quick read
-
Social Security is currently facing a financial shortfall, which could result in significant cuts to benefits.
-
By making strategic investments, it’s possible to supplement your retirement income and counteract reduced Social Security benefits.
-
Focusing on ETFs that offer steady income could be beneficial, but it’s important to understand the associated risks.
Lately, there have been rumors about Social Security potentially being eliminated altogether, but thankfully, that’s not true. However, it’s clear that lawmakers are in a tough spot and need to respond to a funding crisis.
Social Security primarily relies on payroll taxes for funding, so there’s no imminent danger of it being entirely discontinued. Still, cuts to benefits seem quite possible.
The timeline for any cuts remains uncertain, influenced by how revenue streams perform in the coming years, as well as whether the program’s trust funds merge or remain separate. Regardless, it seems wise to prepare for possible reductions over the next decade.
If you’re nearing the end of your working years, it might be time to strategize ways to bolster your retirement income apart from Social Security. One effective approach could be through ETFs, or exchange-traded funds.
ETFs allow you to invest in a broad range of assets with just one purchase. However, if you’re considering ETFs as a Social Security supplement, here are a couple of key points to keep in mind:
-
Assess how much risk you can comfortably take on.
-
Choose a fund that offers an appropriate yield.
With that in perspective, here are three ETFs to consider if you’re anxious about potential Social Security cuts and looking for extra income.
1. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) is designed to track the S&P 500 Low Volatility High Dividend Index, focusing on established companies with strong dividend yields while avoiding more volatile options for stability.
This ETF could be a solid choice for retirement because it aims to generate consistent income without excessive risk. Plus, it pays dividends monthly, making it convenient for managing retirement finances.
2. Vanguard High Dividend Yield ETF (VYM)
The Vanguard High Dividend Yield ETF (VYM) follows the performance of U.S. companies that distribute above-average dividends. This fund diversifies across different industries to minimize risks linked to over-concentration in any single sector.
VYM might suit retirees due to its low costs and potential for reliable income. Vanguard is well-regarded for having low expense ratios. If VYM doesn’t quite meet your needs, there are other options available.
For instance, VYM gives quarterly dividends, while some might prefer monthly payments, which Vanguard also provides through their various funds.
3. JPMorgan Equity Premium Income ETF (JEPI)
If you have a higher risk tolerance, consider the JPMorgan Equity Premium Income ETF (JEPI). This fund targets large-cap U.S. stocks and generates income via selling covered calls on its assets.
JEPI also sends out monthly payments, which can particularly benefit retirees seeking regular income. However, it’s essential to note that the use of call options may limit the fund’s overall growth. Like any equity-focused ETF, it’s also subject to market fluctuations.
It’s time to rethink passive investing
For over a decade, the prevailing investment advice for everyday Americans has been to automate and keep expenses minimal, rarely varying from that path. However, more investors are realizing that complete detachment can lead to missed opportunities.
Once you comprehend the potential of your investments—and recognize options, like an app allowing you to start a self-directed investment account with just $50—it can feel eye-opening. It’s a reminder that taking an active role can lead to better financial outcomes.
