Baby Boomers: 4 Schwab ETFs for Passive Income and Stability in Retirement in July

Passive cash flow makes it easier for investors to cover their living expenses without selling their shares. Furthermore, the assets that produce higher yields tend to be less volatile.

You can try picking individual dividend stocks, and that works well for some investors. However, you can also take the easy route to passive income and stability with reliable Schwab ETFs. Although the brokerage firm has ETFs with various objectives, some of them aim to provide stable, passive cash flow for their investors.

These are some of the top Schwab ETFs baby boomers may want to consider if they want less volatility and higher yields.

Schwab US Dividend Equity ETF (SCHD)

The Schwab US Dividend Equity ETF (NYSEARCA:SCHD | SCHD Price Prediction) is a fan-favorite in dividend investing subreddits, and it’s easy to see why. This fund has a yield of close to 4% and prioritizes large-cap stocks. It has an annualized return of 12.5% over the past five years, demonstrating that the fund can compete with the broader stock market while delivering a high yield.

SCHD’s top three positions are ConocoPhillips (NYSE:COP), Cisco (NASDAQ:CSCO), and Texas Instruments (NASDAQ:TXN). The top 10 holdings make up 41% of its assets, and most of the top 10 holdings make up 4% of the total ETF’s positions.

The energy sector has the most representation, making up more than 20% of the fund’s total assets. Consumer staples are right behind it, comprising 19% of the fund’s total positions.

Schwab High Yield Bond ETF (SCYB)

The Schwab High Yield Bond ETF (NYSEARCA:SCYB) isn’t the type of ETF that will produce life-changing returns. It’s the type of ETF that remains flat and isn’t very volatile. Investors still like it because it has a yield above 7%. which goes along nicely with a 0.03% expense ratio.

More than half of the fund’s assets are allocated in BB-rated bonds. About one-third of SCYB’s funds go into B-rated bonds. The ETF does not have any A-rated bonds, and less than 10% of its holdings are in bonds with ratings below a B.

SCYB diversifies its capital across more than 1,800 bonds. Most of the bonds mature in 1-5 years. This fund makes the most sense for retirees, especially since bond interest is taxed as ordinary income. 

Schwab US REIT ETF (SCHH)

Real estate investment trusts are known for having higher yields than the average stock. That’s necessary for them to compete since REIT cash distributions are treated as ordinary income. The Schwab US REIT ETF (NYSEARCA:SCHH) is a competitive ETF that delivers a 3.70% SEC yield and only has a 0.07% expense ratio.

The fund is less volatile than most stocks and delivered an annualized 6.4% over the past five years. The fund has more than 100 stocks and pours 48% of its assets into its top 10 holdings. The top three positions — American Tower (NYSE:AMT), Prologis (NYSE:PLD), and Welltower (NYSE:WELL) — make up more than 21% of its total assets.

Schwab International Dividend Equity ETF (SCHY)

The Schwab International Dividend Equity ETF (NYSEARCA:SCHY) gives investors exposure to international stocks that generate solid cash flow. Many investors learned the value of international stocks amid tariff concerns that started the year. U.S. stocks declined sharply during that stretch while many international stocks rallied.

SCHY has a 0.08% expense ratio and an SEC yield that’s hovering close to 4.30%. The fund has delivered an annualized 11.4% return over the past three years. SCHY holds approximately 100 stocks and primarily distributes its assets across consumer staples, financial services, and communication services. No sector makes up more than 20% of the fund’s positions.