Retiring Soon? Why High-Yield ETFs Are Just as Important as Social Security

If you’re getting close to retirement age, one of the most important things to do is try to figure out a Social Security filing strategy. While your monthly benefits will hinge on your personal wage history, your filing age will also help determine how much money Social Security pays you each month.

For example, if you file for Social Security at full retirement age (FRA), which is 67 for people born in or after 1960, you’ll get your exact monthly benefit based on your wage history. If you file prior to FRA, your monthly benefit will be reduced. And if you delay your claim past FRA, your monthly benefit will get a permanent boost.

But as important an income source as Social Security might be for you in retirement, it shouldn’t be your only income source. The reality is that Social Security is only designed to take the place of about 40% of your pre-retirement paycheck.

Most seniors, however, need about 70% to 80% of their pre-retirement pay to live comfortably. So you’ll need income outside of Social Security to fill in that gap. And investing in high-yield ETFs could be your ticket to boosting your retirement income and getting to enjoy your post-working years with less financial stress.

High-yield ETFs are funds that focus on producing above-average income for investors. They do so through a variety of strategies and holdings.

Unlike individual stocks or bonds, ETFs allow you to own a potentially large number of different companies with a single investment. In other words, you get diversification in your portfolio without having to do a ton of legwork.

Another big perk of investing in high-yield ETFs is that many of these funds pay investors on a consistent, predictable basis. When you’re living off of your investment income, that’s important.

Also, high-yield ETFs can generate income even if market conditions aren’t good. And those payments can serve as a hedge against market volatility.

There are numerous high-yield ETFs you can look at adding to your investment portfolio. Any time you’re looking to buy shares of an ETF, you need to make sure you’re aware of:

• The fund’s strategy

• The fund’s returns and yield

• The costs involved, known as expense ratios

ETFs generally have relatively low expense ratios, but some funds charge higher fees than others. It’s important to compare your choices carefully.

Meanwhile, here’s a short list of high-yield ETFs you may want to think about adding to your portfolio:

• JPMorgan Equity Premium Income ETF (JEPI) – A high-yield equity ETF using a covered-call strategy on S&P 500 companies.

• SPDR Portfolio S&P 500 High Dividend ETF (SPYD) – A fund that invests in the 80 highest dividend-yielding companies within the S&P 500.

• Global X SuperDividend ETF (SDIV) – A fund that aims to provide high monthly income by investing in 100 of the highest-yielding stocks globally.

• iShares Preferred & Income Securities ETF (PFF) – An ETF that invests in U.S. preferred securities, which typically pay higher dividends.

• iShares Emerging Markets Dividend ETF (DVYE) – A fund that focuses on high-dividend-paying companies in emerging markets.

Many retirees struggle to get by on Social Security alone. But if you combine a portfolio of high-yield ETFs with those monthly benefits, you may find that you have access to a pretty solid income stream, and that you’re able to replace enough of your pre-retirement paycheck to not have to worry about money all the time.

For more than a decade, the investing advice aimed at everyday Americans followed a familiar script: automate everything, keep costs low, and don’t touch a thing. And increasingly, investors are realizing that being completely hands-off also means being completely disengaged.

That realization hits like a lightning bolt when you realize not just how much better your returns could be, but that there are amazing offers like one app where new self-directed investing accounts funded with as little as $50 can receive stock worth up to $1,000.

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