Written by We all crave some kind of financial security. In 2025—where interest rates rise faster than sourdough prices and the U.S. dollar’s strength feels more symbolic than certain—that security often gets bundled into one phrase: Fixed Income.
Sounds lovely, right?
But in today’s world of tariffs, debt ceilings, and shifting global alliances, even fixed income isn’t as “fixed” as it used to be. Let’s look at how you can approach this strategy with clarity—and caution.
📚 What Is Fixed Income?
Fixed income investments pay you a set amount of interest over time. Think:
- Bonds (government, municipal, corporate)
- Certificates of Deposit (CDs)
- Treasury Inflation-Protected Securities (TIPS)
- Money Market Funds
- Annuities
- Preferred Stocks (a hybrid, but often included)
These tools are beloved for predictable returns and lower volatility—especially compared to stocks. But that doesn’t make them invincible.
📚 Investment Scenario: Denise Fairling, the Structured Steward
Denise Fairling, a 63-year-old nearing retirement, built her income plan using:
- A 5-year CD ladder through Ally Bank
- TIPS held in her Fidelity IRA
- A low-fee municipal bond ETF from Vanguard
She earns around 4.2% overall—but closely watches inflation trends and is considering foreign fixed income for diversification. “I want reliable income, but not tunnel vision,” she says.
✅ Why Fixed Income Looks Good Right Now
- Higher Interest Rates: After a decade of microscopic yields, 4%+ returns are back on the table.
- Stability: Less nerve-wracking than growth stocks or crypto.
- Cash Flow: Ideal for retirees, near-retirees, or anyone needing predictable income.
❌ But Let’s Be Real…
- Dollar Erosion Is a Risk: If the U.S. dollar weakens, your “fixed” income may not stretch as far—especially internationally.
- Inflation Still Matters: Even with better yields, real returns might lag behind rising living costs.
- Lock-In Periods: Some tools (like CDs and annuities) tie up your cash for years.
- Annuities Can Be Fee-Heavy: Read the fine print—twice.
🧭 Strategic Ideas for 2025 (That Don’t Require a Crystal Ball)
1. Look for Real Assets That Mimic Fixed Income
- Dividend-paying utility stocks, infrastructure ETFs, and even farmland REITs can offer relatively stable income and some inflation protection.
2. Use a Bond/CD Ladder
- Spread maturities over 1–5 years.
- Helps you reinvest at higher rates if the dollar weakens further or inflation rises.
3. Keep Some Liquidity
- Money market funds are yielding 4–5% again, and you can move your money around.
- If you’re unsure about locking up funds, stay flexible.
4. Use TIPS to preserve purchasing power
- They adjust with inflation. Not perfect—but helpful if you’re worried about eroding purchasing power.
- Consider holding in a tax-deferred account, since TIPS interest is taxable.
- Learn more: TreasuryDirect TIPS
5. Balance Domestic & International Exposure
- Global bond funds can provide a hedge against U.S. dollar weakness.
- Explore international fixed income ETFs like: iShares Global Bond ETF (BNDX)
- Prefer funds that spread across strong economies and currencies—not just random picks.
🌍 What the Economic Trends Mean for You
- Tariffs increase costs across supply chains. Corporate margins tighten. Some corporate bonds may become riskier.
- Government budget cuts (especially in Medicare, housing, or state-level programs) could affect muni bond stability.
- Global realignment (e.g., de-dollarization efforts) may put pressure on U.S. fixed income to offer even higher yields.
So while yields look great now, the real return and currency value you get back might not match the peace of mind you’re expecting.
🎯 The Smart Approach: Blend Security with Agility
Fixed income can still be a smart part of your financial life. But the trick in 2025 is to:
- Stay diversified, even within fixed income.
- Stay flexible, especially with maturities.
- Mix short- and mid-term fixed income to balance yield and flexibility
- Avoid complex annuities with high fees unless you understand every clause
- And stay aware that stability today doesn’t guarantee security tomorrow.
You’re not being paranoid. You’re being practical.