As someone who writes about retirement frequently, I am well aware that Social Security will not pay me enough money to maintain the kind of lifestyle I know I want. Instead, I will need to build an investment portfolio that continues to generate income for me. And here are three investments I plan to hold onto once I retire.

1. Dividend shares

The advantage of dividend stocks is that they allow you to make money in two ways. First, like all stocks, dividend stocks have the potential to gain value over time. You could buy shares of a particular dividend-paying company today at $ 400 a piece, and in 20 years, they could end up being worth $ 1,200 a piece.

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But dividend stocks, too, not surprisingly, pay dividends, usually on a quarterly basis. This means having access to a regular income during retirement, which is particularly appealing to me.

If there is a year when the stock market is underperforming and I cannot sell stocks for profit, I can fall back on the dividend payments I receive and use them as income to pay for my expenses. And if it’s not necessary, I can always reinvest my dividends for further growth.

2. Municipal bonds

Municipal bonds are those issued by states, cities and other localities (as opposed to corporate bonds, which are issued by corporations). Municipal bonds tend to pay less interest than corporate bonds, but the upside is that any interest payments you receive won’t be taxable federally. Additionally, if you buy municipal bonds issued by your home state, you also won’t pay state or local taxes on that interest income.

Here’s why it’s important to me. Right now I have my retirement savings in a SEP IRA and a 401 (k) solo. Both accounts give me initial tax relief on my contributions, but withdrawals during retirement will be subject to tax. For this reason, it is important for me to have a source of income that does not increase my tax burden.

Additionally, bonds are generally a less volatile investment than stocks. In retirement, I believe that I will need to keep a large portion of my portfolio in bonds to avoid exposing myself to excessive risk.

3. S&P 500 Index Funds

Once I retire, I suspect that my risk tolerance might decline in the investment environment. And that’s why I think S&P 500 index funds are a good bet.

Index funds are passively managed funds that aim to match the performance of the benchmarks to which they are linked. S&P 500 index funds track an index made up of the 500 largest publicly traded stocks (as measured by market capitalization). The index itself offers instant diversification, which is a good thing to have in your portfolio as a retiree. And it’s a great way to keep getting richer while protecting yourself against market downturns.

The choices you make for your investment portfolio could set the stage for a rewarding retirement. While I don’t plan on ending my career anytime soon, all of these investments seem like a good bet for me, and they can be for you too.


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