2 ETFs That Are Perfect For Retirement Income

A big concern that’s common among retirees is not having enough money to cover their expenses. The reality is that many seniors today retire on just Social Security. But those benefits are often not generous enough to help retirees cover their many expenses.  

Consider this: The average retired worker on Social Security today collects about $2,000 a month. That’s an annual income of just $24,000. It may be enough to cover some bills, but it could still leave a huge gap – especially since retirement has a sneaky way of being more expensive than many people anticipate.

That’s why it’s important to bring savings with you into retirement, and to have a portfolio that’s able to produce income on an ongoing basis. In that regard, ETFs, or exchange-traded funds, are a good bet.

An ETF is basically a collection of assets, and different ETFs have different strategies and goals. An S&P 500 ETF, for example, will aim to match the performance of the S&P 500 index.

As a retiree, there are three important things to look for an in income-producing ETF:

• A decent yield
• An amount of risk you’re comfortable with
• A low expense ratio

With that in mind, here are two ETFs you may want to consider for retirement income.

1. The Schwab U.S. Dividend Equity ETF (SCHD)

As a retiree, you may not have the biggest appetite for risk in your portfolio. And that’s okay. Many people have to accept a certain level of investment risk to grow wealth for retirement. But when you’re in retirement, you may want to scale back a bit.

That’s what makes the Schwab U.S. Dividend Equity ETF a potentially good fit. This ETF only looks at companies with a history of increasing their dividends for 10 years or more. In other words, it focuses on stable, quality businesses with staying power, making it a less risky ETF than others.

With an SEC yield of 3.78%, it’s not exactly the highest payday you’ll find. But it’s a reasonable return given the risk profile. And with an investor-friendly expense ratio of 0.06%, you’re not paying a lot for that return, either.

2. The Vanguard High Dividend Yield Index Fund ETF (VYM)

The Vanguard High Dividend Yield Index Fund ETF has a fairly modest SEC yield of 2.57%. But what you lose out on in the form of a “just okay” yield, you gain in the form of more stability.

The Vanguard High Dividend Yield Index Fund ETF is loaded with large-cap stocks, which means it may be less prone to volatility than other ETFs. If you’re someone who’s willing to take on a little more risk, then the Vanguard High Dividend Yield Index Fund ETF may not be for you.

However, if you’re a more cautious investor by nature (or feel you should be one in retirement), then you’re looking at a pretty decent yield, all things considered. And with an expense ratio of 0.06%, you’re getting a solid investment at a fairly low cost. That’s a pretty winning combination.

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