments.

CDs are not a way to build wealth, but they can work as a way of getting a small return on money earmarked for a specific purpose in the foreseeable future.

"Certificates of deposit are attractive to those looking to lock in a guaranteed return, but rates tend to be lower than U.S. Treasury securities with a similar maturity," says Jeremy Bohne, principal and founder of Paceline Wealth Management in Boston. "These are typically used by people that aren't comfortable buying securities on their own. While most banks are stable, you are exposed to potential credit risk, albeit remote."

Dividend-Paying Stocks

Dividend stocks provide a regular stream of income by paying a portion of profits to shareholders. These stocks may offer a degree of stability and a cushion against market volatility. The companies that pay dividends are often well established, which can be an indication of their long-term financial health.

"Dividend-paying stocks can provide an attractive yield, potentially exceeding the returns available from bonds or CDs. They also offer the potential for capital appreciation, although this comes with higher volatility," says Raymond Micaletti, chief investment officer at Allio Finance, a robo advisor headquartered in Seattle.

Despite a widely held belief that some stocks are "safe," all equity investing carries risk.

"There's no guarantee that companies will continue to pay dividends, and companies may reduce or eliminate their dividend payouts in times of financial stress," Micaletti says.

"Preferred shares generally offer higher yields than common stocks or bonds." - Jeffrey Wood, partner at Lift Financial in South Jordan, Utah

Bohne says another potential mistake investors make with dividend stocks is seeking the highest possible yield. This can lead to two problems: "Companies that pay out all of their income have little to no growth potential, and a very high dividend yield can signal an unsustainable dividend that the company might reduce, or eliminate entirely," he says. "Unlike the interest paid to bondholders, dividends are discretionary and there is no requirement to pay them."

Preferred Shares

Holders of preferred stock typically receive a fixed dividend that is paid out before any dividends are paid to holders of common stock. Additionally, preferred shareholders typically have priority over common shareholders in the event of a company's bankruptcy or liquidation. The tradeoff is that preferred shareholders have no voting rights.

"Preferred shares generally offer higher yields than common stocks or bonds," says Jeffrey Wood, a partner and investment advisor at Lift Financial in South Jordan, Utah.

Wood adds that preferred shares typically have less price volatility than common stocks.

On the flip side, he says, "Preferred shares are more complex than common stocks or bonds and may be more difficult to understand. Preferred shares can still be subject to price volatility, particularly during market downturns. They may have call features, meaning that the issuer can redeem the shares at a certain price, potentially leaving the investor with reinvestment risk."

High-Yield Savings Accounts

Concerns about the safety of cash rose suddenly in the aftermath of Silicon Valley Bank's collapse.

"For years, many advisors simply ignored the cash that clients had sitting in the bank, whether or not it was FDIC-insured, and whether or not it earned a competitive rate," says Ben Cruikshank, president of Flourish Cash in New York.

Following the collapse of SVB, he adds, advisors are quickly realizing that they need solutions for clients' cash held at non-brokerage institutions, which they don't manage but can advise on.

High-yield savings accounts are a popular vehicle for holding cash.

These accounts are highly liquid, which means money is easy to access should the depositor need it quickly, says Mark Henry, founder and CEO of Alloy Wealth Management in Greenville, South Carolina.

"Rates have increased at many banks, so there are quite a few options to choose from right now. This is a great option for those who are more risk-averse or don't feel comfortable locking (in)," Henry says.

However, he adds, "A high-yield savings account is typically still lower-yielding than a CD or other fixed investments."


Annuities are often-controversial financial products that provide a guaranteed stream of income over a certain period of time, often until death. While some people see annuities as a useful tool for retirement planning and income security, others criticize them for high fees, complex terms and conditions, and the potential for low returns.

Additionally, annuities are not very liquid, meaning that it can be difficult to withdraw money early without paying hefty penalties.

Like any other investment, annuities may not be suitable for everyone, as everyone has specific financial goals and needs.

Paul Tyler, chief marketing officer of Nassau Financial Group in Hartford, Connecticut, says investors considering an annuity should understand they offer higher rates than many bank CDs and often with penalty-free withdrawal options.

Frequently, he says, annuities offer liquidity that retirees need in an emergency. "Liquidity features are typically called free withdrawal amounts (and) may range from 5% to 10% each year of the principal placed in the annuity," Tyler says.

A downside, he says, is that only individuals age 59½ or older are eligible for many of the benefits of annuities. "That is the age at which people can take money from tax-qualified accounts without paying an IRS penalty," he says

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