What Should Retirees Invest In?

Planning for retirement doesn’t stop once you leave the workforce. It’s just as crucial to manage and grow your savings to ensure long-term financial security. With traditional pensions becoming less common and inflation eroding purchasing power, retirees need a smart investment strategy. They must figure out how to generate income while preserving capital. Fortunately, the right mix of assets can provide stability and growth without excessive risk.

A financial advisor can help you ensure you’re optimizing your investment strategy and making the right asset choices for your needs.

1. Municipal Bonds

Though bonds, as a class of securities, are not going to make you particularly high returns, they offer stability and the prospect of some growth. Within this class of securities, retirees should give close consideration to revenue and general obligation municipal bonds. Besides offering investors tax-free interest, these kinds of securities can help keep investors from being pushed into the next highest tax bracket, which is something that pensions and required minimum distributions from IRAs and 401(k)s can do.

Mutual funds focused on municipal bonds are also an attractive option for many retirees. Bond mutual funds let you invest in a variety of bonds, often with staggered maturity dates. You can get consistent income and have your bond investments managed by experienced professionals.

If you find yourself with a large lump sum or are at or near retirement consider creating a bond ladder. This means buying a series of bonds with staggered maturity dates. This way the bonds provide a small infusion of cash over consecutive years rather than a big payout.

2. Stocks

Though stocks are generally thought of as a risky investment better fit for younger investors, retirees can still find value. That said, you generally want to be more conservative as you get older. One maxim says that your portfolio’s percentage of stocks should equal 100 minus your age. According to this guideline, if you’re 65, around 35% of your money should be in the stock market. Of course, this will vary depending on personal circumstances and risk tolerance. There are two types of stocks that retirees should give close consideration to.

Defensive Stocks

These kinds of stocks give investors exposure to companies that offer services and products that are seen as essential. This differs from consumer discretionary goods and services. Here are four areas to focus your search on when looking for defensive stocks:

• Utilities: Utility companies provide the necessities of life, like water, electricity and heating.
• Telecommunications: Phone and internet services are no longer a luxury in today’s economy. Consumers rely on their cell phones and internet services for major parts of their daily lives, including telephone calls, mobile apps, streaming music, movies and television shows.
• Consumer staples: Consumer staples are the household basics that consumers purchase regularly. Examples include toothpaste, toilet paper and soap.
• Healthcare: During a recession, consumers may hold off on elective procedures, but they still spend on medicines, regular check-ups and urgent surgeries.

Dividend Stocks

Dividends represent a percentage of profits paid out to shareholders. Not all stocks pay dividends but among the ones that do, there’s a hierarchy. At the top are so-called Dividend Kings and, after them, the Dividend Aristocrats. The former belong to the S&P 500 and have raised their dividends 50 years or more in a row; the latter belong to the S&P 500 and have raised their dividends 25 years or more in a row.

Mutual funds focusing on dividend stocks could also be a good choice. Because mutual funds are managed by top investment professionals, your investment decisions will be made by those in the know. Mutual funds also allow you to invest in many different stocks, diffusing your risk and protecting you if one of the companies doesn’t perform as well as expected.

3. Real Estate Rentals

A rental property can be a solid source of income if you have the cash to buy it. Retirees should consider investing in real estate rentals because they offer a steady stream of passive income, hedge against inflation and provide potential long-term appreciation. Unlike stocks, which can be volatile, rental properties generate consistent cash flow through tenant payments, helping retirees cover living expenses without depleting their savings.

Additionally, real estate tends to appreciate over time, preserving and even growing wealth. Rental properties also offer tax benefits, such as depreciation deductions and mortgage interest write-offs, which can lower taxable income. For retirees looking for a tangible, income-generating asset with potential for capital appreciation, real estate rentals can be a valuable addition to their investment portfolio.

4. Certificates of Deposit

Certificates of deposit, or CDs, are a strong, low-risk investment option for retirees. Basically, you give a certain amount of money to a bank. Generally, you can choose this amount, though some banks have minimums. When you put the money in, you’ll pick a term, generally from one month to 10 years. You can’t touch the money until the term is up. When it ends, you’ll get your money back, plus interest. The interest rate is predetermined and increases the longer the term.

CDs are great for retirees because they force you to save a certain segment of your money for later in your life, and you earn interest on top of that. Just make sure you can go without the money for the entire term, as you’ll face steep penalties if you take out the money early.

5. Alternatives to Cash

Even though you’re thinking about other investment vehicles, it’s important to remember that you still need to keep cash on hand to cover the necessities like rent or mortgage payments, food and clothes – as well as unexpected expenses.

Retirees should still make sure this money is working for them, though. Rather than letting your cash sit in a checking account or traditional bank savings account where you get no or next-to-no interest, put the money you need immediate access to in a money market account or a high-yield savings account. As of April 2026, it was possible to find high-yield savings accounts offering an annual percentage yield of approximately 3.5%. ¹

6. Annuities

Retirees may want to invest in annuities as they provide guaranteed, steady income, which reduces the risk of outliving their savings. Unlike market-dependent investments, annuities offer financial stability through fixed payouts, which can last for a set period or even a lifetime. This makes them a valuable supplement to Social Security and pension income.

Additionally, annuities offer tax advantages by allowing earnings to grow tax-deferred until withdrawals begin, helping retirees manage their tax burden. They also provide flexibility with options like immediate or deferred annuities tailored to different income needs. For retirees seeking predictable cash flow and financial security, annuities can be a smart addition to their investment portfolio.

7. Real Estate Investment Trusts (REITs)

For retirees who want real estate exposure without the hassle of being a landlord, REITs offer a practical middle ground. These companies own and operate income-producing properties, from apartment buildings and medical facilities to warehouses and shopping centers, and pass the bulk of their earnings along to investors as dividends. Federal law sets a high distribution threshold, which is why REITs tend to be among the more generous dividend payers in the market.

Because most REITs trade on major exchanges, they offer something physical real estate never can: the ability to buy or sell quickly. They also spread risk across many properties and markets rather than concentrating it in a single building or location. For retirees seeking steady income, an inflation hedge and a hands-off alternative to direct property ownership, REITs deserve a place in the conversation.

Financial Advisor Services for Retirement Investments

Managing investments in retirement is more complex than simply preserving what you have saved. Between required minimum distributions, Roth conversions, Social Security timing and rising healthcare costs, the financial decisions made in the early years of retirement can have consequences that compound over time. A financial advisor can help you think through these interconnected choices and build a strategy aligned with your income needs, risk tolerance and time horizon.

Advisors come in several forms, and understanding the difference matters. Fee-only fiduciary advisors charge a flat or hourly rate and are legally obligated to act in your best interest. Commission-based advisors earn compensation from the products they recommend, which can create conflicts of interest. Registered Investment Advisors (RIAs) are regulated by the SEC or state securities authorities and must adhere to a fiduciary standard. Knowing how your advisor is compensated is one of the most important questions you can ask before engaging one.

A good advisor does more than manage a portfolio. They can coordinate investments, taxes, and withdrawals to minimize sequence-of-returns risk. Long-term care is another area where professional guidance adds real value. The cost of assisted living, home health aides and nursing facilities can drain a retirement portfolio. An advisor can evaluate long-term care insurance, hybrid life insurance products and self-funding strategies to help you prepare.

Not every retiree needs ongoing advisory services. Some may benefit from a one-time comprehensive financial plan, while others prefer periodic check-ins. Many advisors offer flexible engagement models to accommodate both approaches. The key is finding someone whose credentials, compensation structure, and communication style match your needs.

Bottom Line

There are a lot of ways for retirees to invest even after their working days are done. It is important to do so because you want your retirement nest egg to last as long as possible. And with people living longer than ever, your nest egg may need to stretch further than you thought. From stocks and bonds to cash and certificates of deposit, there are a lot of options. What’s important is finding the right asset allocation for you.

Retirement Planning Tips for Retirement Planning

• Financial advisors can help retirees get on track with their investments. 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.
• One part of planning for retirement is knowing how much money you’ll be getting from all sources, including the government. Find out how much you’ll get from Uncle Sam with our free Social Security calculator.

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