The strategy that built your retirement savings probably won't be the one that protects them. Growth-focused investing works great when you're 35 and adding money every paycheck. It works differently when you're 60 and need that money to produce income you can count on every month.
The stock market averages 10% per year over long periods. But "average" is misleading when you're withdrawing money. A bad year at the wrong time can permanently damage a portfolio you're drawing from (that's called sequence of returns risk, and I wrote a separate article about it). The point is that depending entirely on the stock market for retirement income introduces a type of risk that doesn't exist during your accumulation years.
Here are five ways to generate retirement income that aren't tied to what the S&P 500 does on any given Tuesday.
1. Treasury Bonds and CDs
The simplest option. You lend money to the U.S. government (Treasuries) or a bank (CDs), and they pay you a fixed interest rate for a set period.
As of early 2026, 5-year Treasury notes are yielding around 4%. A 1-year CD at a competitive online bank pays roughly 4.5%. These rates are the highest they've been in over 15 years, which makes this option more viable than it was during the decade of near-zero rates.
On $200,000, a 4% Treasury yield gives you $8,000 per year, or about $667 per month.
The advantages are obvious: these are among the safest investments in the world. Treasuries are backed by the U.S. government. CDs up to $250,000 are FDIC insured. You know exactly what you're getting and when.
The disadvantage is equally obvious: the yields are modest. If you need $4,000 a month in retirement income and you're earning 4%, you'd need $1.2 million in Treasuries. Most people don't have that. So bonds and CDs work well as a foundation, but they're rarely enough on their own.
2. Dividend Stocks
Companies that pay regular dividends give you income without requiring you to sell shares. A diversified dividend ETF like Vanguard High Dividend Yield (VYM) currently yields around 2.8%. Individual dividend aristocrats (companies that have increased their dividend for 25+ consecutive years) typically yield 2-4%.
On $200,000 in a dividend ETF yielding 3%, you'd receive $6,000 per year, or $500 per month.
The appeal is that you get income while still participating in the growth of the stock market. Over time, the companies increase their dividends, which gives you a built-in raise. And you still own the shares, so your principal can appreciate.
The risk is that you're still in the stock market. In 2020, dozens of companies cut or suspended their dividends. Your account balance fluctuates daily. If you need steady income and you're checking your portfolio every morning, that volatility takes a real psychological toll even if the math works out long-term.
3. Real Estate Investment Trusts (REITs)
REITs are companies that own income-producing real estate (apartment buildings, office towers, warehouses, healthcare facilities) and are required by law to pay out at least 90% of their taxable income as dividends. You can buy them like stocks through any brokerage.
A diversified REIT ETF like Vanguard Real Estate (VNQ) yields around 3.5%. Sector-specific REITs can yield more, but with more concentration risk.
On $200,000, a 3.5% REIT yield gives you $7,000 per year, or about $583 per month.
REITs give you exposure to real estate income without owning or managing property. That's the advantage. The disadvantage is that publicly traded REITs move with the stock market. In 2022, VNQ dropped 26%. You're getting real estate income, but the share price is still subject to market sentiment, interest rate changes, and economic conditions. It's more volatile than owning a property directly.
4. Fixed Annuities
An annuity is a contract with an insurance company. You give them a lump sum, and they guarantee you a fixed payment for a set period or for life. A fixed annuity locks in a rate at the time of purchase.
Current rates on a 5-year fixed annuity are around 5-5.5%. A single premium immediate annuity (SPIA) for a 65-year-old might pay around 6.5-7% of the premium amount annually for life.
On $200,000 in a SPIA at 6.5%, you'd receive $13,000 per year, or about $1,083 per month, guaranteed for life.
The advantage is the guarantee. An insurance company is contractually obligated to pay you. For people who want certainty above all else, annuities provide it.
The disadvantages are real. Once you hand over the money, it's typically gone. You've traded a lump sum for an income stream. If you die early, the insurance company keeps the balance (unless you pay extra for a death benefit rider). The payments are fixed, so inflation erodes their purchasing power over time. And the fees and complexity of annuity contracts can be hard to evaluate. Read the fine print carefully, or better yet, have a fee-only financial advisor review it for you.
5. Private Real Estate Lending
This is the one most people haven't heard of. You lend capital to a real estate operator who uses it to acquire a property. Your loan is secured by a first-position lien on that property, recorded through a title company. You receive fixed monthly payments for the term of the note, typically 5-7 years. When the note is paid off, your principal is returned.
Yields on private real estate notes typically range from 8-12%, depending on the deal structure, term length, and loan-to-value ratio.
On $200,000 at 10%, you'd receive roughly $20,000 per year, or about $1,667 per month (on a fully amortized note, some of each payment is principal return, so the interest income portion decreases over time as the balance declines).
The advantage is the combination of yield and structure. Payments are fixed. They don't fluctuate with the stock market. You hold a lien on a real property, which is the same protection a bank has on a conventional mortgage. And you don't manage the property. The buyer (or tenant) handles all of that.
The disadvantages are illiquidity and concentration. You can't sell a private note on an exchange. Your money is committed for the term. And unlike an ETF that holds hundreds of positions, a single note is concentrated in one property. Due diligence matters here more than in most investments. You need to trust the operator, understand the property, and be comfortable with the terms before committing capital.
Putting It Together
No single strategy on this list is the complete answer. Each one has trade-offs. Treasuries are safe but low-yielding. Dividend stocks pay more but fluctuate. Annuities guarantee income but sacrifice flexibility. Private notes offer the highest yields but require due diligence and aren't liquid.
The people who build sustainable retirement income typically use some combination. A base of guaranteed income (Social Security, maybe a pension or annuity) covers essential expenses. A layer of moderate-yield holdings (bonds, dividend stocks) provides additional cash flow with some growth potential. And a smaller allocation to higher-yielding alternatives (private notes, REITs) boosts the total income number.
The specific mix depends on your situation. How much do you need per month? How much do you have saved? What's your risk tolerance? When do you plan to retire? There's no universal answer. But there is a framework: cover your needs with guaranteed income, then build from there.
If you want a deeper comparison of these strategies with specific numbers and a due diligence checklist, I put together a free guide that walks through all five side by side.