Planning for retirement
Best Investments for Retirees: What Each One Is Actually For
There's no single best investment during retirement. Retirement money has three jobs (paying income, keeping up with inflation, and sitting ready as cash), and the investment that's good at one of them is poor at another.
Key points
- Match each investment to a job: income, inflation protection, or a cash cushion.
- The safest investments for retirees, such as Treasury bills and insured CDs, protect your dollars and can lose ground to inflation.
- FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category. It doesn't cover annuities, mutual funds or stocks.
- I bonds are limited to $10,000 per person per calendar year.
- Delaying Social Security is a way to get more inflation-adjusted income for life.
The three jobs retirement money has to do
Income. Social Security replaces part of the paycheck. The rest comes from interest, dividends, or selling a little of what you own each year.
Keeping up with inflation. A retirement can run 30 years. Prices won't stand still for that long, and an income that's comfortable at 65 can feel thin at 85 if it never rises.
A cash cushion. The furnace dies, or the market drops the year you need a new car. Money you can reach without selling at a loss keeps one problem from becoming two.
No single product does all three well.
Best investments for retirees, compared by job
| Investment | What it's for | Main risk |
|---|---|---|
| Insured savings account or CD | Cash cushion; known interest | Inflation; early withdrawal penalty on CDs |
| Treasury bills (4 to 52 weeks) | Cash cushion; short-term income | Inflation; the rate may be lower when you reinvest |
| Treasury notes (2 to 10 years) | Fixed income for a set period | Price falls if rates rise and you sell early |
| TIPS | Income that tracks inflation | Price swings before maturity |
| I bonds | Inflation protection for smaller sums | $10,000 yearly limit; locked for 12 months |
| Bond funds | Regular income; steadier than stocks in most years | Value falls when rates rise; no maturity date |
| Dividend stock funds | Income with room to grow | Stock market losses; dividends can be cut |
| Broad stock index funds | Long-term growth ahead of inflation | Large drops, sometimes for years |
| Income annuities | A paycheck for life | Hard to reverse; depends on the insurer; inflation |
| Delaying Social Security | More inflation-adjusted lifetime income | You need other money to live on while you wait |
Safest investments for retirees
"Safe" here means you get your dollars back. Those dollars can still buy less later.
Bank accounts and CDs
The FDIC insures deposits up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. Savings accounts, checking accounts and CDs all count.
The FDIC lists stocks, bonds, mutual funds, annuities and life insurance as not insured, even when a bank sells them.
A CD pays a fixed rate for a fixed term, and the bank charges a penalty if you take the money out early.
Treasury bills and notes
Treasuries are loans to the U.S. government, backed by its full faith and credit. Bills run from 4 to 52 weeks. You buy them at a discount or at face value and get the face value at the end, and any difference is your interest. Notes run 2, 3, 5, 7 or 10 years and pay interest every six months.
The minimum is $100 at TreasuryDirect, and brokerages sell them too. Interest is taxed by the federal government and exempt from state and local taxes.
Hold a Treasury to maturity and you get the face value. Sell a 10-year note early after rates have risen and you'll get less than you paid.
TIPS and I bonds
TIPS (Treasury Inflation-Protected Securities) come in 5-, 10- and 30-year terms. The principal rises with the Consumer Price Index, and the fixed interest rate is paid on that adjusted principal every six months. At maturity you get the adjusted principal or your original principal, whichever is higher.
I bonds are savings bonds whose rate combines a fixed part and an inflation part that resets every six months. Per TreasuryDirect, you can buy up to $10,000 in electronic I bonds per Social Security number per calendar year, and since January 1, 2025 they're sold only electronically. I bonds issued from May 1 through October 31, 2026 earn a composite rate of 4.26%, which includes a 0.90% fixed rate. Treasury sets a new rate every May 1 and November 1, so bonds bought from November 1, 2026 will carry whatever rate is announced that day.
You can't cash an I bond for the first 12 months. Cash it before five years and you give up the last three months of interest. With that purchase limit, I bonds stay a small part of any large plan.
Best investments for retirement income
Bond funds
A bond fund holds many bonds and pays out the interest, which spreads your risk across many borrowers.
The catch: a fund never matures. A single Treasury note returns your principal on a set date, and a fund's price just follows the market. When rates rise, bond prices fall. In 2022, 10-year Treasury bonds lost about 17.8%, according to the annual return data kept by Professor Aswath Damodaran at NYU Stern. Investor.gov's bond page lists credit risk, interest rate risk and inflation risk among the risks of owning bonds.
Dividend and broad stock funds
Stocks are the usual tool for the inflation job. In Damodaran's data covering 1928 through 2025, the S&P 500 with dividends averaged about 11.9% a year before costs and inflation. It also lost money in 26 of those 98 years, with a worst year of -43.8% in 1931 and a 36.6% loss in 2008. Past returns don't guarantee future ones.
Dividend funds hold companies that pay out more of their profits in cash. Companies can cut dividends in hard times, and a dividend fund still falls when the market does. A broad index fund holds the whole market and pays a smaller dividend.
How much to hold in stocks is its own subject. Our comparison of the 60/40 portfolio and 70/30 shows what different mixes have done in good and bad years.
Annuities
An annuity is a contract with an insurance company. In its simplest form, an immediate income annuity, you hand over a lump sum and the insurer pays you a set amount every month for life. Its job is to keep you from outliving your money.
Investor.gov's annuity page makes three points we'd underline:
- The guarantee is only as good as the insurer. Its promise depends on "its financial strength and claims-paying ability." Annuities aren't FDIC insured.
- Deferred annuities carry surrender charges if you take money out in the early years.
- Deferred annuities come in several kinds (fixed, fixed indexed, registered index-linked and variable), each with more risk than the last. In the fixed and fixed indexed kinds, the cost is built into the rate or the limit on your gains.
A basic income annuity pays a flat amount, so inflation eats into it each year. And once you've bought a lifetime payout, you can't get the lump sum back.
Questions to ask before buying one:
- What is every fee, and what's the total each year in dollars?
- How long is the surrender period, and what's the charge in each year?
- How is the salesperson paid for this product?
- Does the payment ever rise, and what happens to the money if I die early?
- What's the insurer's financial strength rating, and what does my state's guaranty association cover?
Delaying Social Security
Nobody sells this one. Every year you wait past full retirement age adds 8% to your benefit, up to age 70, and claiming at 62 cuts it by 30% if you were born in 1960 or later, per the Social Security Administration.
The bigger check gets cost-of-living adjustments for life. In effect, spending from savings for a few years while you wait "buys" more inflation-adjusted lifetime income from the government. It doesn't pay off for everyone, and poor health or a need for the money now can make an earlier claim the sensible choice. Our retirement age guide lays out the claiming ages, and retiring at 62 with $400,000 shows the trade in dollars.
Putting the jobs together
One common way planners frame it: money you'll need in the next year or two goes in the cash tools, money for the following several years goes in bonds, and money you won't touch for a decade or more can sit in stocks. The right sizes depend on your spending, your other income and your nerves, and we won't put percentages on it for you. Our retirement planning guide shows how to work out the spending and income figures.
Where you hold things matters too. Interest and withdrawals from a traditional IRA or 401(k) are taxed as income, and from age 73 (75 if you were born in 1960 or later) the IRS requires yearly withdrawals. See required minimum distributions.
Our retirement calculator tests a plan with your own figures. For how much you can draw each year, read the 4% rule and the 7% rule, and for the basics of building the mix, retirement investing.
Common questions
What is the safest investment for a retiree?
For protecting your dollars: FDIC-insured deposits within the $250,000 limits, and U.S. Treasury securities held to maturity. Neither protects you from inflation over a long retirement. TIPS and I bonds add inflation protection.
What is the best investment for monthly income in retirement?
There isn't one. Social Security is the only inflation-adjusted lifetime income most people have. Bond funds, CDs and Treasuries pay interest, dividend funds pay dividends, and an income annuity pays a fixed monthly amount for life. Each carries a different risk, shown in the table above.
How much can I put in I bonds in 2026?
Up to $10,000 in electronic I bonds per person for the calendar year, according to TreasuryDirect.
Are annuities FDIC insured?
No. The FDIC lists annuities among the products it doesn't insure, even when they're bought at a bank. An annuity's guarantee depends on the insurance company that issued it.
We base our guides on primary sources such as the IRS, the Department of Labor, and federal regulators. Read our editorial policy. Spot an error? Tell us.
