If you’re over 50, it’s probably time to start thinking seriously about retirement if you haven’t done so already. At this point, you may only have about another decade of work ahead of you — or maybe less, depending on your exact age. And it’s important to understand the role Social Security will play during your senior years.
In a nutshell, you can expect Social Security to replace about 40% of your pre-retirement earnings if you bring home an average wage. If you’re a higher earner, though, then you might get even less replacement income out of Social Security.
Now let’s talk about how much income you might need in retirement. If you expect to live a modest lifestyle, you may be just fine if you’re able to replace 60% to 70% of your regular paycheck. If you have big goals for retirement, you might need 80% of 90% of your salary, or even 100%, to pull them off.
No matter what lifestyle you’re hoping and planning for in retirement, it’s pretty clear that you’re not going to achieve it on Social Security alone. So it’s a good idea to hold investments that pay you on a regular basis.
With that in mind, here are three ETFs you may want to consider buying soon. Not only might they help you build more retirement wealth, but they can also serve as steady income once your career comes to an end.
1. The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) is a good option for investors with a healthy appetite for risk. It invests in Nasdaq-100 companies, which means it’s loaded with tech and other growth stocks that can be subject to volatility. As a hedge against that, JEPQ sells covered calls against its holdings to generate income.
You may want to invest in JEPQ because it tends to generate a higher monthly income than other ETFs. That’s a good thing when you’re trying to boost your portfolio ahead of retirement and supplement your Social Security during it. But if you’re going to buy shares of JEPQ, you may want to balance them with other funds that carry less risk.
2. The SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) tracks the S&P 500 High Dividend Index, which selects the 80 highest-yielding dividend stocks. If you’re looking for an ETF that generates income consistently, this may be a good bet, as the fund’s yields tend to outpace the broader market.
Also, unlike JEPQ, SPYD does not sell covered calls to generate income. By avoiding that strategy, SPYD opens the door to more capital appreciation.
If you like the idea of an ETF that generates steady cash flow while opening the door to growth potential, SPYD could be a good bet. However, it’s by no means a no-risk fund, since you’re still investing in the stock market.
3. The Vanguard Total Bond Market ETF (BND)
If you’re well over 50 and retirement is right around the corner, you may want to limit your exposure to risk at this stage of life. And if so, it could pay to consider the Vanguard Total Bond Market ETF (BND).
The Vanguard Total Bond Market ETF (BND) holds U.S. investment-grade bonds, which are known to be far less volatile than stocks. And the steady income it provides could be a nice complement to whatever Social Security pays you.
Of course, like all bond funds, BND still carries interest rate risk. But it’s generally a much less risky option than funds like JEPQ and SPYD.
That said, if you’re still planning to work for a good number of years, BND may not offer enough growth for you. If you still want to buy it, you may want to pair it with a stock-focused ETF that offers more upside.