Retirees May Have a Better Option Than Dividends Right Now

Dividends should play a major role in the passive income portfolios of retirees. But with market valuations getting just a tad on the high end, I do think that retirees should think about diversifying their portfolio’s passive income streams. Undoubtedly, there is a wide range of securities that offer fairly bountiful yields, some of which may require taking little to no market risk.

Of course, by taking on no market risk, you’ll have to settle for a lower return. But with competitive yields on a wide range of instruments, I think there’s never been a better time to diversify beyond dividend stocks, especially for retirees who want to take a bit of risk off the table in 2025, even if it’s tough to do so amid the roaring bull market and high hopes for the S&P 500.

As always, every retiree’s risk tolerance will vary. Many may be better served by sticking with primarily dividend stocks, provided they’re able to ride out the waves of the market along the way to one’s golden years.

Some other retirees may feel comfortable betting on higher-momentum technology names, which, while incredibly volatile, can also yield a good amount while spoiling shareholders with frequent dividend hikes. Perhaps Broadcom (NASDAQ:AVGO) and IBM (NYSE:IBM) are the most notable among the high-tech firms with healthy dividends, which sit at 1.0% and 2.5%, respectively, at the time of writing.

In this piece, we’ll take on a more conservative approach for retirees who want to subtly reduce their equity exposure over time without cutting into the passive income they’ll receive from investments. Perhaps it is possible to increase one’s passive income while derisking one’s portfolio. Here are alternative options that may be a better fit for more conservative retirees who are becoming more cautious than optimistic.

The 10-year Treasury Note yields more than 4.5%

The 10-year note yield is settling just north of 4.5% after briefly flirting with 4.8% earlier this year. Undoubtedly, yields are a whole lot higher than they were three years ago. With growing macro uncertainties, I wouldn’t be surprised if bond yields made another run for new highs. And if tariffs end up kicking off a trade war, perhaps bond yields could get a whole lot higher.

Either way, a lack of tariffs could also act as a drag on yields and a jolt for prices. Either way, I think Treasury bonds are starting to look quite attractive again, especially if you want a yield that’s less correlated to the stock market.

Of course, the bond market has been mirroring the stock market in recent years, a rare phenomenon that may or may not continue over the coming years. Either way, early 2025 doesn’t seem like all too bad a time to top up one’s bond exposure, especially if you’ve grown uncomfortable with how large your equity allocation may have grown amid the great 2023-2025 bull market. Whether you’re considering a 3-month T-Bill or a 10-year note, there are attractive options in the bond market right now for those retirees seeking yields in the ballpark of 4-5%.

Real estate investment trusts (REITs) offer outsized yields at reasonable valuations.

Real estate investment trusts can be a great income option for retirees who are open to the volatility that comes with being a lazy landlord. Indeed, the REITs can be choppy at times, but if you’re in the market for a particularly high yield, there are options out there that could be worth checking out.

Crown Castle (NYSE:CCI), which is in the business of cell towers, boasts a towering (forgive the pun) 7% yield. The REIT is closer to a stock than a bond, but for fans of low-cost, ultra-high-yields, the name is worth watching closely as shares look to bottom out after a multi-year crash off 2021 all-time highs.

High-yield savings accounts (HYSAs) are worth parking one’s cash.

Finally, high-yield savings accounts (HYSAs) can be a quick, efficient way to get high interest on one’s parked cash. They’re pretty straightforward solutions that can provide bang for the buck in today’s higher-rate world. SoFi Technologies (NASDAQ:SOFI) has a savings account that’s flirting with 4%—a pretty good rate to hold dry powder on the sidelines. Though SoFi is more popular with Millennials rather than Baby Boomers, I do think retired Boomers can do rather well with everyday cash stashed in their HYSAs at these elevated rates.

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