For the millions of Baby Boomers about to enter their golden years, replacing lost income has become the topic du jour for many financial planners. Products such as annuities have become increasingly popular for investors as they seek to continue their monthly paychecks throughout retirement. However, many of these plans come layered with various fees and surrender charges. In addition, payout rates for annuities have fallen over the last few years. With the cost of living steadily rising and other traditional income products like the iShares Barclays Short Treasury Bond (NYSE:SHV) paying next to nothing, retirees face a serious income crunch. Luckily, there are several other avenues for investors to explore.
TUTORIAL: Exchange Traded Funds

Plenty of Options
With so much attention being thrust towards replacing lost wages, the number of options for investors looking for dividends has increased exponentially of the last few years. The boom in the exchange-traded fund industry provides investors several ways to add dividend income to a portfolio. Both the iShares Dow Jones Select Dividend Index (NYSE:DVY) and Vanguard Dividend Appreciation ETF (NYSE:VIG) hold the lion's share of assets in the space. However, they are not the only games in town. New asset classes, once reserved for institutional investors, are now available for retail investors. By tapping into some of these choices, portfolios now have a way to add diversification benefits and potentially higher yields. After all, since the 1960s, dividends have accounted for nearly 65% of the total return of the S&P 500 in sideways moving markets. Here are some of the new and interesting ways to add that extra income.

A Preferred Play From up North
Preferred shares quasi-stock/bond nature is becoming quite popular with income seekers. In exchange for zero voting rights, holders get a steady stream of dividend payments and preference in bankruptcy situations. The iShares S&P U.S. Preferred Stock Index (NYSE:PFF) has nearly $8 billion in assets, but a better play may come from our neighbors in Canada. The newly launched Global Canada Preferred ETF (Nasdaq:CNPF) holds about 60 different Canadian preferred stocks and allows investors to profit from the strength of the loonie versus the U.S. dollar. CNPF's yield is roughly 4.52%, but has the potential to be higher as the dollar continues its long-term slide. Holdings in the fund include preferred shares from the Bank of Montreal (NYSE:BMO) and TransCanada (NYSE:TRP). Similarly crossing the stock-bond tight rope, convertible bonds could be a great fit for investors. The SPDR Barclays Capital Convertible Bond (NYSE:CWB) offers a way to play that asset class.

Inflation Fighters
The rise in living costs is a major concern to retiring investors. Floating rate bonds and senior loans adjust rates every 30 to 90 days, making them quite attractive in rising rate environments. Both the Market Vectors Investment Grade Floating Rate ETF (Nasdaq:FLTR) and PowerShares Senior Loan Portfolio (Nasdaq:BKLN) focus on these types of bonds. Each offers investors the ability to bet on different levels of credit quality, with FLTR tapping into the upper part of the floating-rate market and BKLN holding junk bonds. Both funds pay monthly dividends and will benefit as the Federal Reserve begins raising interest rates in the future.

Go Anywhere Plays
Holding a number of different asset classes, including common stocks, REITs, closed-end funds, MLPs, preferred stocks and Canadian royalty trusts, the Guggenheim Multi-Asset Income (NYSE:CVY) is an interesting broad choice for portfolios. Top holdings include SeaDrill (Nasdaq:SDRL) and the Eaton Vance Limited Duration Income Fund (NYSE:EVV). The "yield hog" fund pays an impressive 4.5% dividend. For those investors who want a strictly international go-anywhere play on dividends can use its sister fund, the Guggenheim International Multi-Asset Income (NYSE:HGI).

Bottom Line
With replacing lost income on the minds of many retiring Baby Boomers, the options for dividend-focused investing continue to grow. The ETF boom has opened many higher yielding asset classes to the retail world. The previous funds, along with the iShares High Dividend Equity (NYSE:HDV) are just some of the variety now available for portfolios.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    Top 3 Inflation Protected Bond Mutual Funds

    Learn about the characteristics and suitability of the top inflation-protected bond mutual funds, and how investors can use these funds to their advantage.
  2. Economics

    The 9 Industries Driving Texas' Economy

    Find out which industries are driving the Texas economy. Learn about the largest and fastest growing employers and producers in Texas.
  3. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  4. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  5. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  6. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  7. Mutual Funds & ETFs

    The Top Vanguard Emerging Market ETF

    Learn why growth investors should consider investing in VWO's portfolio of emerging market stocks.
  8. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  9. Investing Basics

    How to Pick the Best Muni Bonds and Muni Bond ETFs

    Municipal bonds are a good addition to a diversified portfolio as long as you choose correctly based on population and local economic trends.
  10. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  3. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  6. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!