7 High-Return Low-Risk Investments for Retirees in 2025

Why Low-Risk Doesn’t Have to Mean Low Return

If you’re retired or approaching retirement, you’ve probably heard the same tired advice: “Move everything to bonds and cash.” In my 18 years as a Certified Financial Planner, I’ve watched that blanket guidance cost retirees tens of thousands of dollars in missed income. The truth is more nuanced—and more hopeful.

With the 2026 Social Security cost-of-living adjustment coming in at just 2.8% while Medicare Part B premiums continue climbing, the squeeze on retirees’ purchasing power is real. A recent Employee Benefit Research Institute survey found that 38% of retirees are depleting savings faster than projected, largely due to persistent inflation in healthcare and housing costs. That’s not a reason to panic. It is a reason to be strategic.

What I see most often is retirees falling into one of two traps: either they take on far too much risk chasing yield, or they park everything in a checking account earning 0.01% and watch inflation silently erode their nest egg. The seven investments below occupy the sweet spot—meaningful returns with guardrails that let you sleep at night. For a deeper look at how inflation quietly damages portfolios, I recommend reading The Silent Killer for Retirement Portfolios: A CFP’s Guide.

1. U.S. Treasury I Bonds

I Bonds remain one of the most underutilized tools in a retiree’s arsenal. Issued by the U.S. Treasury, they carry zero default risk and pay a composite rate that adjusts every six months with the Consumer Price Index. As of May 2025, the composite rate sits at 3.11%.

The purchase limit is $10,000 per person per calendar year through TreasuryDirect.gov, plus an additional $5,000 if you direct your tax refund toward paper I Bonds. A married couple can therefore shelter $30,000 annually in an inflation-indexed, tax-deferred instrument. Interest is exempt from state and local taxes, too.

Key Considerations

• You cannot redeem I Bonds within the first 12 months.
• Redeeming before five years forfeits the last three months of interest—a minor penalty for a very safe investment.
• They’re ideal for the portion of your emergency fund you won’t need immediately.

2. Treasury Inflation-Protected Securities (TIPS)

TIPS are the I Bond’s more liquid cousin. Traded on the secondary market, they adjust their principal value with inflation and pay a fixed coupon on top. In mid-2025, 5-year TIPS are yielding a real return of approximately 1.8% above inflation—historically attractive territory.

I often tell my clients that a TIPS ladder—buying individual TIPS maturing in consecutive years—creates a predictable, inflation-adjusted income stream that mimics a pension. If you hold to maturity, you eliminate interest-rate risk entirely. TIPS mutual funds and ETFs offer convenience but carry price volatility, so individual securities are usually better for retirees who need certainty.

“A retiree who built a 10-year TIPS ladder in 2015 has seen their income keep pace with 31% cumulative CPI inflation through 2025—without touching a single share of stock.”

3. High-Yield Savings Accounts and Money Market Funds

This is your liquidity layer. As of August 2025, several FDIC-insured online banks are paying between 4.25% and 4.75% APY on high-yield savings accounts. That’s not a misprint—these rates have held up even as the Federal Reserve began modest rate cuts in late 2024 and early 2025.

For slightly higher yields with similar safety, government money market funds invest in short-term Treasury bills and repurchase agreements. Vanguard’s Federal Money Market Fund (VMFXX) was recently yielding 4.48%. These funds aren’t FDIC-insured, but because they hold government-backed securities, the risk of loss is essentially negligible.

How Much to Keep Liquid

• I generally recommend retirees maintain 6 to 12 months of living expenses in high-yield savings.
• Any additional cash needed within 1–2 years can sit in a money market fund.
• Earnings are taxed as ordinary income, so consider holding these in an IRA if your tax bracket is high.

4. Certificates of Deposit (CD) Ladders

CDs offer the one thing retirees value above almost everything else: certainty. You deposit a fixed amount, receive a guaranteed rate, and get your principal back at maturity. With current 12-month CD rates hovering around 4.30–4.60% at competitive banks and credit unions, the math is straightforward.

A CD ladder spreads your money across multiple maturities—say, 6-month, 12-month, 18-month, and 24-month CDs. As each rung matures, you either spend the proceeds or reinvest at the longest rung. This approach provides regular access to cash while capturing higher long-term rates. According to Investopedia, CD laddering is one of the most effective strategies for retirees who want predictable income without market exposure.

One caution: early withdrawal penalties can be steep—typically 3 to 6 months of interest for CDs under a year. Always confirm the penalty schedule before you buy. If flexibility matters, look into no-penalty CDs, which typically yield about 0.25% less but give you full liquidity.

5. Dividend Aristocrat Stocks

This is where we inch slightly up the risk spectrum—but with good reason. Dividend Aristocrats are S&P 500 companies that have increased their dividend every year for at least 25 consecutive years. The list includes names like Johnson & Johnson, Procter & Gamble, Coca-Cola, and 3M.

These aren’t speculative growth stocks. They’re mature, cash-rich businesses that have maintained payouts through the 2008 financial crisis, the 2020 pandemic, and every recession in between. The S&P 500 Dividend Aristocrats Index has historically delivered annualized total returns of approximately 10.5% over the past 20 years, with lower volatility than the broader market.

Why They Belong in a Retiree’s Portfolio

• The average Dividend Aristocrat yields roughly 2.4–2.8%, with dividends growing 6–8% annually.
• Qualified dividends are taxed at the favorable long-term capital gains rate (0%, 15%, or 20% depending on income).
• A basket of 15–20 Aristocrats, or a low-cost ETF like NOBL, provides diversification without complexity.

That said, stocks carry real risk. I typically suggest retirees allocate no more than 20–35% of their portfolio to equities, depending on their time horizon and other income sources. If you’re concerned about how inflation interacts with stock holdings, take a look at Inflation and Retirement Savings: 5 Myths That Cost Seniors.

“In my practice, the retirees who weather downturns best aren’t the ones with the highest returns—they’re the ones with two to three years of spending in safe, accessible assets so they never have to sell stocks at a loss.”

6. Investment-Grade Corporate Bond Funds

When interest rates rose sharply in 2022–2023, bond prices took a historic hit. Many retirees swore off bonds entirely. But here’s what most people miss: if you’re buying bonds for income and holding to maturity (or holding a fund long enough), higher rates are a gift, not a punishment.

Investment-grade corporate bond funds hold debt from companies rated BBB or higher by major credit agencies. As of mid-2025, intermediate-term investment-grade funds are yielding between 4.8% and 5.5%. Vanguard’s Intermediate-Term Investment-Grade Fund (VFICX) currently yields around 5.1% with an average duration of roughly 6 years.

Managing the Risk

• Stick to intermediate-term funds (3–7 year duration) to balance yield and price sensitivity.
• Avoid high-yield (“junk”) bonds, which can behave more like stocks during downturns.
• Consider holding bond funds inside tax-deferred accounts since interest is taxed as ordinary income.

For retirees who want individual bond certainty without the research burden, target-maturity bond ETFs (like the iShares iBonds series) function like a CD with a known maturity date, but offer corporate bond-level yields.

7. Fixed and Fixed-Indexed Annuities

I’ll be honest: annuities have a complicated reputation. Some of it is deserved—variable annuities with high fees and surrender charges have burned many retirees. But plain-vanilla fixed annuities and properly structured fixed-indexed annuities (FIAs) can serve a very specific and valuable role.

A multi-year guaranteed annuity (MYGA) works almost identically to a CD, except it’s issued by an insurance company. In August 2025, 5-year MYGAs from A-rated carriers are paying 4.6–5.0%, often beating comparable CDs. Interest grows tax-deferred until withdrawal, which is a significant advantage for retirees in higher brackets who don’t need the income immediately.

Who Should Consider Annuities

• Retirees who have maximized their IRA and 401(k) contributions and want additional tax-deferred growth.
• Those without a pension who want guaranteed lifetime income—a single premium immediate annuity (SPIA) can replicate pension-like payments.
• Anyone with longevity in their family who worries about outliving savings. A deferred income annuity purchased at 65 that begins payments at 80 can be remarkably cost-effective.

The key is working with a fee-only advisor (not a commission-based agent) and comparing quotes from multiple carriers. Never put more than 25–30% of your liquid assets into any annuity. Liquidity matters, especially when unexpected healthcare costs arise. The Consumer Financial Protection Bureau offers a helpful guide on evaluating annuity contracts before you sign.

Putting It All Together: A Sample Allocation

Every retiree’s situation is different, but here’s a framework I frequently use with clients in their mid-60s who have $500,000 to $1 million in investable assets and Social Security covering about 40% of their expenses:

• Liquidity (15–20%): High-yield savings and money market funds for 6–12 months of spending.
• Short-term income (20–25%): CD ladder and I Bonds covering years 1–3 of withdrawals.
• Intermediate income (20–25%): TIPS ladder and investment-grade bond funds for years 3–7.
• Growth with income (20–25%): Dividend Aristocrat stocks or a low-cost dividend ETF.
• Guaranteed floor (10–15%): MYGA or SPIA annuity for baseline income certainty.

This allocation targets a blended return of roughly 4.5–5.5% annually while keeping maximum drawdown risk well below what a stock-heavy portfolio would experience. More importantly, it gives you two to three full years of spending without ever needing to sell equities during a downturn.

The Risks You Still Need to Watch

Low risk is not no risk. Here’s what to stay vigilant about:

• Inflation persistence: If CPI stays above 3.5%, your purchasing power erodes even with these strategies. Revisit your allocations at least annually. For actionable steps on this front, see 7 Ways to Stop Inflation From Depleting Retirement Savings.
• Tax drag: Interest from bonds, CDs, and savings accounts is taxed at your ordinary income rate—potentially 22% or more. Use Roth conversions strategically to shift future income into tax-free territory. The IRS provides updated Roth conversion rules and income thresholds each year.
• Fraud: Scammers specifically target retirees sitting on substantial savings with “guaranteed high return” schemes. If any investment promises more than 6–7% with “no risk,” walk away.
• Healthcare costs: Fidelity estimates the average 65-year-old couple will need approximately $315,000 for healthcare expenses in retirement (2024 estimate). Make sure your investment plan accounts for Medicare premiums, supplemental coverage, and potential long-term care needs.

Your Next Move

You don’t need to overhaul your entire portfolio this week. Start with the easiest wins: open a high-yield savings account if you’re still earning 0.01% at a big bank. Buy your annual $10,000 in I Bonds before December 31. Request a CD rate sheet from your local credit union.

Then schedule a comprehensive review—whether with a fee-only CFP® or on your own—to build a strategy that balances the seven categories above against your specific Social Security benefit, pension income, tax situation, and spending needs. The goal isn’t to get rich in retirement. The goal is to never run out, to keep pace with inflation, and to have enough margin that a bear market or a medical surprise doesn’t derail everything you’ve worked for.

That’s not just possible with high-return low-risk investments for retirees—in today’s rate environment, it’s entirely achievable.