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

Quick Read

• Delaying Social Security to age 70 permanently boosts monthly benefits 24%, yet the program only replaces 40% of pre-retirement income.

• Monthly-paying high-yield ETFs can help close the 30-point gap between Social Security’s 40% replacement rate and the 70-80% income retirees need.

If retirement is approaching, one of the most consequential decisions you will face is when to file for Social Security. Your monthly benefit depends partly on your personal wage history, but your filing age shapes the number just as powerfully.

Filing at your full retirement age (FRA), which is 67 for anyone born in 1960 or later, delivers the baseline benefit your earnings record produces. Claim before FRA and that monthly check is permanently trimmed. Delay your claim past FRA and Social Security tacks on a permanent boost. Delayed retirement credits grow your benefit by 8% for each year you wait past FRA, up to age 70. For workers whose FRA is 67, waiting the full three years to age 70 means a 24% larger monthly payment for life. Credits stop accruing at 70, so filing after that birthday adds nothing.

As valuable as those strategies are, Social Security was never designed to carry the full load. The Social Security Administration is explicit: the program is built to replace about 40% of the average worker’s pre-retirement income. Meanwhile, most financial advisers cite a target of 70% to 80% of pre-retirement earnings to maintain a comfortable lifestyle in retirement. That leaves a gap of 30 or more percentage points that must come from somewhere else.

High-yield ETFs are one of the more practical tools for closing that gap. When held alongside Social Security, a well-chosen set of income-focused funds can produce a meaningful, predictable cash flow stream that does not depend solely on market appreciation.

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The case for high-yield ETFs in retirement

High-yield ETFs are funds built around above-average income rather than capital growth. They pursue that goal through a range of strategies, including dividend stocks, covered-call options, preferred securities, and global equity income plays. The common thread is regular distributions paid to shareholders.

The diversification benefit is real and practical. Owning a single ETF can expose a retiree to dozens or even hundreds of underlying holdings, spreading company-specific risk without requiring the time or expertise to build a stock-by-stock portfolio. For someone stepping away from a paycheck, that breadth can matter.

Predictability is another advantage that often gets overlooked. Many high-yield ETFs pay on a monthly schedule, which lines up naturally with monthly expenses. A fund that delivers income whether markets are rising or falling can also serve as a partial buffer during volatile stretches, since distributions continue even when share prices pull back.

That said, no two high-yield ETFs work the same way. Expense ratios, yield sources, distribution schedules, and risk profiles vary considerably. Understanding what you own before you buy is essential.

Five high-yield ETFs worth examining

Before looking at specific funds, it helps to know what to compare. The three most important factors are: the fund’s income strategy; its trailing yield and distribution history; and its annual expense ratio, since fees compound against returns over a long retirement. ETFs generally carry lower costs than mutual funds, but some high-yield funds charge meaningfully more than others.

Here is a closer look at five funds that income-focused retirees frequently consider:

• JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) pairs a portfolio of large-cap U.S. stocks with a covered-call overlay on S&P 500 names. The options premium supplements ordinary dividend income, producing a trailing yield near 8% and monthly distributions. The expense ratio is 0.35%.

• SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD) tracks the 80 highest dividend-yielding companies inside the S&P 500. The fund pays quarterly rather than monthly, carries a very low expense ratio of 0.07%, and currently yields around 4%.

• Global X SuperDividend ETF (NYSEARCA:SDIV) takes a global approach, holding 100 of the highest-yielding equities worldwide, including emerging market companies. Its trailing yield is roughly 9%, it pays monthly, and it carries a 0.58% expense ratio. The global scope means investors also absorb currency and political risk.

• iShares Preferred and Income Securities ETF (NASDAQ:PFF) invests in U.S. preferred securities, which sit between bonds and common stock in the capital structure and typically offer higher yields than common shares. PFF’s trailing yield is near 5.5%, it pays monthly, and its expense ratio is 0.45%.

• iShares Emerging Markets Dividend ETF (NYSEARCA:DVYE) focuses on high-dividend-paying companies in developing economies. Yields in this space tend to run higher than domestic alternatives, though emerging market exposure brings additional volatility that retirees should weigh carefully.

No single fund on this list is a complete retirement income solution. Each has trade-offs: JEPI may lag a rising market because the covered calls cap upside. SDIV’s high yield reflects the higher risk embedded in global small-cap and financial names. PFF is sensitive to interest rate moves. The right allocation depends on each investor’s risk tolerance, timeline, and the size of the income gap that needs to be filled.

For retirees who combine Social Security income with a thoughtfully built portfolio of income-producing ETFs, the math can work in their favor. Bridging the gap between a 40% replacement rate and a 70% to 80% income target is a genuine challenge, but the tools to do it are accessible and relatively straightforward to understand.

Editor’s note: This update adds current trailing yields for JEPI (approximately 8%), SPYD (approximately 4%), SDIV (approximately 9%), and PFF (approximately 5.5%), and includes the specific 24% benefit boost available to workers with a full retirement age of 67 who delay claiming until age 70.

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