No matter how carefree we are in our youth, as we start to approach retirement age, we begin to value reliability and predictability — in our portfolios as well as our Wi-Fi connections.

It’s also when we begin to prioritize income generation over capital growth. Fortunately, income-focused doesn’t have to mean low return, and a fixed-income portfolio might be just the ticket for a financially carefree retirement.

With the right combination of investments, your fixed-income portfolio can generate the money you want and the peace of mind you need. But what is the right combination?

While your personal circumstances definitely come into play (which is why it’s always worth consulting with your financial advisor), we suggest these four must-have elements:

1. Exchange-traded funds (ETFs)

Think of exchange-traded funds as cousins to mutual funds. They hold what traders call a basket of commodities. In other words, they include some stocks and some bonds — just like their cousins.

Unlike mutual funds, however, ETFs are traded throughout the day. Also, ETFs tend to cost less than mutual funds, despite their small trading fees. Not all EFTs are fixed-income EFTs, but those that are do invest in fixed-income securities such as bonds.

2. Investment-grade corporate and government bonds

By investing in investment-grade corporate and government bonds, you gain a reliable source of income. Sold by brokerage firms and banks, bonds usually pay dividends every six months until the bond’s maturity date.

Government treasury bonds, generally considered one of the safest, are long-term investments, maturing after 10 years. Investment-grade corporate bonds have more flexibility, maturing at various intervals, starting at five years.

3. High-yield bonds

Also known as junk bonds, high-yield bonds are riskier than investment-grade corporate bonds. These bonds come from corporations with higher default risks, such as startup companies, and their credit ratings can be quite low.

However, investors continue to include junk bonds in portfolios because they can yield 150 to 300 basis points more than investment-grade corporate bonds. In addition, high-yield bonds carry less risk when included in ETFs or mutual-fund investments.

4. Certificates of deposit (CDs)

CDs are best described as inaccessible savings accounts with modest returns. Issued by commercial banks, CDs are insured by the FDIC up to $250,000 per individual.

CDs come with a fixed maturity date and interest rate. Extremely safe, they tend to have lower yields. However, by laddering your investment through CDs with different maturity dates, a higher yield is possible.

Pro tip!

The ladder strategy can be used with both CDs and bonds. Here’s how it works: The investor opens several CDs with different maturity dates. As an account matures, the investor can then reinvest the money into another CD — hopefully at a higher rate. Laddering also allows investors to access funds at regular intervals as the CDs mature. Many investors ladder their accounts so one matures every year.

The bottom line

Of course, everyone’s portfolio should be individualized according to their personal assets and needs. As you answer questions such as “Is immediate access to my funds needed?”and “Is long-term or short-term investment right for me?” your financial planner will help determine what investments work best within your fixed-income portfolio.

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