Best IRA Stock Portfolio
Note: The portfolio below is an updated 2026 version of an income-focused IRA allocation originally designed for an early retirement. The objective is to balance current income, diversification, dividend growth, and some potential for long-term capital appreciation.
When my wife retired at the end of 2015 at age 61, we faced a problem common to many early retirees—how to replace the retirement income we would give up by waiting until Full Retirement Age to claim Social Security. We also had to adjust our spending after moving from a full salary to a fractional pension, while health insurance purchased under the Affordable Care Act substantially increased our premiums and raised our deductible. Until we reached Medicare eligibility and Full Retirement Age for Social Security, the main challenge was generating enough investment income while still trying to preserve and grow our investment principal.
The original portfolio was created during a near-zero interest rate environment, when reaching a yield of at least 4% meant accepting more risk through dividend stocks, high-yield bonds, preferred securities, and REITs. The environment is very different in 2026. Investment-grade bond funds now provide yields around 5%, while high-yield bond funds offer yields above 6%. As a result, an income portfolio can reach a 4% target without relying as heavily on exceptionally high-yielding stocks.
For the revised portfolio, I use six different sources of income:
- Diversified investment-grade bond ETFs
- A diversified high-yield corporate bond mutual fund
- High-quality dividend-paying stocks
- A diversified dividend-stock ETF
- A preferred securities ETF
- A Real Estate Investment Trust (REIT) mutual fund
The portfolio can be grouped into five primary categories—common stocks, investment-grade bonds, high-yield bonds, preferred securities, and REITs. The mutual funds and ETFs supply broad diversification, while the individual stocks add dividend income along with the possibility of dividend increases and long-term capital gains.
An important difference from the original portfolio is that the old individual corporate bonds have been removed. Those bonds were purchased with relatively short maturities and are no longer suitable for a newly constructed portfolio. The updated allocation instead uses diversified bond funds. This spreads credit risk among many issuers rather than concentrating it in a handful of individual companies and also makes the portfolio easier to manage.
Several stocks from the original allocation have been replaced as well. The goal is not simply to buy whatever stocks currently offer the largest dividends. An unusually high dividend yield can sometimes indicate that investors are anticipating a dividend cut or serious weakness in the underlying business. The revised stock allocation instead focuses on large, established companies that pay meaningful dividends and have reasonable prospects for maintaining those payments.
The table below lists the updated holdings, ticker symbols, approximate current yields, and percentages of the total portfolio. The yields are based on figures available in late August 2026. Dividend yields on individual stocks move with their share prices, while fund yields and distributions can also change.
| Security |
Symbol |
Approx. Current Yield (in %) |
Approximate Percent of Portfolio (in %) |
|
Vanguard High Dividend Yield ETF
| VYM
| 2.29%
| 8.0%
|
|
Procter & Gamble
| PG
| 3.01%
| 3.0%
|
|
Exxon Mobil
| XOM
| 2.50%
| 3.0%
|
|
Chevron
| CVX
| 3.47%
| 3.0%
|
|
AbbVie
| ABBV
| 2.60%
| 3.0%
|
|
Amgen
| AMGN
| 2.28%
| 3.0%
|
|
Verizon Communications
| VZ
| 5.63%
| 3.0%
|
|
PepsiCo
| PEP
| 4.16%
| 3.0%
|
|
Southern Company
| SO
| 3.38%
| 3.0%
|
|
ONEOK
| OKE
| 4.67%
| 3.0%
|
|
VanEck Preferred Securities ex Financials ETF
| PFXF
| 6.74%
| 7.0%
|
|
Vanguard Real Estate Index Fund Admiral Shares
| VGSLX
| 3.27%
| 13.0%
|
|
Vanguard High-Yield Corporate Fund Admiral Shares
| VWEAX
| 6.28%
| 20.0%
|
|
Vanguard Intermediate-Term Corporate Bond ETF
| VCIT
| 5.41%
| 15.0%
|
|
Vanguard Intermediate-Term Bond ETF
| BIV
| 4.93%
| 10.0%
|
|
Combined approximate yield on all securities
|
| 4.59%
|
Dividend Stocks For IRA
These holdings do not fit neatly into only stock and bond categories. Preferred securities combine characteristics of both equities and debt, while the REIT fund is an equity real estate investment. Under the revised allocation, 45% of the portfolio is invested in bonds. That includes 20% in the high-yield corporate bond fund and 25% in investment-grade bond ETFs. The REIT fund accounts for another 13%, preferred securities represent 7%, and the remaining 35% is invested in common stocks and the dividend-stock ETF.
Together, these allocations add up to exactly 100%. Compared with the original portfolio, the revised strategy relies more heavily on diversified bond funds and removes the need to choose individual corporate bonds. Because investment-grade fixed-income securities now offer substantially higher yields than they did when the original portfolio was constructed, bonds can contribute much more of the portfolio's overall income.
The individual-stock allocation is also diversified across industries rather than simply consisting of whichever companies currently pay the highest yields. Procter & Gamble and PepsiCo add consumer-staples exposure. AbbVie and Amgen represent healthcare. Verizon adds telecommunications, while Southern Company provides exposure to a regulated utility. Exxon Mobil and Chevron represent integrated energy companies, and ONEOK provides midstream energy infrastructure exposure.
ONEOK has a direct connection to the original portfolio because Magellan Midstream Partners is no longer publicly traded. ONEOK completed its acquisition of Magellan in 2023. Magellan was structured as a master limited partnership, while ONEOK is a corporation, making ONEOK a simpler individual energy-income investment to hold inside an IRA.
My objective isn't to divide the portfolio between stocks and bonds according to a rigid conventional asset-allocation formula. Instead, the idea is to diversify across several income-producing asset classes while retaining enough equity exposure to offer long-term appreciation and the potential for dividend growth.
It is also worth remembering that bond mutual funds, bond ETFs, preferred stock ETFs, and REIT funds buy and sell securities over time as their portfolios change. Their distributions can therefore rise or fall. A fund's current SEC yield or distribution yield should never be viewed as a guaranteed future return.
Dividend stocks work similarly. A stock's dividend yield is based on its dividend payment relative to its current share price, so the yield changes whenever the stock price moves even if the company leaves its dividend unchanged. The dividend payment itself is not guaranteed either. Even established businesses can reduce or eliminate dividends if their financial condition weakens.
Best Stocks For IRA Conclusion
Using the late-August 2026 yields and portfolio percentages shown above, this allocation generates an approximate 4.59% current yield. That puts it modestly above the original 4% income objective without requiring every individual stock to carry an unusually high dividend yield. Investment-grade and high-yield bonds now contribute much more of the portfolio's income than they could when the original strategy was developed.
I would not choose an individual stock simply because its dividend yield is high or because an analyst considers the shares undervalued. Instead, the revised stock portfolio combines dividend-paying businesses from several industries. Procter & Gamble, PepsiCo, AbbVie, Amgen, Verizon, Southern Company, Exxon Mobil, Chevron, and ONEOK all provide income, while the Vanguard High Dividend Yield ETF diversifies the equity allocation among hundreds of additional companies.
No individual stock represents more than 3% of the overall portfolio. This is intentional. If one company suffers a dividend reduction, disappointing earnings, a regulatory issue, a lawsuit, a decline in commodity prices, or another company-specific problem, the effect on the entire IRA should remain relatively limited. Most of the portfolio is held through diversified ETFs and mutual funds.
Importantly, a portfolio like this can be held inside a Rollover IRA funded with assets transferred from a former employer's 401(k) plan. Earnings and gains in a Traditional Rollover IRA generally grow tax-deferred until distributed. Dividends, bond interest, and fund distributions can therefore be reinvested without creating a current federal income-tax liability inside the IRA, although distributions from the account are generally taxable and remain subject to IRA distribution rules.
Reinvesting dividends and fund distributions can gradually increase the number of shares held in the account. For someone who does not yet need the portfolio's income for living expenses, this gives the income stream an opportunity to compound. A retiree who needs the cash can instead take some or all of those distributions rather than reinvesting them.
This is still primarily an income-oriented allocation rather than a conventional growth portfolio. An investor with many years until retirement and little need for current income would generally want considerably more exposure to broad stock-market and growth investments. Someone already retired may instead place greater importance on income, diversification, and reducing the need to sell stocks to cover living expenses.
No single portfolio works for every investor, and a 4% or 5% yield should not be viewed as a guaranteed return. Stock prices, bond prices, interest rates, dividends, and fund distributions continually change. Still, this revised allocation fits the 2026 interest-rate environment much better than the original collection of decade-old stocks and individual bonds while retaining the original goal of producing meaningful retirement income from a diversified IRA.
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Written by Alex Bost
Updated on 8/26/2026.
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