2 ETFs That Are Perfect For Retirement Income

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2 ETFs That Are Perfect For Retirement Income.

investing ideas :: 4hrs ago :: source - 24/7 wallstreet

By Maurie Backman

Quick Read

SCHD screens dividend growers for a 3.4% yield, while VYM diversifies across 600+ stocks at just 0.04% in annual expenses.
Social Security's average $2,071 monthly benefit in 2026 often falls short, making dividend-focused ETFs essential tools for closing the retirement income gap.
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A big concern shared by many retirees is not having enough money to cover their expenses. The reality is that a significant number of seniors retire on Social Security alone. Those benefits, however, are often not generous enough to bridge the full gap between income and expenses.

Consider the numbers: the average monthly Social Security retirement benefit for 2026 is $2,071, or roughly $24,850 per year. That income may cover some essential bills, but retirement has a way of being more expensive than people expect, which means even that updated figure can leave a meaningful shortfall.

That's why it's important to enter retirement with savings, and to build a portfolio capable of generating income on an ongoing basis. In that regard, ETFs (exchange-traded funds) are worth a close look.

An ETF is essentially a basket of assets. Different ETFs follow different strategies and pursue different goals. An S&P 500 ETF, for example, aims to match the performance of the S&P 500 index.

As a retiree evaluating income-producing ETFs, three criteria matter most:

A decent yield
A level of risk you're comfortable carrying
A low expense ratio

With those criteria in mind, here are two ETFs worth considering for retirement income.

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

Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is designed for investors who prioritize dividend quality over pure yield. The fund screens for companies with a record of raising their dividends for at least 10 consecutive years, which filters out weaker businesses and keeps the portfolio focused on financially durable companies. It follows the Dow Jones U.S. Dividend 100 Index and holds 100 stocks.

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The fund currently carries a 30-day SEC yield of approximately 3.4% and an expense ratio of 0.06%. That combination is hard to beat in the dividend ETF space: the yield reflects genuine income from dividend-paying businesses rather than return-of-capital distributions, and the cost stays low enough that very little of that income is lost to fees. Since its 2011 inception, SCHD has delivered a 481% cumulative total return.

In October 2024, the fund completed a 3-for-1 share split, with shares beginning to trade at their post-split price on October 11, 2024. More recently, the fund's annual reconstitution removed several energy and consumer cyclical stocks while adding financial-services companies, maintaining its 0.06% expense ratio. These periodic rebalances are part of what keeps the fund aligned with companies that can sustain and grow their dividends over time.

2. The Vanguard High Dividend Yield ETF (VYM)

Vanguard High Dividend Yield ETF (NYSEARCA:VYM) takes a different approach. Rather than filtering for dividend growth history, it starts with a large universe of U.S. dividend-paying stocks and selects those with above-average forecasted yields. The result is a broader, more diversified fund: it includes more than 600 qualifying stocks, which virtually eliminates the negative impact any one holding might have.

VYM currently carries a 30-day SEC yield of approximately 2.4%. That trails SCHD on income, but the tradeoff is added diversification and stability. The fund's expense ratio is 0.04%, making it one of the most cost-efficient ways to access a high-dividend equity portfolio. Total net assets stand at approximately $79 billion, reflecting the fund's standing as one of the most widely held ETFs of its kind.

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For retirees who want broad exposure to dividend-paying large-cap stocks at minimal cost, VYM offers a compelling case. The yield is more modest, but the combination of wide diversification and an extremely low expense ratio means more of the income generated by the underlying holdings flows directly to shareholders.

Editor's note: This article has been updated to reflect the current average Social Security retirement benefit of $2,071 per month for 2026, revised SCHD and VYM SEC yields (approximately 3.4% and 2.4%, respectively), a corrected VYM expense ratio of 0.04% (down from the previously stated 0.06%), and added context on SCHD's October 2024 3-for-1 share split and 481% cumulative total return since inception.

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Contact editorial@247wallst.com for any questions or corrections.