How to Invest for Guaranteed Income

Looking for guaranteed income? It’s not easy — and you’re unlikely to get rich from guaranteed income generators alone.

One of the fundamental rules of investing is that returns above what experts call the risk-free rate of return only come when you take some level of risk. However, as you approach retirement, it’s wise to include options that offer stability and predictability. Here are some of the most popular choices.

Guaranteed Lifetime Annuities

These contracts provide a guaranteed income for life—regardless of market performance or longevity. You can also choose a contract that continues payments for as long as you or your spouse (or another person, such as a child or grandchild) lives.

It’s important to remember that these are insurance contracts, not investments. You pay premiums to an insurance company, and in return, they are contractually obligated to make payments as outlined. The guarantee depends on the claims-paying ability of the insurer.

Fixed Annuities

If you want a guaranteed rate of return and tax-deferred growth, but don’t need immediate income, a fixed annuity may fit your needs. These products credit a set rate of return for a specified period and defer taxes until you start receiving income.

Fixed Index Annuities

Fixed index annuities are more complex insurance products, not traditional investments. They provide a modest minimum guaranteed return, along with the potential to earn more if the stock market performs well.

If the market rises, you participate in part of the gain; if it falls, you still receive your minimum guarantee. These may be suitable if you believe the market will grow, don’t need access to the funds for several years (surrender periods can last seven years or more), and prefer to avoid losses.

As with all annuities, the guarantees depend on the financial strength and stability of the issuing insurance company.

Guaranteed Investment Contracts (GICs)

Often found in 401(k) and 403(b) plans, GICs offer a guaranteed rate of return. While not backed by outside insurance, they are generally considered safe by most financial planners.

Money Market Funds

Money markets are ultra-safe mutual funds designed to maintain a $1 per share value. Fund managers invest in very short-term, high-quality securities—such as government notes, highly rated bonds, and commercial paper issued by financially stable companies.

Certificates of Deposit (CDs)

For a government-backed guarantee, consider a certificate of deposit. Banks use CDs to raise funds for lending, and in exchange, they pay you a rate slightly higher than typical savings accounts—provided you commit to keeping your money deposited for a set term.

Bank-issued CDs are insured by the FDIC, and those offered by credit unions are covered by the National Credit Union Administration (NCUA).

The Bottom Line

While no strategy can deliver high returns without risk, these guaranteed income options can help preserve your savings and provide stability in retirement. A balanced approach—combining guaranteed income with diversified investments—can help ensure both security and growth over time.