By Brent Matthew
You’ve spent decades building your nest egg and now comes the hard part: turning those savings into a paycheck that lasts as long as you do.
The challenge? There is no shortage of so-called “income solutions” out there. Dividend stocks promise growth potential. Bonds offer predictability. Annuities guarantee payments. Each has passionate advocates and critics who will tell you to run the other direction.
So which one actually delivers the most reliable retirement income? Let’s look at what each option really offers.
Dividend Stocks: Growth Potential With a Side of Uncertainty
Dividend-paying stocks can seem like the perfect retirement income source. You get regular payments, plus your principal can grow over time. Companies like Johnson & Johnson and Coca-Cola have paid dividends for decades, building impressive track records.
But here’s what keeps retirees up at night: dividends aren’t guaranteed. Companies can—and do—cut or eliminate dividend payments when times get tough. During the 2008 financial crisis, hundreds of companies slashed their dividends. In 2020, pandemic-related cuts hit shareholders hard once again.
Then there’s the principal problem. Your dividend checks might keep coming, but if the stock market drops 20%, 30%, or more, so does your account balance. If you need to sell shares during a downturn to cover expenses, you’re locking in losses you may never recover from.
Dividend stocks can play a role in your retirement portfolio, particularly in your growth bucket.
But counting on them as your primary income source means accepting market volatility at a time when you can least afford it.
Bonds: The “Safe” Option That’s Not Always Safe
Bonds have long been considered the conservative choice for retirees. You loan money to a government or corporation, and they pay you regular interest until the bond matures and returns your principal.
The appeal is clear: bonds are generally less volatile than stocks, and many carry strong credit ratings. Treasury bonds, backed by the U.S. government, are about as safe as investments get.
But “safe” doesn’t mean risk-free or optimal for retirement income. Bond yields have been historically low for years. A 10-year Treasury bond might pay around 4-5%—not much when inflation eats into your purchasing power. Corporate bonds pay more but come with credit risk; if the company struggles, you could lose both your interest payments and your principal.
There’s also interest rate risk to consider. When rates rise, existing bond values fall. If you need to sell before maturity, you might take a loss.
Bonds absolutely have a place in a well-structured retirement plan, particularly in your cash bucket for short-term needs and stability. But relying on them alone for income often means accepting lower returns and reinvestment risk when bonds mature.
Annuities: Guaranteed Income You Can’t Outlive
Here’s where annuities stand apart: they’re the only option that can guarantee you’ll receive income payments for the rest of your life, regardless of how long you live or what happens in the market.
Think of an annuity as creating your own personal pension. You transfer a lump sum to an insurance company, and in return, they contractually guarantee to pay you a specific amount on a regular schedule. Whether you live to 75 or 105, those checks keep coming.
Fixed annuities and Multi-Year Guaranteed Annuities (MYGAs) offer predictable returns without market exposure—your principal is protected even when stocks crash. Fixed-index annuities provide the security of principal protection with the potential for growth tied to market indexes.
No risk of losing your principal, but you can still benefit when markets perform well.
The income riders available on many annuities further strengthen their retirement income advantage. These features guarantee minimum payout rates regardless of account performance, meaning you know exactly how much income you’ll receive before you even commit.
But annuities aren’t perfect for every situation or every dollar you’ve saved. They typically require longer-term commitments, and early withdrawals can trigger surrender charges. That’s why smart retirement planning doesn’t put everything into one basket.
The Real Answer: It Depends on Your Goals
Asking which single option is “best” misses the point entirely. The most reliable retirement income strategy uses different tools for different purposes. Your cash bucket might hold CDs and fixed annuities for immediate needs and emergencies. Your income bucket could include MYGAs, fixed-index annuities with income riders, and bonds to create predictable cash flow. Your growth bucket might contain dividend stocks, mutual funds, and variable annuities to help your money outpace inflation over time.
The right mix depends on your specific situation: When do you need income? How much do you need? What’s your risk tolerance? Do you want to leave a legacy?
These aren’t one-size-fits-all questions, which is why working with a fiduciary financial advisor who can assess your complete financial picture matters so much.
Take Control of Your Retirement Income
Stop wondering whether your money will last. Annuities offer something dividend stocks and bonds simply can’t match: contractual guarantees that protect your retirement lifestyle no matter how long you live or what chaos the markets throw your way.
Ready to build reliable retirement income you can count on? Call Scottsdale Wealth Advisory at (480) 247-9090, email info@SWAFirm.com, or schedule your free consultation at calendly.com/BrentMatthew.
Our team can help you create a personalized plan that combines the right mix of income sources to fund the retirement you’ve worked so hard to achieve.
Your guaranteed income awaits.
Frequently Asked Questions About Reliable Retirement Income
What is the most reliable source of retirement income?
Annuities provide the most reliable retirement income because they’re the only financial product that can contractually guarantee lifetime payments regardless of market performance or how long you live. Fixed annuities and Multi-Year Guaranteed Annuities (MYGAs) protect your principal from market volatility while providing predictable income. Fixed-index annuities offer principal protection with growth potential tied to market indexes. Unlike dividend stocks (which companies can cut) or bonds (which carry interest rate and reinvestment risk), annuities with income riders guarantee specific payout rates before you commit. However, the most effective retirement strategy typically combines multiple income sources—annuities for guaranteed income, bonds for stability, and dividend stocks for growth—customized to your specific needs and risk tolerance.
Are dividend stocks or annuities better for retirement income?
Annuities are better than dividend stocks for guaranteed retirement income, while dividend stocks are better for growth potential. Dividend stocks offer the possibility of increasing income over time and growing principal, but companies can cut or eliminate dividends during economic downturns (as happened in 2008 and 2020). Your account balance also fluctuates with market volatility, creating risk if you need to sell during a downturn. Annuities, by contrast, provide contractually guaranteed lifetime income that continues regardless of market conditions or longevity. The optimal retirement strategy often places dividend stocks in your “growth bucket” to combat inflation over time, while using annuities in your “income bucket” to create a reliable foundation of guaranteed cash flow you can’t outlive.
What are the disadvantages of relying on bonds for retirement income?
While bonds are considered conservative investments, they have several disadvantages for retirement income. First, bond yields have been historically low in recent years—10-year Treasury bonds typically pay around 4-5%, which may not keep pace with inflation and living expenses. Second, bonds carry interest rate risk: when interest rates rise, existing bond values fall, potentially forcing losses if you need to sell before maturity. Third, corporate bonds expose you to credit risk—if the issuing company faces financial trouble, you could lose both interest payments and principal. Fourth, bonds create reinvestment risk: when bonds mature, you must reinvest at whatever current rates are available, which may be lower than your original bond. Finally, relying solely on bonds often means accepting lower overall returns compared to a diversified strategy that includes annuities for guaranteed income and equities for growth potential.
About Brent
Brent Matthew is the founder and CEO of Scottsdale Wealth Advisory, a full-service fiduciary retirement planning firm serving pre-retirees and retirees across Arizona and multiple states. With a strong commitment to always putting clients first, Brent leads the firm in developing comprehensive, tax-efficient financial plans tailored to each family’s unique goals. He is responsible for researching investment, annuity, and life insurance strategies and building smart asset allocations that reflect both long-term growth and risk management.
Brent is driven by a core belief: “The success of this firm will be measured by the success of the families it represents.” That client-first approach has guided his work since the beginning. He is currently enrolled at the College for Financial Planning and is on track to earn his CERTIFIED FINANCIAL PLANNER® designation. He also holds his Series 65 license and Arizona Life and Health Insurance Producers License.
Outside the office, Brent embraces the Arizona outdoors with “lil B” and their two pomskies, Heimo and Kota. Whether he’s hiking, fishing, dirt biking, skiing, golfing, kayaking, or skeet shooting, Brent finds balance and joy in staying active. He’s also a fan of CrossFit, brunching, and cruising the Phoenix canal system on his beach cruiser—usually with classic tunes from the Marshall Tucker Band, Gordon Lightfoot, or Crosby, Stills & Nash playing in the background. To learn more about Brent, connect with him on LinkedIn.
Advisory services are offered by Scottsdale Wealth Advisory, LLC, an Investment Advisor in the State of Arizona. Insurance products and services are offered through Scottsdale Wealth Advisory, LLC. Scottsdale Wealth Advisory, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency, and is not engaged in the practice of law. Be sure to consult with a licensed financial professional to confirm the accuracy of the insurance product you are considering.
