Copyright 2025 by Safe Investing Digest. All Rights Reserved
Chapter 1: Why It’s Time to Look Beyond Stocks and Bonds
If you’re retired—or getting close—you’ve probably heard the same financial advice for decades: “Just stick with a mix of stocks and bonds and you’ll be fine.”
That might have worked in the past. But things have changed.
The financial world retirees face today is very different than the one your parents or even your older siblings experienced. Bond yields are lower, stock markets are more volatile, and the cost of living just keeps going up.
That’s why more and more retirees are looking for safer, smarter income alternatives. Not to replace stocks and bonds entirely—but to diversify and build more dependable cash flow in a world that’s become a lot less predictable.
Let’s take a closer look at why looking beyond the traditional 60/40 portfolio may be one of the best decisions you make for your retirement.
The Problem: Low Yields and Rollercoaster Markets
Not long ago, you could count on your savings to earn a decent return with very little risk. A simple CD or U.S. Treasury bond might have paid 5%, sometimes more. That income, combined with Social Security and maybe a pension, was enough for many retirees to live comfortably.
Today? Not so much.
Even with recent interest rate increases, safe bond yields are still historically low, and many retirees find themselves needing to stretch their savings further than they ever imagined.
And the stock market? It can feel like a rollercoaster ride—up one day, down the next. For younger investors, that kind of volatility might be manageable. But when you’re drawing income from your investments, those wild swings can be dangerous.
There’s even a name for it: sequence-of-returns risk—the danger of having to sell investments for income during a market downturn. It can drain your nest egg faster than you planned.
So, what’s the solution?
The Shift: From Growth to Income and Stability
In retirement, it’s not just about growing your money—it’s about making it last.
That’s where many traditional strategies fall short. Stocks are built for long-term growth, not consistent income. And bonds, while historically safer, no longer provide the yield many retirees need to cover their monthly expenses.
That’s why the focus is shifting toward investments that generate steady, predictable income—without requiring you to gamble on the next big market move.
The Case for Diversification with Alternatives
You don’t have to abandon stocks and bonds entirely. But adding new types of investments to your portfolio—things like REITs, BDCs, senior loans, and closed-end funds—can help you:
- Earn more monthly income
- Reduce your exposure to market volatility
- Add inflation protection with real assets
- Feel more confident in your financial future
These are known as alternative income investments—and they’re becoming an essential part of modern retirement planning.
Now, to be clear: “alternative” doesn’t mean risky or exotic. It simply means investments outside the traditional categories of publicly traded stocks and government or corporate bonds.
And here’s the good news: Many of these alternative options are designed specifically to meet the needs of conservative investors who want safety, stability, and simplicity—not speculation.
Why This Approach Works for Retirees
You don’t need to beat the market. You don’t need to double your money. You just need enough steady income to live comfortably, enjoy your retirement, and sleep well at night.
That’s exactly what these alternative investments can offer:
- Regular payouts (monthly or quarterly)
- Real-world assets behind them, like real estate or infrastructure
- Protection from inflation, rising rates, and market drops
- Diversification so you’re not putting all your eggs in one basket
You might even find that this kind of investing is more predictable and less stressful than constantly tracking the stock market.
A Quick Preview of What’s Ahead
In the chapters that follow, we’ll explore six of the most retiree-friendly alternative income investments. For each one, you’ll learn:
- What it is (in plain English)
- How it generates income
- What risks to watch for—and how to reduce them
- Real-life examples of retirees using it successfully
- Where to find it, research it, and add it to your portfolio
Here’s a sneak peek:
- REITs: Real estate income without being a landlord
- BDCs: High-yield income from lending to small businesses
- Closed-End Funds: A shortcut to diversified income with built-in leverage
- Preferred Stocks & Senior Loans: Hybrid investments offering better yields than bonds
- Simple Portfolio Blueprints: Putting it all together in a balanced, safe way
If you’ve ever felt frustrated by low interest rates… worried about the next market crash… or just unsure where to find dependable income—you’re in the right place.
This book is for you.
Final Thought: You’re Not Alone
Many retirees feel overwhelmed by today’s financial landscape. You’re not alone. But there are good solutions—and they’re simpler than you might think.
By learning about a few safe, time-tested alternatives, you can take back control, reduce your worry, and create the kind of retirement income that works for you—not for Wall Street.
Let’s dive in and explore how you can build your own smarter, safer retirement income plan—beyond stocks and bonds.
Chapter 2: REITs – Real Estate Income Without the Landlord Duties
What if you could earn steady monthly income from real estate—without fixing toilets, chasing down tenants, or worrying about leaky roofs?
That’s the promise of REITs, short for Real Estate Investment Trusts. They let you invest in income-producing real estate without ever owning property directly. And for retirees, they can be one of the simplest and most effective ways to boost income, fight inflation, and diversify away from the stock market.
Let’s explore why REITs deserve a place in your retirement portfolio.
What Is a REIT?
Think of a REIT as a mutual fund for real estate. Instead of buying shares of Apple or Microsoft, you’re buying a slice of real estate—commercial buildings, apartment complexes, hospitals, warehouses, even cell towers.
REITs collect rent from tenants and pass most of that money (at least 90% of their income by law) directly to shareholders like you in the form of dividends. That’s why they can offer such attractive and consistent payouts.
In short:
- You own shares, not buildings.
- You get paid from rents and real estate profits.
- You stay liquid—you can buy or sell your REIT shares any day the stock market is open.
Why REITs Work So Well for Retirees
Here are a few reasons why REITs are especially useful during retirement:
✅ Steady Monthly or Quarterly Income
Many REITs pay out dividends every three months, and a growing number pay monthly. These payments can help supplement Social Security or pension income—especially in today’s low-yield bond environment.
✅ Inflation Protection
As inflation rises, so do rents—and that means more income for the REIT, and in turn, more income for you. This makes REITs one of the best tools for preserving your purchasing power over time.
✅ Diversification
REITs don’t always move in sync with the stock or bond markets. That makes them a helpful tool to spread out your risk. Even a small allocation can reduce your portfolio’s ups and downs.
✅ Tax Benefits
REIT dividends are often taxed more favorably than interest from bonds or savings accounts, especially if you own them in a tax-advantaged account like a Roth IRA.
Public vs. Private REITs: Which Should You Choose?
There are two broad categories of REITs:
1. Publicly Traded REITs
- These are listed on major stock exchanges like the NYSE.
- You can buy them through your regular brokerage account.
- They’re highly liquid and easy to research.
- Prices may be more volatile, since they trade like stocks.
✅ Best for most retirees due to accessibility and transparency.
2. Private or Non-Traded REITs
- These don’t trade on public markets.
- They may offer higher yields, but also come with less transparency, higher fees, and are much harder to sell if you need your money quickly.
⚠️ Approach with caution—many retirees have been burned by private REITs with limited liquidity and poor disclosures.
Equity REITs vs. Mortgage REITs: What’s the Difference?
REITs generally fall into two buckets:
🏢 Equity REITs
These own and operate physical real estate—like office buildings, apartments, shopping centers, or data centers. Their income comes from rent. They tend to be more stable and less sensitive to interest rates.
Examples: Realty Income (O), American Tower (AMT), Prologis (PLD)
✅ Ideal for long-term income and inflation protection.
🏦 Mortgage REITs (mREITs)
These don’t own buildings. Instead, they invest in real estate debt (like mortgages). While they often pay higher dividends, they are much more sensitive to interest rate changes and can be volatile.
⚠️ Better suited for experienced investors willing to manage the added risk.
Real-Life Example: How a Retired Couple Built $500/month with REITs
Meet Gary and Linda, a retired couple living in Arizona.
When they first retired, most of their savings were in a mix of dividend stocks and bonds. But after a couple of rocky market years—and seeing their bond income shrink—they decided to explore REITs.
They shifted about $100,000 into a mix of low-cost REIT ETFs, including:
- Vanguard Real Estate ETF (VNQ) – broad diversification across property types
- Schwab U.S. REIT ETF (SCHH) – a low-fee option with steady dividend growth
- Realty Income (O) – a monthly-paying REIT focused on retail and industrial properties
The result?
- A more predictable income stream, averaging around $500/month
- Increased diversification and peace of mind
- A better hedge against rising inflation and rent prices
Best of all, they did it without becoming landlords—or lifting a single hammer.
How to Get Started with REITs
You don’t need to be a financial expert to invest in REITs. Here’s a simple way to begin:
✅ Start with a REIT ETF
ETFs offer broad exposure, low fees, and instant diversification.
Top REIT ETFs to consider:
- VNQ – Vanguard Real Estate ETF
- SCHH – Schwab U.S. REIT ETF
- XLRE – Real Estate Select Sector SPDR Fund
These ETFs invest in dozens (or hundreds) of REITs across various sectors—like housing, industrial warehouses, medical facilities, and more.
✅ Decide Where to Hold Them
REITs often work well in tax-advantaged accounts like an IRA or Roth IRA, since their dividends may be taxed at a higher rate in a taxable account.
✅ Start Small and Monitor
Begin with a small portion of your portfolio—5% to 15% is a common range for retirees looking to add income and diversification.
Key Takeaways
- REITs give you access to real estate income without being a landlord.
- They offer steady payouts, inflation protection, and portfolio diversification.
- Stick with publicly traded equity REITs or REIT ETFs for simplicity and liquidity.
- Avoid private REITs unless you fully understand the risks and lock-up periods.
- You can get started with as little as a few hundred dollars—and potentially add hundreds of dollars in monthly income to your retirement plan.
In the next chapter, we’ll explore another overlooked gem for retirees: Business Development Companies (BDCs)—which let you earn 8%–10% yields by helping America’s small businesses grow.
Let’s keep building your smarter retirement income plan—one dependable investment at a time.
Chapter 3: BDCs – Earning Income by Lending to Small Businesses
If you’ve ever dreamed of being the bank—earning regular interest payments while helping Main Street businesses grow—then Business Development Companies, or BDCs, might be just what you’re looking for.
These unique investments let you tap into a reliable stream of high-yield income by providing loans to small- and mid-sized American businesses. And for retirees looking for steady, monthly income without stock market whiplash, BDCs can be a powerful addition to a conservative income portfolio.
Let’s break down how BDCs work, why they’re so income-friendly, and how you can invest in them safely.
What Is a BDC?
A Business Development Company is a special type of investment company created by Congress in 1980 to help small and growing U.S. businesses access capital. In exchange for certain tax advantages, BDCs are required to:
- Invest at least 70% of their assets in small and mid-sized U.S. companies
- Distribute at least 90% of their income to shareholders
That last part is key: Like REITs, BDCs pass nearly all their income directly to you. That’s why many BDCs offer yields in the 8% to 10% range, far higher than typical bonds or dividend stocks.
In simple terms:
- BDCs lend money to private companies
- They collect interest and fees
- That income is paid out to you as dividends
You get to sit back and collect the monthly income—no banking license required.
Why BDCs Are a Great Fit for Retirees
Let’s look at what makes BDCs so attractive for income-focused investors in retirement:
✅ High Yields
Because they lend to smaller businesses (which often pay higher interest rates than big corporations), many BDCs offer 8%–10% annual yields. Some even pay monthly.
✅ Diversified Exposure
A single BDC might lend to 50 to 150 companies across industries like healthcare, manufacturing, or software—giving you built-in diversification.
✅ Floating-Rate Loans
Many BDC loans are tied to floating interest rates, which means your income can rise when rates rise—a nice benefit in inflationary periods.
✅ Support for American Businesses
By investing in BDCs, you’re helping fuel the growth of U.S. small businesses—often the backbone of local communities and job creation.
What’s the Catch? Understanding the Risks
While BDCs can be a strong source of income, they’re not without risks. Here’s what to watch out for:
⚠️ Interest Rate Sensitivity
Rising rates are good for BDC income—but they can also reduce the value of BDC shares. Keep a long-term view and focus on income, not short-term price swings.
⚠️ Credit Risk
Some of the companies BDCs lend to are small and may not have access to traditional bank financing. If a borrower defaults, it could impact income. That’s why it’s important to choose diversified, high-quality BDCs or ETFs.
⚠️ Premiums and Discounts
Some BDCs trade at prices above or below their net asset value (NAV). Overpaying can reduce your future returns.
Real-Life Example: A Single Retiree Boosts Her Income with BDCs
Meet Sandra, a 72-year-old retiree living in Oregon. After years of relying on bond funds and CDs, she was frustrated by shrinking yields and growing inflation.
Her financial advisor introduced her to BDC ETFs—funds that invest in a wide range of BDCs, giving her exposure to dozens of small business loans in one simple investment.
Sandra chose the VanEck BDC Income ETF (BIZD), which holds top BDCs like:
- Main Street Capital (MAIN) – known for its steady dividends and strong management
- Ares Capital (ARCC) – one of the largest and most stable BDCs
- Prospect Capital (PSEC) – a higher-yielding option with a monthly payout
By investing $50,000, Sandra now receives about $375/month in income—a huge improvement over her previous bond fund. Plus, she loves that her investment is helping real businesses grow across the U.S.
The Best Way to Get Started: Individual BDCs vs. BDC ETFs
There are two ways to invest in BDCs:
1. Individual BDC Stocks
If you enjoy doing your own research, you can invest directly in top BDCs like:
- Main Street Capital (MAIN) – Monthly payer with a great track record
- Ares Capital (ARCC) – Consistent dividends, solid history
- Horizon Technology Finance (HRZN) – Focused on lending to tech and life sciences companies
✅ Pros: Higher yields, ability to pick your favorites
⚠️ Cons: More research needed, single-company risk
2. BDC ETFs
For simplicity and diversification, many retirees prefer BDC ETFs like:
- VanEck BDC Income ETF (BIZD) – Exposure to 25+ BDCs in one fund
- Invesco KBW High Dividend Yield Financial ETF (KBWD) – Includes BDCs and other financial income stocks
✅ Pros: Instant diversification, no research required
⚠️ Cons: Slightly lower yield due to fund fees
Where to Hold BDCs
Because BDC dividends are usually taxed at ordinary income rates, many retirees choose to hold them inside a tax-advantaged account like:
- Traditional IRA
- Roth IRA
- 401(k) rollover
This helps you keep more of your income—and avoid surprises at tax time.
Key Takeaways
- BDCs generate high-yield income by lending to U.S. small businesses
- They’re required to pay out 90% of their income to investors—often monthly
- BDCs offer inflation protection through floating-rate loans
- ETFs like BIZD offer a simple, diversified way to get started
- Ideal for income-focused retirees seeking something more dependable than stocks
In the next chapter, we’ll uncover another overlooked income gem: Closed-End Funds (CEFs)—a tool many retirees use to unlock stable, discounted income from sources like municipal bonds, preferred stocks, and more.
Let’s keep building your income portfolio—with smart, steady steps.
Chapter 4: Closed-End Funds – The Retiree’s Hidden Income Secret
If you’re searching for higher income without higher risk, Closed-End Funds (CEFs) might be one of the best-kept secrets in the retirement investing world.
CEFs have been around for over a hundred years—older than mutual funds, in fact—but many investors still haven’t heard of them. That’s a shame, because CEFs can deliver generous monthly income, often in the 6%–10% range, with built-in diversification and professional management.
Let’s pull back the curtain and see how CEFs work—and how retirees across the country are using them to create reliable, low-maintenance income streams.
What Is a Closed-End Fund?
A Closed-End Fund is a type of investment fund that pools money from shareholders to invest in a specific strategy—like municipal bonds, preferred stocks, senior loans, or even real estate.
Here’s what makes CEFs different from the more familiar mutual funds or ETFs:
- They have a fixed number of shares. Unlike mutual funds, CEFs don’t issue or redeem shares daily. Instead, they trade on the stock exchange like a regular stock.
- They often trade at a discount or premium to the value of the assets inside the fund (called Net Asset Value, or NAV).
- They can use leverage. Many CEFs borrow modest amounts to boost income, which is why their yields are often higher than ETFs or mutual funds.
In plain English: a CEF is like a professionally managed investment bucket that doesn’t slosh around every time someone wants in or out. That stability can be a big advantage for income investors.
Why CEFs Are Ideal for Retirement Income
Here’s why more and more retirees are turning to CEFs to generate dependable monthly cash flow:
✅ High Monthly Income
CEFs are known for their generous dividend payouts, often in the 6%–10% range. Many pay monthly, which makes budgeting in retirement easier.
✅ Access to Unique Income Sources
With CEFs, you can invest in specialized income assets that are hard to buy individually—like senior loans, convertible bonds, or preferred stock.
✅ Professional Management
Unlike DIY investing, CEFs are run by experienced managers who actively select and monitor investments on your behalf.
✅ Potential Discounts
Here’s a big perk: many CEFs trade for less than the value of their underlying assets. It’s like buying a $1 bill for 90 cents. These discounts can help boost your yield and total return.
Real-Life Example: A Retired Teacher Builds a $1,200/Month Income Stream with CEFs
John, a retired teacher in Florida, had always been a careful saver. But once he entered retirement, his bond funds weren’t producing enough income—and he didn’t want to sell stocks during a market downturn.
After learning about closed-end funds, he decided to invest $200,000 across a mix of income-focused CEFs, including:
- Nuveen Municipal Credit Income Fund (NZF) – federally tax-free bond income
- PIMCO Income Strategy Fund II (PFN) – high monthly payouts from mortgage bonds and loans
- Cohen & Steers Preferred Securities and Income Fund (CPXAX) – diversified preferred stock income
- BlackRock Enhanced Equity Dividend Fund (BDJ) – equity income with covered call strategies
Today, John earns over $1,200/month in income, much of it tax-free thanks to his municipal bond CEFs. He appreciates the professional management and loves the fact that he no longer needs to chase yield or worry about daily market swings.
Understanding Discounts and Premiums
Because CEFs trade on the stock market, their share price can fluctuate independently of the value of their holdings (NAV). This creates discounts and premiums:
- Discount: When a fund trades below NAV
➤ Example: NAV = $10/share, market price = $9. You’re getting assets at a 10% discount. - Premium: When a fund trades above NAV
➤ Example: NAV = $10/share, market price = $11. You’re paying more than it’s worth.
As a retiree, it’s usually best to look for funds trading at a discount, as this can boost both your income yield and potential for price appreciation.
Websites like CEFConnect.com make it easy to find current discounts and compare fund performance.
The Most Retiree-Friendly CEF Categories
Here are a few types of CEFs well-suited for conservative investors focused on income:
🏛️ Municipal Bond CEFs
- Offer tax-free income, especially valuable in taxable accounts
- Example: Nuveen AMT-Free Quality Municipal Income Fund (NEA)
🏦 Preferred Stock CEFs
- Offer stable income between bonds and common stocks
- Example: Flaherty & Crumrine Preferred Income Opportunity Fund (PFO)
📈 Covered Call Equity CEFs
- Sell call options on stocks to generate extra income
- Example: BlackRock Enhanced Equity Dividend Trust (BDJ)
💰 Multi-Asset or Income-Blended CEFs
- Hold a mix of bonds, loans, and dividend stocks
- Example: PIMCO Dynamic Income Fund (PDI)
How to Invest in CEFs (the Simple Way)
Getting started is easier than you might think. Here’s how to do it:
✅ Start with a Watchlist
Use tools like CEFConnect.com or Morningstar to screen for CEFs with:
- A long history of income payments
- Consistent discounts (not premiums)
- Reasonable fees
- Solid management teams
✅ Diversify Your Selections
Don’t put all your eggs in one fund. Instead, build a mix across bond, preferred stock, and equity income funds. A diversified approach can help smooth out the bumps.
✅ Consider Holding in an IRA
Because CEFs often pay high, taxable income, many retirees prefer to hold them in an IRA or Roth IRA to minimize taxes.
CEF Myths (and the Truth)
Let’s clear up a few common misconceptions about closed-end funds:
Myth: “If a CEF trades below its NAV, something must be wrong.”
Truth: Many high-quality CEFs trade at discounts simply because of supply and demand—not because of poor performance.
Myth: “CEFs are too complex for me.”
Truth: Once you understand the basics, CEFs are actually simpler to manage than individual stock or bond portfolios.
Myth: “That yield is too good to be true.”
Truth: The yield is real—but always check that it’s earned through interest and dividends, not from returning your own capital.
Key Takeaways
- CEFs offer retirees high monthly income, often in the 6%–10% range
- You can invest in assets like municipal bonds, preferred stocks, and more—all managed by professionals
- CEFs trade on the stock market and can be bought at discounts to NAV
- Diversify across a few well-chosen funds to build a reliable income stream
- Great for IRAs and Roth IRAs due to their tax-inefficient payouts
In the next chapter, we’ll explore Preferred Stocks and Senior Loans—two overlooked but powerful ways to earn reliable income from strong companies while reducing overall portfolio risk.
You’re halfway through—and your retirement income plan is coming together beautifully!
Chapter 5: Preferred Stocks and Senior Loans – Income from Strong Companies
If you’ve ever wished you could earn higher income than a regular bond, without the rollercoaster of the stock market, this chapter is for you.
Preferred stocks and senior loans are two lesser-known investment types that often sit quietly in the background—paying steady income and helping retirees like you build a more stable, balanced portfolio. They may not grab headlines, but for income-focused investors, they do something even better: they work.
Let’s take a closer look at how these two investments can help you earn solid income while dialing down your risk.
What Are Preferred Stocks?
Preferred stocks are a unique type of investment that combines features of both stocks and bonds.
When you buy a preferred stock, you’re not really buying ownership in a company the same way you are with a regular stock. Instead, you’re lending the company money in exchange for a fixed dividend, often paid quarterly.
Here’s how they work:
- You get priority dividends, meaning preferred shareholders are paid before common stockholders.
- If a company cuts dividends, common stock usually goes first—preferreds are more protected.
- They typically offer higher yields than bonds from the same company.
- However, they don’t grow in value much—preferreds are income-focused, not built for capital appreciation.
Think of them as “middle of the road” investments—higher income than bonds, less risk than stocks.
Why Preferred Stocks Are Great for Retirees
Preferred stocks are a smart choice for retirees who want consistent income without a lot of surprises. Here’s why:
✅ Higher Yields
It’s not unusual for preferreds to yield 5%–7%, especially when bought through low-cost ETFs or closed-end funds.
✅ Stability
Preferred prices tend to move less than regular stocks. They’re not immune to market swings, but they’re often less volatile.
✅ Predictable Payments
Because most preferreds pay a fixed dividend, you’ll know what to expect—perfect for retirees who value consistency.
What Are Senior Loans?
Now let’s switch gears and talk about senior loans—also known as bank loans or leveraged loans.
These are loans made to large, established companies, often to fund expansion or acquisitions. What makes them unique is their place in the capital structure: they are called “senior” because they get paid back first if a company runs into financial trouble.
Here’s why that matters: if a company goes bankrupt, senior loan holders get paid before bonds, preferred stock, or common shareholders.
That’s a big deal for risk-averse investors.
Why Senior Loans Work Well in Retirement
Senior loans can play an important role in retirement portfolios for several reasons:
✅ Floating-Rate Income
Unlike most bonds, senior loans have variable interest rates. When rates go up, so does your income. That’s a powerful hedge against inflation.
✅ Low Default Rates
While no investment is risk-free, most senior loan funds are diversified across dozens or hundreds of companies, and professional managers are skilled at avoiding defaults.
✅ High Yields
Many senior loan funds yield 6% or more, making them a reliable source of monthly income.
Real-Life Example: Adding Preferreds for Peace of Mind
Robert, a 68-year-old retiree from Colorado, was tired of watching his bond funds barely keep up with inflation. He wanted something with more income—but not too much risk.
After some research, he decided to invest $75,000 into a preferred stock ETF, specifically the iShares Preferred and Income Securities ETF (PFF). This fund holds a broad basket of preferred stocks from well-known companies like banks and utilities.
The result?
- He now earns about $375/month in income
- His portfolio is less volatile than it was with common stocks
- He feels more confident knowing that preferred dividends have priority during market downturns
That’s the kind of income-plus-peace-of-mind combo that makes preferreds so appealing.
Easy Ways to Invest in Preferred Stocks and Senior Loans
If you’re not comfortable picking individual securities (and most retirees aren’t), ETFs and closed-end funds offer a simple and diversified way to get started.
📦 Preferred Stock ETFs
- iShares Preferred and Income Securities ETF (PFF) – one of the largest, broad exposure
- Invesco Preferred ETF (PGX) – focuses on investment-grade preferreds
- Global X U.S. Preferred ETF (PFFD) – low-cost, diversified option
💼 Senior Loan ETFs
- SPDR Blackstone Senior Loan ETF (SRLN) – actively managed, well-diversified
- Invesco Senior Loan ETF (BKLN) – tracks a broad loan index
- Highland/iBoxx Senior Loan ETF (SNLN) – another floating-rate option
You can also consider closed-end funds if you’re seeking even higher yields (often 7%–9%), but keep in mind they can be more volatile.
Preferred Stocks vs. Senior Loans: A Quick Comparison
| Feature | Preferred Stocks | Senior Loans |
|---|---|---|
| Income Type | Fixed-rate dividends | Floating-rate interest |
| Yield | 5%–7% | 6%–8% |
| Risk Level | Moderate | Lower (senior in capital structure) |
| Best Used For | Stable income, moderate risk | Income plus inflation protection |
| Sensitivity | Sensitive to interest rate moves | Benefit from rising rates |
For many retirees, owning both makes a lot of sense. They complement each other—preferreds offer stability and higher fixed income, while senior loans offer protection from rising rates and early repayment priority.
Key Takeaways
- Preferred stocks provide steady income and sit between bonds and common stocks in terms of risk and reward.
- Senior loans are floating-rate loans to companies that sit at the top of the repayment chain.
- Both investments offer yields of 5%–8%, making them valuable income tools for retirees.
- Using ETFs or closed-end funds makes investing in these assets simple and diversified.
- Adding these investments can reduce overall volatility and boost income—without stepping too far outside your comfort zone.
In the final chapter, we’ll put everything together. You’ll learn how to build your own safer retirement income portfoliousing the alternatives we’ve explored so far. We’ll look at sample portfolios, research tools, and next steps—so you can move forward with confidence and clarity.
You’re almost there!
Chapter 6: How to Build a Safer Income Portfolio with Alternatives
By now, you’ve discovered several powerful—and often overlooked—ways to generate steady, reliable income in retirement. From REITs and BDCs to closed-end funds, preferred stocks, and senior loans, each of these alternatives offers a unique path to higher income, lower risk, and more peace of mind.
Now, it’s time to put all the pieces together.
In this final chapter, you’ll learn how to build a retirement portfolio that works for you—one that matches your goals, comfort level, and income needs. Whether you’re a conservative saver, a balanced investor, or someone willing to take a bit more risk for higher rewards, this chapter gives you the tools to take the next step.
Start With Your Retirement Goals
Before choosing specific investments, take a moment to clarify what matters most to you.
Ask yourself:
- How much monthly income do I need to supplement Social Security or pension?
- Am I more focused on stability or growth?
- How much short-term risk am I willing to tolerate?
- Do I want my investments to be hands-off or do I enjoy being more involved?
Your answers will help guide how much you should allocate to each type of alternative investment.
Three Sample Portfolios for Retirees
Let’s look at three sample portfolios that show how you might mix these alternative income sources based on your goals. These are just examples—you can adjust them to fit your needs.
🧘 Conservative Income Portfolio (Sleep-Well-at-Night Focus)
- 30% REITs (via REIT ETFs like VNQ or SCHH)
- 30% Municipal Bond CEFs (for tax-free income)
- 20% Preferred Stock ETF (such as PFF)
- 20% Senior Loan ETF (such as SRLN or BKLN)
🟢 Goal: Preserve capital, generate tax-advantaged income, minimize volatility
⚖️ Balanced Income Portfolio (Blend of Safety + Yield)
- 25% REITs
- 25% BDC ETF (like BIZD) or top BDCs like ARCC and MAIN
- 20% Closed-End Funds (diversified by sector)
- 15% Preferred Stock ETF
- 15% Senior Loan ETF
🟢 Goal: Steady monthly income with moderate risk and broad diversification
🚀 Growth-Oriented Income Portfolio (Higher Yield, Hands-On)
- 20% Individual REITs or higher-yield REIT CEFs
- 25% BDCs (individual or through ETF)
- 25% Closed-End Funds (PIMCO, BlackRock, and Nuveen income funds)
- 15% Preferred Stock Closed-End Fund
- 15% Floating-Rate Senior Loan Fund
🟢 Goal: Maximize yield with diversified income streams and a willingness to handle some price swings
Where to Research and Track These Investments
When you’re exploring new investments, the right tools can save you time and help you avoid mistakes. Here are some free (and easy-to-use) places to learn more:
🔍 CEFConnect.com
The go-to site for researching closed-end funds, including current discounts, yield history, and portfolio breakdowns.
💼 Morningstar.com
Offers ratings, insights, and screeners for REITs, ETFs, and preferred stock funds.
🧮 ETF.com
Helpful for comparing REITs, senior loan funds, and BDC ETFs side-by-side.
📚 Seeking Alpha
Good for real-life investor commentary and updates on individual REITs, BDCs, and income funds.
Start by searching the tickers mentioned in this book, then branch out as you grow more confident.
Safety Tips for Retirees Using Alternatives
While the income is appealing, it’s important to remember that these investments are not without risk. Here are a few ways to protect yourself:
✅ Diversify Across Types
Don’t go “all in” on one sector. For example, instead of holding only REITs, blend in BDCs, senior loans, and preferreds to cushion against market swings.
✅ Don’t Chase the Highest Yield
If an investment pays 12% when others pay 7%, ask why. Super-high yields often come with extra risk. Aim for consistent, sustainable income over the long haul.
✅ Use Tax-Advantaged Accounts When You Can
Many of these investments are best held in IRAs or Roth IRAs, since the income they generate is usually taxed at your regular income rate.
✅ Rebalance Once or Twice a Year
Check your portfolio periodically and make small adjustments to stay on track. You don’t need to trade constantly—just make sure your income goals and risk levels stay aligned.
Final Encouragement: You Don’t Need to Take Big Risks
One of the biggest myths in retirement investing is that you have to choose between safety and income—that if you want higher yield, you have to roll the dice.
But as you’ve seen throughout this book, that’s not true.
You can build a smart, diversified, income-focused portfolio using alternative investments that are:
- Transparent
- Professionally managed
- Widely available
- And easy to buy through your regular brokerage account
Better yet, you can do it on your terms—whether that means investing $5,000 or $500,000.
Where to Go From Here
If you’re ready to start:
- Pick one investment type from this book that interests you most—REITs, BDCs, or CEFs.
- Start small—you don’t need to overhaul your portfolio overnight.
- Track your results for a few months and see how it fits into your broader retirement plan.
Remember: you don’t have to be perfect—just intentional.
With a little knowledge, some practical steps, and a focus on safety and simplicity, you can build an income portfolio that helps you enjoy the retirement you’ve worked so hard for.
You’ve Got This
Congratulations! You’ve taken a major step toward creating smarter, safer retirement income. You’ve learned:
- Why traditional stocks and bonds may not be enough anymore
- How alternative income investments can fill the gap
- How to build a plan that works for your specific goals
Now it’s time to put what you’ve learned into action—and start enjoying the benefits of a well-diversified income stream that doesn’t keep you up at night.
Your retirement years should be about freedom, peace of mind, and steady income—and now, you’re well on your way.
Conclusion: Build Your Retirement on a Safer Foundation
You’ve now taken an important step—looking beyond the traditional stock-and-bond playbook and exploring a smarter, more stable way to generate retirement income.
You’ve learned that dependable income doesn’t have to come with sleepless nights or risky bets. With investments like REITs, BDCs, closed-end funds, preferred stocks, and senior loans, you can create a diversified retirement portfolio that delivers steady cash flow, inflation protection, and peace of mind—without the ups and downs of the stock market dictating your future.
These aren’t fringe investments. They’re time-tested tools that have quietly helped thousands of retirees live comfortably and confidently—often with far more income than traditional bonds or dividend stocks alone can provide.
You don’t need to use all of them. Start with one or two that feel like a good fit. See how they perform. Then gradually build from there.
Want to Go Deeper?
If one of the alternatives in this book sparked your interest, and you’d like to learn more, you can take a deeper dive with any of my full-length books, each designed to give you a clear, in-depth roadmap to safe income strategies:
- 📘 The Passive Landlord: Earn Safe 12% Returns Investing in REITs
Discover how to earn steady, real-estate-backed income without becoming a landlord. - 📘 The 8% Solution: Double Your Retirement Income With High-Yield Closed-End Funds
Learn how to use diversified, professionally managed CEFs to boost monthly income and reduce market stress. - 📘 9% Retirement Paycheck: How to Generate Steady, Worry-Free Income for Life
Build a powerful income portfolio using a mix of high-yield investments tailored for retirement security.
All titles are available now at Amazon.com in paperback and eBook formats.
Final Thought
Your retirement years should be about freedom—freedom from money worries, freedom to enjoy your time, and freedom to live on your terms.
The strategies in this book are here to help you do just that.
So take that next step. Review what you’ve learned. Pick one investment to explore further. And know that you’re not just chasing income—you’re building a more stable, resilient, and rewarding financial future.
You’ve got this.
Disclaimer
This book is intended for educational purposes only and does not constitute personalized financial advice. Every investor’s situation is different. Before making any financial decisions, including those involving the investments discussed in this book, please consult with a licensed financial advisor, tax professional, or other qualified expert.
All investing involves risk, and past performance does not guarantee future results. While the author has made every effort to present accurate and up-to-date information, no responsibility is assumed for errors, omissions, or outcomes resulting from the use of this material.