Retirement income products
Retirement income products
Designing a portfolio for retirement income

Dan YuDan Yu
Managing director of EisnerAmper's Wealth Division and lead retirement expert

For retirees with $500,000 saved up, Dan Yu recommends diversifying with plenty of investments that will generate income. In fact, 70 percent of his portfolio consists of fixed-income investments.

"What we want to have is income streams from a diversified bond mutual fund. Due to the limited asset base, bond funds would be the best choice from a diversification standpoint. It should be understood that as interest rises, bond fund principal will suffer some decline," he says.

To minimize the damage from rising interest rates, investors should keep the average maturity of the bond fund under four years.

To avoid losing purchasing power due to inflation, he recommends allocating about 30 percent to equities. Using more aggressive investments will provide growth over time that should outstrip the rate of inflation. Of course, aggressive investments come with higher risk.

Dan Yu's portfolio recommendation
Dan Yu's portfolio recommendation

70 percent fixed income / 30 percent equities

"One thing that could be added is a fixed annuity that pays out almost immediately or within 30 days after contributing the capital. That is one way to hedge the bet of them living a long life; at least there is a fixed income stream in addition to what Social Security provides," says Yu. He would allocate $50,000 to the annuity.

"An immediate fixed annuity for a 70-year-old should provide about $250 per month. This will vary a bit from company to company," he says.

The secret to finding a good annuity is getting good advice. Variable annuities tend to be trickier with a lot of hidden fees that are not in the client's best interest, says Yu.

In addition to the fixed annuity, Yu recommends using $100,000 to build a CD ladder.

As the CDs mature, the investor could evaluate his or her financial position and decide how much to roll back into the ladder.


In Yu's example, the retiree would get income from dividends and capital gains in addition to the interest from the CD ladder, bond fund and regular payments from the fixed annuity.

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