The 2026 Social Security cost-of-living adjustment is expected to provide a modest increase for retirees, but higher household expenses can quickly absorb that extra income. For someone receiving an average benefit, a 2.8% COLA works out to roughly $56 more per month.
That increase can help with everyday expenses, but it may not fully offset the rising cost of groceries, Medicare premiums, insurance, housing and other necessities. For retirees looking for another potential source of income and long-term growth, dividend-focused exchange-traded funds may be worth examining.
Three funds stand out for different reasons: the Vanguard Dividend Appreciation ETF (VIG), the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), and the First Trust Rising Dividend Achievers ETF (RDVY).
Each fund takes a different approach to dividend investing. VIG emphasizes companies with a history of increasing dividends, NOBL focuses on businesses with exceptionally long dividend-growth records, while RDVY combines dividend growth with stronger earnings characteristics.
COLA
The Social Security Administration’s 2026 cost-of-living adjustment is 2.8%. For an average monthly Social Security benefit, that translates into roughly $56 more each month.
The adjustment is intended to help benefits keep pace with inflation, but individual retirees may experience inflation differently from the broader measure used to calculate the COLA.
Healthcare costs, property taxes, homeowners insurance and food can represent a large share of a retiree’s budget. If those expenses rise faster than a household’s Social Security income, the increase may not provide much additional spending power.
Dividend-growth ETFs offer a different approach. Rather than relying entirely on annual government adjustments, investors can own companies that have historically increased their dividend payments over time.
Of course, dividends are not guaranteed, and stock prices can decline. These funds should therefore be viewed as investments with market risk rather than replacements for Social Security.
VIG
The Vanguard Dividend Appreciation ETF is designed around companies with records of increasing their dividends. Its combination of dividend growth, diversification and a very low expense ratio makes it one of the better-known funds in this category.
VIG has an expense ratio of 0.04%. At that rate, an investor pays about $4 annually for every $10,000 invested, before considering the effect of investment performance.
The fund also has substantial assets, giving it considerable scale and trading liquidity.
VIG’s dividend income is not necessarily the highest among dividend ETFs. Its trailing 12-month distribution was about $3.58 per share, compared with $2.13 in 2019 in the figures provided.
That illustrates an important distinction between dividend yield and dividend growth. A fund does not need to have the highest starting yield to potentially provide increasing income over time.
VIG has also produced significant long-term total returns. The figures provided show a 246.13% gain over the previous decade and a 12.5% gain year to date as of the referenced data.
Past performance, however, does not guarantee future results.
NOBL
The ProShares S&P 500 Dividend Aristocrats ETF takes a stricter approach to dividend growth.
NOBL tracks companies in the S&P 500 that have increased their dividends for at least 25 consecutive years. That requirement removes many companies that might otherwise qualify as dividend investments.
The result is a portfolio with meaningful exposure to industries such as consumer staples, industrials and healthcare. The fund generally has less exposure to technology than a broad S&P 500 fund.
Among its holdings in the provided data were Nucor, West Pharmaceutical Services and IBM. No individual holding accounted for more than 1.76% of the portfolio.
NOBL had approximately $11.07 billion in net assets and paid about $2.03 per share over the trailing 12 months.
Its 13.43% year-to-date return in the supplied figures also demonstrates that dividend-focused funds can participate in broader market gains. However, the fund can still decline when stocks fall.
Its long dividend-growth requirement may appeal to investors who place greater emphasis on companies with established histories of returning cash to shareholders.
RDVY
The First Trust Rising Dividend Achievers ETF takes a somewhat different route.
Rather than requiring decades of consecutive dividend increases, RDVY looks for companies with characteristics including strong earnings, relatively low payout ratios and growing dividends.
That approach gives the fund access to companies that may not qualify for NOBL’s 25-year requirement.
The portfolio includes companies such as Lam Research, Applied Materials and Alphabet, along with financial companies and other businesses.
The growth-oriented strategy can provide greater exposure to economically sensitive industries. It can also lead to more volatility than some traditional dividend strategies.
RDVY’s trailing 12-month distribution was approximately $0.677 per share in the figures provided. Its lower payout reflects the fund’s greater emphasis on earnings and dividend growth rather than current income.
The supplied performance figures show RDVY gaining 20.48% year to date, 32.62% over the previous year and 352.57% over the previous decade.
Those returns are historical and should not be interpreted as expectations for future performance.
Risks
Dividend ETFs can provide diversification and exposure to companies that return cash to shareholders, but they remain stock investments.
That matters for retirees. Someone who depends on a portfolio for near-term living expenses may not be able to tolerate a substantial decline in stock prices.
RDVY may also experience larger swings because of its exposure to semiconductor and other growth-oriented companies. Semiconductor businesses can be particularly sensitive to changes in economic conditions, capital spending and industry cycles.
VIG and NOBL have their own risks. A long history of dividend increases does not guarantee that a company will continue increasing its payout. Companies can reduce or suspend dividends when financial conditions deteriorate.
For that reason, the appropriate allocation depends on an investor’s income needs, time horizon, risk tolerance and broader portfolio.
Bottom Line
A $56 monthly Social Security increase can provide useful additional income, but it may not significantly change a retiree’s financial picture. Dividend ETFs can offer another potential source of income and long-term growth, although they come with market risk.
VIG may appeal to investors seeking a low-cost dividend-growth strategy. NOBL focuses on companies with at least 25 consecutive years of dividend increases, while RDVY offers a more growth-oriented approach.
None should be considered a guaranteed replacement for Social Security income. A diversified retirement portfolio should account for both income needs and the possibility of market losses.
FAQs
How much is the 2026 Social Security COLA?
The 2026 COLA is 2.8%.
What is VIG?
VIG is an ETF focused on dividend-growing companies.
What is NOBL?
NOBL tracks S&P 500 companies with long dividend-growth records.
What is RDVY?
RDVY focuses on earnings growth and rising dividends.
