Investing In Retirement: 6 Lower-Risk Options to Add to Your Portfolio (2024)

If you’re investing in retirement, you want to be careful.

As you settle into your golden years, the last thing you’d want to experience is a major financial setback that could jeopardize your comfortable lifestyle and force you back into the 9-to-5 grind.

That’s why we’ve compiled a list of lower-risk investment options you can add to your portfolio to keep growing your nest egg without the constant fear of losing it all.

Investing in Retirement? Here Are 6 Lower-Risk Options to Add to Your Portfolio

1. Bonds

In simple terms, bonds are debt obligations organizations issue to raise money. In return, these organizations agree to pay you interest payments while you wait for the bond to reach maturity. On the bond’s maturity date, you get to collect the bond’s face value. Bonds’ target return rate varies depending on the bond type and duration but generally falls between 2% and 6%.

Compared to other popular investment options such as stocks, bonds are much less volatile, making them less likely to experience significant fluctuations in value. Here’s why: Unlike stocks, investing in bonds does not give you ownership rights. In other words, you won’t benefit when the organization grows, but this also means you won’t take as much of a financial hit when the organization’s performance suffers.

Some of the most common types of bonds include corporate, municipal and treasury bonds.

• Corporate bonds. These bonds are issued by companies to raise capital for various purposes, such as expansion or research. Though they typically offer higher yields than government bonds, they also come with a higher level of risk since companies are more likely to default on their debt obligations.
• Municipal bonds. As the name suggests, municipal bonds are issued by state and local governments. They’re often used to fund infrastructure projects, such as the construction of schools and hospitals.
• Treasury bonds. Treasury bonds are issued by the U.S. government to support public spending. Since there’s a slim chance that the government will default on its debt, treasury bonds are generally considered one of the safest investment options and can provide a stable source of income for retirees. However, because of their low risk, treasury bonds typically offer lower yields than corporate or municipal bonds.

Before investing in bonds, consider factors such as interest rates, credit ratings and the maturity of the bond. By selecting a mix of bond types to diversify your investment portfolio, you can create a low-risk investment strategy that provides reliable income during your golden years. You can typically purchase bonds through a broker, an ETF, or from the U.S. government at TreasuryDirect — depending on the type of bond you want to invest in.

Cash is king again.High interest rates make safe investments more attractive. Here’s our list of safe cash investments.

2. Publicly Traded REIT Index Funds

According to R.J. Weiss, a certified financial planner and founder of the personal finance site, The Ways to Wealth, Quality REITs or REIT index funds that invest in large real estate properties are another low-risk investment option to consider during retirement. Because REITs are required by law to pay 90% of their annual income to investors as dividends, they offer some of the highest dividend yields in the market — with a target return rate that ranges from 3% to 6%.

However, Weiss notes that REITs “may be susceptible to interest rate changes since economic fluctuations and market risks can impact property values and rental income.”

Despite these risks, REITs remain a safer investment option than traditional stocks, given their lower volatility and large dividends.

3. High-Interest Savings Accounts

If you have an extremely low risk tolerance level and don’t want to put your money in the stock market, you could consider opening a high-interest savings account. For example, Ally Bank currently offers a high-yield savings account that earns a 3.75% APY.

By parking your excessive cash in high-yield savings accounts instead of your checking account, you can prevent rising inflation from eroding your purchasing power during your retirement years. Plus, most high-yield savings accounts provide easy access to funds and FDIC insurance of up to $250,000.

To find the best deal, take the time to comparison-shop and keep an eye on promotional offers from different financial institutions. Check out our top picks for the best high-yield savings accounts to get started.

4. Treasury Inflation-Protected Securities

Treasury Inflation-Protected Securities, also known as TIPS, are a type of treasury bond issued by the U.S. government that offers protection against inflation. Because TIPS’ principal value is indexed to inflation, its value adjusts with rising prices.

For example, if your principal is $2,000 and the Consumer Price Index shows an inflation rate of 3.5%, your new principal will be $2,070. Your interest payment will also be based on the adjusted amount.

Upon maturity of the bond, you’ll receive either the inflation-adjusted or the original principal value, whichever is greater. If you want your investments to keep up with inflation, Treasury Inflation-Protected securities are worth considering.

TIPS are issued with maturities of five, 10 and 30 years and pay cash interest semi-annually. You can purchase them through your investment brokerage account or by heading to the U.S. Treasury Department’s website, TreasuryDirect.

5. Preferred Stocks

Another low-risk investment option to explore during retirement is preferred stock. This type of asset has characteristics of bonds and conventional stocks, allowing investors to receive predictable income payments and still have ownership rights.

While not guaranteed, preferred stock’s dividend payments are prioritized over common stock dividends. Its priority also extends to bankruptcy. If a company goes under, preferred shareholders will be paid out before common stockholders.

And in general, you receive higher regular dividends with preferred shares — around 5% to 7%. You can buy preferred stocks the same way you purchase common stocks — typically through an online broker or investing app.

6. Certificates of Deposits (CDs)

A Certificate of Deposit is a savings account that some banks and credit unions offer their customers. Here’s how it works:

By opening a CD account, you agree to leave your money in it for a specific amount of time, anywhere from a few months to several years. In exchange, the financial institution will give you a higher interest rate than what you would normally get on a regular savings account. And compared to stocks or other investment options, CDs are relatively safe since your money is held at a bank.

But here’s the catch: When you purchase a CD, your funds are locked up for the entire term. So, only consider putting your money in a CD account if you’re 100% sure you won’t need the money during retirement.

Jamela Adam is a personal finance writer covering topics such as savings, investing, mortgages, student loans, and more. Her work has appeared in Forbes Advisor, Chime, U.S. News & World Report, RateGenius and GOBankingRates, among other publications.