Replacing lost income has become a hot topic for many financial planners and the millions of baby boomers about to enter their golden years. Figuring out how to turn years of savings into years of income payments has become a pressing issue. Traditional fixed income products like CDs and money market accounts pay next to nothing and bond funds like iShares Barclays 1-3 Year Treasury Bond (NYSE:SHY) have seen their yields plummet as investors have sought safety. As we enter our fourth year of ultra-low interest rates, investors who require a constant stream of payments will be forced to get creative in their search for yield. Luckily, there are several avenues for investors to explore. (For more on retirement income, check out Will Your Retirement Income Be Enough?)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

A Wide Range of Options
With so much attention being thrust towards replacing lost wages, the number of options for investors looking for income has exploded over the last few years. Products such as annuities have become increasingly popular way for investors to continue their monthly paychecks throughout retirement. However, many of these plans come layered with various fees and surrender charges. A better option for income seekers could be within extruded funds. Opportunities for income investors have not been lost in the recent ETF boom and there are countless ways for investors to add dividend income to a portfolio. The trio of the iShares Dow Jones Select Dividend Index (NYSE:DVY), Vanguard Dividend Appreciation ETF (NYSE:VIG) and SPDR S&P Dividend (NYSE:SDY) hold the bulk of the assets in the space. However, these funds are not the only games in town. Over the last year, a plethora of new funds have been created that allow the retail investor set to access asset classes once reserved for institutional investors. By tapping these other choices, investors have the potential to add higher yields as well as gain diversification benefits. Here are some of the new and interesting ways to add that extra income.

Closed-Ended Income
Closed-ended funds are widely misunderstood and ignored by investors. These securities are publicly traded investment companies that raise a fixed amount of capital through an initial public offering (IPO). There are a set number of shares and they trade throughout the day like stocks at discounts or premiums to the underlying value of the fund's assets. The PowerShares CEF Income Composite (Nasdaq:PCEF) is an ETF that tracks a basket of these closed end funds (CEF). Currently, the ETF holds 123 different CEFs across the taxable fixed income and equity option writing strategies sectors. Top holdings include the Eaton Vance Tax-Managed Diversified Equity Income (NYSE:ETY) and Aberdeen Asia-Pacific Income (NYSE:FAX). The fund yields nearly 9% and pays a monthly dividend. For investors in higher tax brackets, the Market Vectors CEF Municipal Income ETF (Nasdaq:XMPT) follows a similar strategy with municipal bonds. (For more on closed end funds, see Open Your Eyes To Closed-End Funds.)

Go Global
Some of the best dividend yields and income opportunities can be found overseas. Foreign corporations have traditionally held a more dividend-friendly culture over comparable American firms and have distributed them to shareholders rather than keeping them as retained earnings. Both the Guggenheim S&P Global Dividend Opportunity (NYSE:LVL) and WisdomTree Global Equity Income (NYSE:DEW) allow investors to tap these opportunities, while keeping some footing on domestic soil. Both offer a wide swath of the world's top dividend payers with the WisdomTree fund holding close to 560 different firms and yielding 4.93%. The Guggenheim ETF holds only 100 stocks, but in exchange for a more concentrated portfolio, investors are rewarded with a dividend yield of over 6%.

Juiced Yields
Finally, both energy master limited partnerships (MLP) and business development companies (BDC) have historically offered some of the highest dividend yields to investors. Swiss bank UBS (NYSE:UBS) offers investors a way to "boost" the yields of these two asset classes. The UBS E-TRACS 2x Wells Fargo BDC ETN (NASDAQ:BDCL) and UBS E-TRACS 2x Long Alerian MLP ETN (Nasdaq:MLPL) use leverage to essentially double the dividends of their underlying indexes. The exchange-traded notes currently yield 14.57 and 11.61%, respectively.

The Bottom Line
As more and more baby boomers focus on replacing lost income during retirement, the options for dividend-focused investing will undoubtedly continue to grow. The ETF boom has opened a variety of different high yielding asset classes to the retail world. The previous funds along with the Global X SuperDividend Fund (Nasdaq:SDIV) are just some of the new ways for investors to gain yield in their portfolio. (For help on designing a dividend portfolio, check out Build A Dividend Portfolio That Grows With You.)

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

Related Articles
  1. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  2. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  3. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  4. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  5. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  6. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  7. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  8. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  9. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  10. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center