While there are many ways to build retirement portfolios, some advisors say that building an income-producing portfolio of taxable bonds is old news: low interest rates and taxation of interest payments as ordinary income have taken taxable bonds out of favor. Tax-exempt income from municipal bonds remains an option, and in equities, dividend paying stocks, or a systematic approach to harvesting long-term capital gains–both of which currently have favorable tax treatment–can work, too. Advisors whose retiree clients will depend on cash flow from retirement accounts could use asset allocation mutual funds, or build a portfolio of mutual funds allocated to 60% equities, 30% bonds, and 10% cash, according to Christopher Hennessey, faculty director of executive education at Babson College, in Boston. Hennessey, a consultant to Putnam Investments, says an allocation to equities will be necessary, as well as a 4% to 4.5% withdrawal rate, to ensure “portfolio survivability”–that the client doesn’t outlive the portfolio.

Advisors need to think of retirement portfolios on a total return basis, and layer a cash flow strategy on top of that, says Harold Evensky, president of Evensky & Katz in Coral Gables, Florida. “Selling the gains is more efficient,” than loading up with interest- and dividend-paying securities. Asset location is a consideration, too: inside or outside of retirement accounts? Portfolios outside of retirement accounts can benefit from the very low costs and turnover of index funds and ETFs–more tax favorable compared with many actively managed accounts since the index components change less often than active funds, so there are lower trading fees, and gains are more tax-deferred.

Both experts say there is a place for certain annuities: Evensky says immediate annuities can be an “extraordinarily important tool” as part of a retiree’s portfolio. He prefers relatively low-cost providers, such as “TIAA-CREF, Vanguard, and Schwab.” Hennessey might put 25% of a $1 million portfolio into a single premium, immediate pay, lifetime annuity split among “two or three of the best insurance companies,” since quality of the insurance company counts with lifetime annuities–after all, advisors want to be sure the company will last as long as the client does.