Morningstar's Guide to Income Investing (2024)

Hell hath no fury like a retiree seeking income.

Although bond yields have ticked up during the past year, they're nothing to write home about: As of this writing, the 10-year Treasury bond yields 1.5% and the 30-year Treasury bond yields 2.2%. Even though ongoing fiscal spending may bolster the economic recovery and stoke inflation, the Federal Reserve has made clear it has no plans to hike rates any time soon.

In the words of Warren Buffett, bond investors face a "bleak future."

So what’s an income-seeker to do?

Dipping a toe in more diversified bond “plus” funds or adding some other types of income-producing securities, such as dividend stocks, REITs, or preferreds, is one option.

Another is rethinking the idea of “income” entirely and instead focusing on generating cash flows in retirement.

“When yields are meager, as they have been for the past decade, pruning appreciated positions to meet living expenses is a way to raise cash while also reducing a portfolio's risk level,” explains Morningstar's director of personal finance Christine Benz. “Holding a cash ‘bucket’ and/or employing a simple annuity product are other tools that can help stabilize a retiree's cash flows.”

Morningstar’s Guide to Income Investing helps investors explore all their options.

Generating Income in Retirement

How to Extract Income from a Retirement Portfolio

We compare different strategies for generating cash flows, from pure total return to income-centric approaches to annuities.

Wade Pfau: The 4% Rule Is No Longer Safe

The noted retirement researcher discusses how pre-retirees and retirees can adjust their plans in times of market stress.

The Good News About Retirement Income

A lower starting withdrawal rate doesn't guarantee you'll have to live on less.

Should Retirees Adopt a Flexible Withdrawal Strategy?

Retirees should consider being flexible with their spending plan.

How Do Flexible Retirement Withdrawals Work in Practice?

Financial planner and retirement researcher Jonathan Guyton explains how to implement spending rules that fluctuate with the market--but not too much.

Will the Real Retirement Income Number Please Stand Up?

Is the 4% rule too high, too low, or just right?

Retirees: If You Love Income, You Should Love Cash Flow Even More

You diversify your investments; why wouldn’t you diversify how you source your in-retirement living expenses?

What Retirees Get Right About Their Retirement Income Instinctively, they understand how to stretch their portfolios.

Is the Retirement-Income Party Finally Over? Today's retirees will have difficulty continuing a long and happy trend. When Higher Inflation Meets Your Withdrawal Rate While few are predicting a 1970s-style inflation spiral, it's still worth thinking through how inflation could affect your plan.

Wondering About Withdrawal Rates? Noted retirement researcher and financial planner Jonathan Guyton visits to discuss his take.

Dividend-Paying Stocks

What's the Difference Between Dividend Yield and Dividend Growth Stocks?

Whether you're in the market for a company paying a juicy yield or one that's growing its payout, here are some things to keep in mind.

Top Dividend-Stock Funds These mutual funds and ETFs pursue various dividend strategies and earn Morningstar Analyst Ratings for Silver or Gold.

10 Superior Dividend Stocks These stocks are good choices whether you're looking for dividend growth, down-market defense, or inflation protection.

5 Dividend Stocks That Are Sustainable Twice Over These stocks offer solid dividends and low ESG risk.

10 Solid Dividend-Paying Stocks on Sale We think the payouts on these names are sustainable.

Fixed-Income Securities

The Best Taxable-Bond Funds

Here are the highest-rated mutual funds and exchange-traded funds across a series of taxable fixed-income Morningstar Categories.

A Checklist for Taxable-Bond-Fund Investors

Five considerations for those investing in fixed-income funds.

What Are Municipal Bonds?

These five questions can help you figure out whether to invest in municipal bonds (and the best way to do it).

The Best Municipal Bond Funds

Here are the highest-rated mutual funds and ETFs across a series of municipal bond fund categories.

For Bond Funds, Is Core-Plus Really a Minus?

Last year’s turbulent fixed-income market sheds some light on the limitations of intermediate core-plus bond funds.

Other Income-Producing Securities

3 Income Alternatives to Consider

There are risks and rewards for income-seekers who turn to preferred stocks, REITs, and core-plus bond funds.

Why Preferred Stocks Don't Make Good Bond Substitutes

Their yields might look tempting, but they come with a few drawbacks.

A 13% Yield: What Could Go Wrong?

There’s not much to like when it comes to structured notes.

Why I'm Lukewarm on Real Estate

Although attractive to yield-seekers, REITs aren't as compelling as they used to be.

Low Interest Rates, Unchartered Bond Markets, and the Income Conundrum Extraordinary times may require adjusting expectations.

Annuities

Is It the Right Time for Annuities? Why investors should consider guaranteed income as part of their retirement strategy.

Using Annuities to Mitigate Risk The Retirement Income Journal editor Kerry Pechter tackles common annuity misconceptions.

Do Annuities Belong in Your Retirement Tool Kit?

These vehicles can be bewildering.

Is an Annuity Right for You?

To understand whether these complicated products might suit you, start with the goals you have for your money.

Understanding the 4 Key Annuity Types

Annuities can offer valuable protection against outliving your assets, but they can also be high-cost and complicated. We dig into some pluses and minuses.

How to Invest in an Annuity

If you’ve decided to purchase an annuity, you’ll also need to think through where to hold it, how much to annuitize, and when to make the buy.