Personal Finance

2 Vanguard ETFs Retirees Can Buy for Reliable Income

Joey Frenette

Published: January 24, 2025 6:47 am

Vanguard exchange-traded funds (ETFs) are a fantastic choice for retired investors looking to play the long game with their portfolios. Undoubtedly, Vanguard is a name that passive investors can put their trust in. Indeed, apart from offering a solid and deep selection of balanced and more aggressive ETFs, investors know they’re getting some of the lowest (if not the lowest) fees on any given indexed product. As a pioneer in the low-cost ETF scene, I’m inclined to view the Vanguard ETFs as one of the gold standards in the scene.

In this piece, we’ll narrow in on some Vanguard ETFs that I view as a perfect fit for retirees who want reliable sources of passive income. Indeed, Vanguard has ample income ETFs at rock-bottom costs, and they can really help bring out the best in one’s golden years. So, without further ado, let’s check in on two Vanguard ETFs worth looking into if you’re looking for smoother (lower volatility) passive income plays to power your retirement fund.

Vanguard High Dividend Yield ETF (VYM)

First, we have the Vanguard High Dividend Yield ETF (NYSEARCA:VYM), which is pretty much a go-to for any passive investor looking for steady and reliable passive income with the lowest possible price of admission (expense ratio of 0.06%). The VYM is a staple for many income investors for a reason. It’s a simple way to expose yourself to hundreds of dividend payers, many of which have a long history of punching above their weight class (not just keeping dividends intact, but growing them over time).

The VYM follows the FTSE High Dividend Yield Index, which is comprised of dividend stocks within a wide range of industries. Indeed, unlike many other higher-yielding dividend ETFs, which may be overweight in financials, you’re getting deep sector diversification from the VYM, which has a modest 22.6% exposure to the financials and double-digit percentage exposure to numerous other sectors that tend to be underrepresented in funds aiming to score the highest yield possible to draw in yield lovers. 

With a modest 2.74% yield, you’re not getting a ton of passive income relative to some of the other financial-heavier ETFs out there. Either way, I’m a fan of the caliber of names within the VYM and think it’s a perfect solution for investors content with yields in the ballpark of 3%.

Surprisingly, the VYM was up 19% in the past year, thanks partly to the appreciation of the dividend payers within the fund. Indeed, some of the top holdings are capable of impressive growth. Semiconductor firm Broadcom (NASDAQ:AVGO) is one of the standout growth plays in the VYM that just so happens to pay a nice, growing dividend. With a perfect mix of growth and income, the VYM is a fantastic Vanguard ETF for retirees looking for more yield than the S&P 500.

Vanguard Dividend Appreciation ETF (VIG)

The Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) is another very strong contender for a spot in retiree’s portfolios. Like the VYM, it’s a low-cost solution (0.06% expense ratio) fit for those looking for a mix of passive income and appreciation. And while the VYM does a great job of balancing appreciation and income, the VIG takes it to the next level, with more of a focus on dividend growth than upfront yield.

The ETF passively follows the S&P U.S. Dividend Growers Index, which, while somewhat bountiful (1.73% yield), is more growth-focused. If a yield south of 2% fits your needs, the VIG ETF may be worthy of a small spot in your portfolio, especially if you’re a younger retiree who needs their retirement fund to grow alongside them over the decades to come. 

Even if you’re not a retiree, the VIG is a great fit for those who understand the value of long-term dividend growth. After gaining 18% in the past year, the VIG may be trailing behind the S&P 500. Either way, value-oriented investors seeking less concentration at the very top of tech may wish to consider the ETF over the S&P 500.