For as long as most of us can remember, “fixed income” has meant the same thing to retirees, and it generally appears in the form of safe and predictable bonds that pay out steady interest, all while allowing the preservation of capital. If you bought a 10-year Treasury or corporate bond ladder, you could collect coupons and never worry about principal.
As far as a retiree looked at everything, their income was fixed, risk was low, and the strategy, albeit boring, was the best possible scenario. Unfortunately, this same scenario is the one many retirees still envision, and it’s dangerously out of date thanks to the bond market in 2022 shattering any such assumptions.
Retirees who had previously purchased bonds expecting them to hold to maturity and collect steady income watched as portfolio values dropped by as much as 20%, if not more, as rates climbed. The income itself might have stayed fixed, but purchasing power did not, and in this case, “fixed income” became a very real loss.
Inflation Broke the Fixed Income Promise
The biggest issue of all for retirees may be that even when bond yields look attractive, inflation has a nasty way of eating up much of what you are actually earning. A 10-year treasury earning 4.06% in mid-February 2026 might sound great, at least until you learn that inflation is holding around 2.4%, which means that the real return you are actually earning is only 1.5%.
Of course, this 1.5% comes before taxes, which takes another chunk out of the money, and after you account for both state and federal taxes, depending on where you live, some retirees could be earning close to zero in real terms.
The hope was that Treasury Inflation-Protected Securities (TIPS) were supposed to solve this problem, but they have their own set of issues. TIPS provide inflation protection, but their yields are lower and hover around 2.46%, depending on maturity. This is better than losing money to inflation, but it’s not the kind of income a retiree can count on to fund the golden years.
The Diversification Myth Collapsed
Retirees who came into retirement with the 60/40 portfolio split in mind, something of a default level driven by good financial planning, worked well because stocks and bonds would move in opposite directions. Whenever equities fell, bonds would rally, which in turn would help smooth out portfolio returns and reduce volatility.
This negative correlation was the entire foundation of why diversification has become such a big deal if you are invested. This entire concept disappeared in 2022 when the stock-bond correlation turned positive, and since then, bonds have lost more money as stocks declined.
Any idea that bonds would provide safety during stock market downturns has all disappeared. The truth is that the 60/40 portfolio split didn’t just underperform, it failed at the very job it was designed to do, and that is to protect capital when equities stumbled.
What Fixed Income Actually Means Now
If traditional bonds no longer deliver what retirees need, the definition of “fixed income” now has to expand. Income-focused strategies now have to include dividend-paying stocks, REITs, preferred stocks, and even covered call ETFs, depending on your risk comfort.
These assets generate regular cash flow, but they are not bonds, and they do carry different risk levels. The trade-off is that many of them offer yields in the 5% to 9% range, well above what investment-grade bonds provide, and some even have built-in inflation protection through dividend growth.
Enterprise Product Partners (NYSE:EPD), for example, offers a 5.99% yield, which is backed by fee-based revenue from energy infrastructure. Realty Income (NYSE:O) pays 4.87% with 22 years of dividend increases. The JPMorgan Equity Premium Income ETF (NYSE:JEPI) pays 8.00% through a combination of dividends and covered call premiums. None of these are bonds, but they function as revenue generators that someone can use to replace traditional fixed income or complement it.
The New Fixed Income Portfolio
Building a retirement income strategy in 2026 means having to rethink what belongs in the “fixed income” bucket. Short-term investment-grade bonds still have a place for both stability and liquidity, especially if you can find them at over 4%, and TIPS provides inflation protection. However, the bulk of income generation is now going to increasingly come from more diversified sources like dividend growth stocks for companies that have strong cash flow, REITs for monthly income tied to real estate, MLPs for energy infrastructure distributions, and bond alternatives like preferred stocks.
The goal isn’t to abandon bonds entirely, only to stop relying on them as the only source of fixed income. In 2026, one recommendation for a retiree who needs $50,000 annually might be to invest 20% in short-term bonds for stability, 30% to dividend-paying blue chips, and REITs for income, 30% to high-yield alternatives like covered call ETFs or MLPs, and another 20% to equities that can provide long-term growth.
Why This Matters for Retirees
The phrase “fixed income” still carries some psychological weight for retirees because it once implied safety. The 2026 bond market just cannot safely deliver on that anymore, as volatility is higher, real yields are lower, and the diversification benefits have weakened. Retirees who are clinging to old definitions are either accepting returns that don’t keep up with inflation or taking on more risk than they might be aware of. Today, shifts in investment strategy are not about taking on unnecessary risk, but more about recognizing that the income landscape has changed and adapting to it.
Top Gaining Stocks
Top Losing Stocks