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A lot of people assume that once they retire, they’ll be able to manage their expenses on Social Security alone. But you may be surprised by how little those benefits amount to.
For context, the average monthly Social Security benefit today is $2,071. If you have extremely low monthly expenses, you may be able to get away with living on a retirement check that small.
But what kind of lifestyle will that buy you? You probably won’t have money for extras, whether it’s treating your grandkids to ice cream or going out to lunch with friends for a weekly meetup. And after a lifetime of hard work, you deserve the leeway to spend on things that make you happy.
If you don’t like the idea of retiring with just a $2,000 monthly income, then you’ll need more than Social Security. And if you’re still working, you have a prime opportunity to load up on ETFs, or exchange-traded funds, that could become a source of steady retirement income for you. Here are three you may want to look at.
1. The Vanguard High Dividend Yield ETF (VYM)
The Vanguard High Dividend Yield ETF (VYM) invests in hundreds of U.S. stocks with higher-than-average dividend yields. It includes companies across a range of industries, including the financial industry, technology, and healthcare, and it focuses on businesses with consistent dividend payouts.
What makes VYM a good option for retirees is that the fund is loaded with large companies, many of which have fairly stable earnings (notwithstanding broad market downturns and events). And because VYM is so diversified within itself, it’s a fairly moderate-risk fund.
Plus, as is the case with many Vanguard funds, VYM has a low expense ratio. And the lower your fees, the more of your money you get to keep.
2. The Schwab U.S. Dividend Equity ETF (SCHD)
The Schwab U.S. Dividend Equity ETF (SCHD) tracks the Dow Jones U.S. Dividend 100 Index, focusing on companies with strong financials across a range of industries. SCHD screens for factors such as profitability and consistent, stable dividend payouts.
Because SCHD does not include companies with iffy financials or unstable dividends in its holdings, it’s a moderate-risk option for retirees who are looking for steady income. The fund also has a low expense ratio, so your fees shouldn’t eat heavily into your returns.
3. The Vanguard Total Bond Market ETF (BND)
The Vanguard Total Bond Market ETF (BND) invests in a range of investment-grade U.S. bonds. These include government bonds and corporate bonds. This allows for steady cash flow, making the fund a good source of reliable retirement income.
If you’re someone who’s not very comfortable with risk, then you may want to favor BND over VYM or SCHD. Bonds aren’t a risk-free investment, but they tend to be less volatile than stocks. And because BND sticks to investment-grade bonds, the likelihood of defaults within the fund is pretty low.
Make sure you have enough income for the lifestyle you deserve
All told, you may find that retirement is not very pleasant if your only source of income is your monthly Social Security check. Even if you’re eligible for a slightly higher benefit than the average today, you may still end up very limited in the absence of outside income.
These ETFs aren’t your only options for boosting your retirement paycheck. But they’re worth considering because they pay consistently without exposing investors to a ton of risk.
Investing in one, two, or all three of these funds could supplement your Social Security checks nicely, giving you the freedom to enjoy life without having to constantly pinch pennies.