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A lot of people enter retirement feeling optimistic about their prospects, only to realize that they don’t have nearly as much income as they need to cover their expenses with ease. And much of that boils down to an overreliance on Social Security.
The average monthly Social Security benefit today is only a little more than $2,000. Granted, you may have a larger monthly benefit coming your way if you earn above-average wages. But Social Security is also facing the possibility of benefit cuts in the future. So before you start counting on getting your money in full, you may want to have a backup plan.
Even if Social Security doesn’t end up cutting benefits broadly, it’s a good idea to set yourself up with extra retirement income to supplement those monthly checks. Here are three ETFs you can look at that pay investors on a monthly basis.
1. The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
If you’re chasing the largest monthly return you can get, the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) probably isn’t for you. Because the fund applies a low-volatility filter when choosing investments, it limits its upside.
But what SPHD gives you instead is access to companies within the S&P 500 that pay generous dividends without marked swings. That could give you access to steady, predictable income in retirement when you need it the most. SPHD pays out monthly distributions, so you can factor those into your income on top of whatever Social Security pays you each month.
2. The iShares Preferred and Income Securities ETF (PFF)
The iShares Preferred and Income Securities ETF (PFF) holds a diversified portfolio of U.S. preferred shares, which pay dividends on a regular basis and still represent an ownership share in a given company. The dividends the fund collects are then distributed to investors on a monthly basis, making it a source of steady income for retirement.
PFF is a good investment for people who may want a higher yield than a typical dividend ETF but aren’t willing to take on a ton of risk. When combined with Social Security, it could result in a respectable monthly income.
However, you should know that PFF holds a lot of assets within the financial sector. If that sector experiences a meltdown, it could impact the fund’s performance.
3. The JPMorgan Equity Premium Income ETF (JEPI)
The JPMorgan Equity Premium Income ETF (JEPI) invests in a portfolio of large U.S. businesses for relative stability and value. However, the fund also issues covered calls that generate income, allowing it to pay investors on a monthly basis.
Because the fund tends to focus on established businesses with relatively low volatility, it’s a moderate-risk investment for retirees. As is the case with any fund that offers covered calls, you may not see as much growth out of JEPI as with other income ETFs. But if you value predictable income over portfolio gains, it could be a great way to supplement your monthly Social Security checks.