Investing in retirement is different from investing for retirement. One obvious reason: Time horizons—investors who are still decades from retirement can invest their retirement savings aggressively, secure in the knowledge that they have plenty of time to wait out extended market downturns. That’s a luxury that investors who are in or near retirement no longer have.
But divergent time horizons are only one reason why the investments selected for retirees’ portfolios could differ from those of pre-retirees, according to PGIM’s retirement-investing expert David Blanchett, PhD, CFP, CFA. Bottom Line Personal asked Blanchett to discuss the investment categories that make particular sense for the retirement plans and portfolios of people who are near or beyond the end of their careers…
Single premium immediate annuities (SPIAs) and deferred income annuities (DIAs) are types of annuities that can provide retirees with a guaranteed income stream for life. The term “annuity” encompasses a diverse range of insurance products, some of which have earned poor reputations due to high fees and virtually incomprehensible complexity. Those drawbacks typically don’t apply to SPIAs and DIAs, which are simple enough that it’s relatively easy to determine if the buyer is getting a good deal.
SPIA
With this type of annuity, the buyer makes a single payment to an insurance company, and then the insurer makes recurring payments to the annuity buyer, which might occur monthly, quarterly or yearly, depending on the annuity terms selected, and typically are guaranteed to continue for the rest of the annuity buyer’s life. It is also possible to purchase a SPIA that makes payments for a fixed number of years or for the lifetime of the annuity buyer and his/her spouse, whichever is longer, among other possibilities.
A common misconception with SPIAs is that if you die, your payments are stopped. While this is true for “life-only” benefit options, this product is actually rare. Most SPIAs include some type of provision where you’re guaranteed to get some minimum level of benefits. Example: If it’s a 10-year SPIA, you’ll get at least 10 years of payments.
Another common guarantee is “cash refund,” which guarantees you’ll get at least your initial premium back regardless of when you die.
DIA
This annuity is very similar to a SPIA except that it doesn’t begin making payments until a future year determined by the annuity buyer.
Because SPIAs and DIAs typically provide income for as long as the annuity buyer is alive, they can serve as a form of longevity insurance. Retirees with SPIAs or DIAs don’t have to worry that they could end up living on Social Security benefits alone if they outlive other savings, a common fear, especially in this era when even the future size of Social Security benefits can seem uncertain.
Important: Unlike Social Security benefits, annuity payments cannot be explicitly linked to keep pace with inflation. While it often is possible to include a rider that offers a fixed annual increase, these riders don’t guarantee that the annuity’s payouts will keep up with inflation.
Multi-Asset Funds
Multi-asset funds, essentially all-in-one portfolios, are an excellent choice for retirees who are searching for a simple investment option. This mutual fund category includes both “target-date funds,” which feature asset allocations crafted for investors who have reached or expect to reach retirement on or around a particular year…as well as “balanced funds,” which typically divide their holdings among stocks, bonds and possibly other investment categories according to a relatively fixed and clearly stated allocation. One extremely common balanced fund allocation is 60% stocks/40% bonds.
Most investors already understand the upside of dividing one’s savings between stocks and bonds in retirement—stocks provide the growth potential that all investors need, including retirees…while bonds provide a measure of stability that’s especially important in retirement when there’s no time to wait out extended market downturns.
Some retirees might ask, Why use a multi-asset fund to accomplish this? After all, a retired investor could divide his/her savings between stocks and bonds—or between stock funds and bond funds—without the help of a single mutual fund that invests in both. Taking a DIY approach to diversification is perfectly reasonable for experienced, disciplined investors who monitor their portfolios and reallocate assets as necessary—but not everyone pays enough attention to their portfolios…and some people who do monitor their investment portfolios closely may make poorly timed, reactionary investment decisions in response to sharp stock market movements.
Hiring a professional money manager to oversee one’s retirement savings can be a prudent solution to these sorts of problems. When you invest in a multi-asset fund, you are in essence hiring a professional money manager to build your portfolio for you. If you put your money in a highly rated multi-asset fund offered by a major mutual fund company, the financial pro who runs that fund serves as the money manager, choosing an appropriate portfolio mix and selecting investments on your behalf. This multi-asset fund manager’s résumé will probably be more impressive than those of most or all of the financial planners you could hire in your area…his financial decisions very likely will be subject to greater oversight than a local financial planner’s would be…and the fund manager’s expertise is likely to be available at a bargain price. Example: A report by mutual fund rating firm Morningstar found that the average fee for a target-date fund was just 0.29% in 2024.
Treasury Inflation-Protected Securities (TIPs)
Treasury Inflation-Protected Securities offer two forms of protection for a portfolio—protection against stock market volatility, much like other US government bonds…and protection against inflation because, unlike most bonds, TIPs’ principal and payments increase to keep pace with inflation. That inflation protection is especially important for retirees—steep inflation is no fun at any age, but retirees tend to suffer more than those still in the workforce. Inflation doesn’t only push up prices, it usually pushes up wages as well, which can offset much of the pain for working-age people but provides little or no protection for retirees who are no longer earning wages.
Unfortunately, TIPs’ inflation protection doesn’t come for free—these bonds typically yield substantially less than conventional Treasury bonds of similar length. Example: As of late 2025, the yield on 10-year TIPS was around 1.7%, versus around 4.0% for other 10-year Treasuries. But the difference is that with TIPS, the benefits are going to increase according to inflation. Example: If regular Treasuries are at 4.0% and TIPS are at 1.7% and inflation is above 2.3%, you’ll actually end up with a higher return with TIPS.
Real Estate and Infrastructure
These investment categories have historically delivered solid growth and—important for retirees—a measure of inflation protection. Investors don’t have to purchase investment properties directly to invest in real estate—it’s easier to invest in Real Estate Investment Trusts (REITs). REITs have underperformed relative to the stock market in the 2020s despite buoyant home prices, held back in part by the struggles of certain segments of the commercial real estate sector. But a longer view paints a very different picture—REIT returns historically have held their own against those of the S&P 500, and many REITs also pay significant dividends.
Infrastructure is another investment class worth investigating. Infrastructure includes things that modern societies require to function, such as pipelines, cell towers, roads and water utilities. Often the companies that construct these sorts of things are grouped in with infrastructure investments as well. Investments in the infrastructure sector tend to deliver steady cash flow and solid dividends—dividend-paying investments hold psychological appeal for some retirees.
There’s a case to be made for including exposure to one or both of these investment classes in a diversified retirement portfolio. Example: A retiree who previously had a classic 60% stocks/40% bonds portfolio might shift to a 50% stocks/30% bonds/20% REITs and/or infrastructure portfolio.
Helpful: The best way to avoid the sometimes-steep expense ratios charged by many real estate and infrastructure-related investments is to purchase shares in large, well-established ETFs offered by major investment companies such as Vanguard or iShares.
