We used to think of retirement as a three-legged stool. You could rely on a pension, Social Security and your own retirement savings. Now that employer-sponsored pensions are becoming a thing of the past, that stool is looking a little wobbly. There are strategies we can use to create our own pension in retirement.


Annuities can increase your retirement confidence. A recent survey asked retirees if they are confident they will be able to maintain their desired lifestyle. Among those who own an annuity, 73% were confident they can keep up their lifestyle in retirement. Among those who do not own an annuity, that number drops to 64%. An annuity is backed by an insurance company and can provide you with a steady stream of income for the rest of your life. There are four types of annuities:

  • Fixed annuities are similar to a Certificate of Deposit or a CD. You put in money for a set amount of time – the accumulation phase – and it grows at a fixed rate. Fixed annuities are predictable. You will know on the front end how much you will receive during the distribution phase.
  • Unlike fixed annuities, variable annuities carry risk. With a variable annuity you are putting money into various investments. You may be able to choose the investments, or they may be pre-set. Either way, if those investments lose value, so does your annuity.
  • Indexed annuities are tied to a market index, like the S&P 500. Your investment will grow when that index goes up, however your money is guaranteed and you will not lose when that index goes down. In exchange for that protection, most indexed annuities have a cap on what you can earn.
  • With an immediate annuity, you can turn a lump sum of money into a steady stream of income for as long as you live. You will not get much return from an immediate annuity, but you will have predictable cash flow throughout retirement.

Dividend Stocks & ETFs

You can buy dividend stocks in your IRA or another taxable investment account. The downside here is that your money is not guaranteed, so you must think about if you can tolerate market fluctuations. You can also consider exchange-traded funds, or ETFs. ETFs are like a basket of securities, which means they offer more diversification than individual stocks. Like any investment, you need to understand what you’re buying with an ETF.

Things to consider with an ETF include:

  • As with any fund, the volatility can vary widely. Some ETFs are double or triple leveraged on the underlying asset. This means if it drops, you could lose two to three times the amount.
  • You also want to make sure that it’s not thinly traded. This means that you want an ETF that has interested buyers. If not, you could go to sell and there’s no one to buy.
  • ETFs can typically be very competitive from a fee standpoint, but if you’re comfortable with the risk of owning individual stocks, your fees could actually be higher in an ETF.

In retirement, we really advocate to find a Certified Financial Planner that can help develop a plan. Many of us have handled our own investments, sometimes for decades. Working with a trusted financial professional will help ensure you have a plan that will work for you.

Real Estate

Investing in real estate can be a good move for additional income in retirement, but it can also be risky. Some retirees will manage the properties they rent, others will hire a management company to do it for them. If you go the second route, you will save time, but the annual fee will add up to about one month’s rent. You may also consider investing in real estate investment trusts, or REITs. They don’t typically correlate with the market, which means REITs may not have the same volatility we’re seeing on Wall Street these days. However, REITs can be risky. Just like any investment, it’s important to understand the risks before you invest.

CD Ladder

Certificates of deposit, or CDs, act like a savings account. You deposit your money, and in exchange you will receive a set interest rate. On the plus side, CDs are low risk and usually low in fees. On the downside, unlike a savings account, you must agree to leave your money untouched for a period of time or risk getting hit with a penalty. CDs typically have higher interest rates than savings accounts. You may be able to get a 2% – 2.5% return on your money if you meet certain minimums. You’ll also get larger returns if you agree to longer terms. A strategy with CDs is to “ladder” them, which means staggering their maturity. For example, if you had $10,000 to invest, you could put $2,000 each into a one-year CD, a two-year CD, a three-year CD, a four-year CD and a five-year CD. If you don’t need the money after one year, you can re-invest that first CD into another five-year CD. This way, you will have money available each year, helping with the liquidity issue.


The Retirement Ready radio show is featured every Saturday on WTMJ 620 AM at 1:00 pm. We will bring you information on: Social Security options, retirement trends, options to retire with life changes and achieving a secure financial future. Listen live here: WTMJ 620AM LIVE

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Drake & Associates does not offer tax or legal advice.