One of the best ways to enjoy retirement is to have a steady source of passive income. However, relying on Social Security payments alone likely won’t give you a cushy post-work life.
After all, the average Social Security payment for retired workers in the U.S. is only $1,767.03 per month at the time of this writing. It’s vital to supplement retirement income with other passive revenue streams in order to live a comfortable lifestyle.
Here are two passive income vehicles that are reliable, have a strong track record of producing positive returns for stakeholders, and offer above-average dividend checks.
A high-yield Vanguard fund
The Vanguard International High Dividend Yield ETF (VYMI -0.03%) is an exchange-traded fund (ETF) that follows the FTSE All-World ex US High Dividend Yield index, a collection of foreign companies with high dividend payouts. This Vanguard fund offers a generous 4.6% yield at the current price and it has a very low expense ratio of 0.22%. The average expense ratio for this ETF category is 0.98% right now.
In the past five years, the fund has produced an average annual return (including dividends and before taxes) of around 8%. That’s lower than the S&P 500 over this period (15.6% average annual return since 2019), but it is impressive for a high-yield dividend fund. After all, high-yield dividend stocks have mostly lagged the broader market since the 2008-2009 global financial crisis.
Even without reinvesting the dividends, investors would have booked a 9.4% return on capital over this period, which is a big benefit for passive income seekers. In short, this Vanguard fund can create both steady levels of passive income and modest levels of capital growth at the same time. Not many other high-yield ETFs can match this key criterion.
A fund that cuts you a monthly check
The JPMorgan Equity Premium Income ETF (JEPI 0.34%) is a fund that aims to generate income and growth simultaneously by selling options on large-cap U.S. stocks, collecting the premiums from said options, and by banking the dividends of its blue chip roster of stock holdings. The fund offers a balance of capital appreciation and monthly dividend payments in a low-risk way.
The fund invests in top-tier companies like Microsoft, Visa, and AbbVie, which have strong track records of capital growth and dividend increases. The fund’s dividend yield changes over time, but it is 8.4% as of this writing.
The JPMorgan Equity Premium Income ETF is an actively managed fund, but its expense ratio is reasonable at 0.35%. This is lower than the average expense ratio of similar funds, which is 1.31%.
The fund was launched in May 2020, and since then it has delivered total returns of 54%, and non-reinvested-dividend returns of 11%. The fund is not meant to outperform the S&P 500 consistently, but it has fulfilled its objective of providing monthly dividend income and decent levels of capital growth. This is an appealing combination for investors who are in their retirement years.