FROM THE BLOG
Generating Income Within a 60/40 Portfolio
Posted by Prospera Financial on April 7, 2026
The traditional 60% equity and 40% fixed‑income portfolio has long been used to balance growth and income. However, lower bond yields, higher volatility, and increased longevity have expanded the set of financial products advisors and clients should consider when seeking sustainable income. Today, income generation often comes from a diversified mix of traditional investments, insurance‑based solutions, and structured products—each playing a distinct role.
On the equity side, income‑oriented mutual funds and ETFs remain foundational. Dividend‑focused equity funds and low‑volatility ETFs can provide recurring income while maintaining exposure to long‑term growth. Actively managed mutual funds may also target income through dividend selection, tactical asset allocation, or multi‑asset mandates. While equities introduce volatility, they help offset inflation risk and support income growth over time.
The fixed‑income allocation traditionally includes bonds, which remain essential for stability and predictable cash flow. Government bonds, investment‑grade corporates, municipals, and high‑yield bonds each offer different yield, credit, and tax characteristics. Bond ladders can provide scheduled income and reinvestment flexibility, while bond funds and ETFs offer diversification and liquidity. However, interest‑rate risk and reinvestment risk mean bonds alone may no longer meet all income needs.
To address these challenges, many portfolios incorporate annuities, which transfer certain risks—such as longevity or market volatility—to insurance carriers. The annuity spectrum is broad:
- Fixed annuities and MYGAs (Multi‑Year Guaranteed Annuities) offer principal protection and predictable, bond‑like yields.
- Fixed Indexed Annuities (FIAs) provide downside protection with interest linked to equity indices, balancing safety and growth potential.
- RILAs (Registered Index‑Linked Annuities) allow for higher upside participation in exchange for defined downside buffers.
- Income guarantees, such as guaranteed lifetime withdrawal benefits, can create a pension‑like income floor regardless of market performance.
Structured investments can further refine income and risk management. Market‑linked CDs combine principal protection (when held to maturity) with equity‑linked returns, while structured notes can generate enhanced income through coupons tied to equity, rate, or commodity indices. These instruments are typically used tactically and require careful attention to issuer credit risk and payoff structures.
When thoughtfully integrated, these tools transform the traditional 60/40 portfolio into a more resilient income engine. By combining growth assets, high‑quality bonds, insurance‑based guarantees, and structured solutions, clients can pursue income that is diversified, durable, and better aligned with modern retirement realities.
Until next time,
Ken Manning
Director of Platform Solutions
