These 3 ETFs Could Pay You Even More Than Social Security

If you worked for decades, there’s a good chance you’ll be eligible for Social Security benefits once you retire. Whether those benefits are enough to support your desired lifestyle, however, depends on you.

If you’re used to bringing home an average salary, you can expect Social Security to replace about 40% of it in retirement — assuming that benefits aren’t cut broadly, of course.

But in that case, living on Social Security alone would mean taking about a 60% pay cut. And while you may very well see your spending decrease in retirement, it may not decrease drastically enough for Social Security alone to cut it.

That’s why it’s important to load up on retirement investments that pay generously. And with a large enough portfolio, you may find that these ETFs actually pay you more money in retirement than Social Security does.

1. The JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) invests in large-cap U.S. stocks within the S&P 500. The reason JEPI has the potential to be a large income-producer is that it sells covered call options against its holdings. Those premiums generate steady income for the fund, which it then shares with investors in the form of monthly distributions.

JEPI offers a number of benefits. In addition to a high monthly income, the fund is actively managed, which can help mitigate risk during periods of market volatility.

But let’s be clear. JEPI is not a low-risk investment, since S&P 500 companies are subject to wild swings. You’ll need to make sure the fund aligns with your personal risk tolerance.

2. The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)

The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) uses a similar strategy to JEPI for income generation — selling covered call options against its holdings. A key difference between the two funds is that JEPQ invests in stocks from the Nasdaq-100 index.

The Nasdaq-100 is heavily comprised of tech and other growth stocks. And any fund that’s centered on growth-focused companies carries risk. So if JEPI is a fairly risky investment, JEPQ is even riskier.

The flipside, though, is that JEPQ may deliver higher yields than JEPI. And if you’re looking to generate a lot of retirement income, that’s important.

3. The iShares Preferred and Income Securities ETF (PFF)

The iShares Preferred and Income Securities ETF (PFF) invests in preferred stocks, which are hybrid securities that blend the features of bonds and common stock. Preferred shares typically pay higher dividends than common stock but don’t always offer the same growth potential. However, as a retiree, your focus is probably income, not growth, so PFF may be a good fit for your needs.

In addition to offering a high yield, PFF offers the benefit of generally being less volatile than a pure stock fund. If you’re someone who’s pretty risk-averse, you may find that PFF is a better fit for you.

That said, PFF’s value could fall as interest rates rise. And it also has a relatively high expense ratio compared to other ETFs. You’ll need to decide if you’re willing to overlook these drawbacks before adding this fund to your portfolio.