Avoid the Income Mistakes Investors Regret Most ...
Dear Investor,
Misconceptions about how to assess your income sources and build an income portfolio can steer you in the wrong direction and cost you tens of thousands of dollars if you’re not careful — especially when understanding how to do things correctly could make all the difference to your financial future.
That’s why we’re taking a moment today to address some of the most common myths and investor mistakes surrounding income investing.
I’m Charles Rotblut, CFA, vice president at AAII, editor of the AAII Journal and lead editor of AAII Dividend Investing.
For decades, I’ve studied the income investing decisions that help those approaching and living in retirement actually fund their lifestyle and goals — not just in
Charles Rotblut Vice President and AAII Journal Editor, AAII
theory, but in real portfolios over many years.
The biggest mistake income investors make is chasing yield without understanding the risks behind it. From there, the mistakes tend to stack: misinterpreting how bonds behave when rates rise, owning vehicles like real estate investment trusts (REITs) or preferred stocks without fully understanding what they are, leaving cash idle in low-yielding accounts, and overlooking how taxes and Medicare premiums quietly erode savings more than many investors realize.
The investors who struggle the most aren’t the ones who made one big mistake, but the ones who didn’t implement a proper framework for their individual preferences and income goals.
AAII’s six-week Income Investing Seminar isn’t just about correcting misconceptions. It’s designed to give you actionable, real-world strategies that help you avoid costly mistakes and build reliable income with confidence.
Rather than simply explaining rules, I focus on strategic decision-making through detailed case studies using real numbers to address investors’ most important questions.
❌ Myth #1: “My total income is the same as my total return.”
Many retirees refuse to sell appreciated assets for spending money — feeling like that’s “eating the principal.”
The reality: A stock that grows 12% and pays no dividend is just as valid an income source as one that pays 4%. The mental accounting around this costs real money.
How AAII’s Income Investing Seminar helps: Session 1 reframes retirement income planning around total return, with income serving as the tool, not the end goal. It challenges the idea that selling appreciated assets is a failure, helping investors avoid overloading on yield-heavy investments and instead build a more diversified, sustainable portfolio.
❌ Myth #2: “It’s fine to rely just on bonds or dividend stocks in retirement.”
Many investors assume that they can safely build an entire income strategy around a single asset class, which leaves the portfolio vulnerable when that source comes under pressure.
The reality: Every income source struggles under certain conditions. Dividend stocks can be cut, bond funds fall when rates rise and REITs suffer when credit tightens. The real question isn’t whether an income source will face pressure, it’s whether your portfolio is diversified enough to withstand it.
How AAII’s Income Investing Seminar helps: Session 1 introduces income-generating assets by role (growth, defense and diversification), showing how resilient income portfolios rely on multiple sources working together. Then, sessions 2 through 4 stress-test different asset classes through real downturns, revealing where each struggles and why diversification matters.
❌ Myth #3: “REITs are reliable diversifiers that move independently from the stock market.”
Many investors who still own REITs believe that they move independently from stocks, helping to provide a reliable buffer when markets drop. The data tells a different story.
The reality: Since 2008, that correlation has sat around 0.80, meaning that REITs now move closely with stocks. Investors carrying REITs for diversification based on older conventional wisdom may be holding significantly more equity-like risk than they realize.
How AAII’s Income Investing Seminar helps: Session 4 confronts this head on using historical correlation data spanning more than 50 years, showing exactly when and why the diversification thesis broke down. Rather than dismissing REITs entirely, the session reframes them as a situational income tool that can earn a place in the right portfolio, not just as a structural hedge against equity risk.
❌ Myth #4: “If your income is tax-exempt or tax-advantaged, you don’t need to worry much about taxes in retirement.”
Many retirees assume that owning the right mix of tax-favored investments like municipal bonds, qualified dividends or Roth accounts can largely solve the retirement tax problem. Unfortunately, it doesn’t.
The reality: Tax management in retirement is far more complex than most investors expect, and mistakes are often invisible until they become expensive. How income sources stack together affects your overall tax rate, and having tax-advantaged accounts is only the starting point, not the entire strategy.
How AAII’s Income Investing Seminar helps: Session 5 uses real-world case studies to show how two retirees with identical portfolios and spending can end up with very different aftertax outcomes based on asset location, Roth conversion timing and Medicare IRMAA awareness. We plan to cover bracket management, income smoothing and account location.
Together, these common misconceptions help explain why investors often outlive their savings, struggle chasing high yields and over-rely on bonds despite good intentions. They are why this seminar centers around four key themes:
Building a reliable income foundation
Evaluating every income source you own
Understanding the real risks hidden in “safe” investments
Keeping more of what your portfolio earns
Most investors lack a strategy that connects investment decisions, retirement income, asset allocation and risk evaluation when building a thoughtful and clear income portfolio.
The difference between guessing and planning can easily mean tens of thousands of dollars, whether you are transitioning into retirement or already retired.
The education you’ll receive in just six weeks by attending my seminar will give you the framework and real-world tools to make confident decisions about how to correctly structure your income portfolio before costly mistakes occur.
Your exclusive invitation to register during our Special Memorial Day sale expires in just a few days.Please note that this offer is reserved for a select group of investors and should not be shared.
Charles Rotblut, CFA Vice President & AAII Journal Editor, AAII
Disclaimer: This seminar provides educational information about income investing including tax planning strategies. It does not constitute personalized tax and retirement income advice. Consult a qualified professional for guidance specific to your situation.
We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.
