6 Bonds That Offer Monthly Payouts to Those on Fixed Incomes

Many people living on a fixed income or beginning retirement look for consistent, low-risk sources of cash flow. Bonds that pay monthly income offer predictable payouts and can help supplement income without subjecting you to the volatility of the stock market.

Here are six types of bonds and bond funds worth considering for monthly income. With the right mix, these options could help you get ahead financially while keeping your money working for you.

1. Government and corporate bond funds

Bond funds hold a mix of government and corporate bonds, offering built-in diversification with the goal of generating steady income.

This type of fund typically makes monthly payments based on the fund's earnings from interest. Since these types of funds hold a variety of bonds with different terms and credit qualities, the income may vary from month to month.

Still, they remain a popular choice for those looking for stability and steady income without having to manage individual bonds.

2. Corporate bonds

When you buy a corporate bond, you're providing money to a company in exchange for regular interest payments. When the bond matures, you also receive your principal.

While many of these bonds pay semiannually, some are structured to pay annually, quarterly, or monthly. Corporate bonds can vary in terms of risk and return depending on the issuing company's credit rating.

3. Municipal bond funds

Municipal bond funds hold debt issued by state and local governments and often pay a monthly income that is exempt from federal income taxes, and sometimes even state and local income taxes.

These funds are popular with folks looking for steady payouts and tax efficiency. They are especially appealing to those in higher tax brackets hoping to minimize their taxable income.

While returns may be slightly lower than those of other bond funds, the tax savings may make them a smarter investment depending on your financial situation.

4. One-month Treasury bills

One-month Treasury bills (T-bills) are among the safest investments available and mature just four weeks after issue. They don't technically pay "interest" in the traditional sense, but rather are sold at a discount and redeemed at face value, with the difference acting as income.

When purchased regularly, one-month Treasury bills can create a steady stream of monthly income. They're fully backed by the U.S. government and can be an ideal cash alternative for conservative investors.

5. Treasury-bill ladders

A Treasury-bill ladder involves buying a series of short-term U.S. Treasury bills that mature at regular intervals, such as three, six, or 12 months.

As each bill matures, the proceeds are reinvested into a new T-bill, helping ensure a steady stream of income and liquidity.

This approach can help you manage interest rate risk while earning predictable returns backed by the U.S. government. T-bill ladders are popular for conservative investors who want reliable monthly income with minimal risk.

6. Mortgage-backed securities

Mortgage-backed securities (MBS) are technically not bonds, but operate in a similar way. They include bundles of home loans sold to investors, with payments passed through to investors when homeowners make their mortgage payments.

While they are considered more complex than traditional bonds, these securities are backed by pools of real estate loans and may offer higher yields than Treasury bonds and bills. That offers the potential to put you on the right track to build wealth.

Bottom line

You don't need to take big risks to earn reliable returns. If you're looking to generate consistent monthly income, these bond options offer a mix of security, tax benefits, and flexibility.

As interest rates change and markets evolve, diversifying your income sources can be a smart way to build your wealth over time. Choosing good fixed-income tools today can help you get to the right financial destination tomorrow.