For many retirees, Social Security provides an important source of monthly income. However, rising living costs continue to challenge household budgets, even after annual cost-of-living adjustments (COLAs). The average monthly Social Security benefit currently stands at $2,082, but many households spend significantly more than that each month on essential expenses.
As inflation continues to influence the cost of groceries, healthcare, housing, and utilities, some retirees are looking beyond Social Security to generate additional income. One approach that has gained attention is investing in exchange-traded funds (ETFs) designed to provide regular income while offering varying levels of growth potential. Four ETFs frequently discussed for retirement income include the NEOS S&P 500 High Income ETF (SPYI), iShares Core High Dividend ETF (HDV), Global X U.S. Preferred ETF (PFFD), and WisdomTree U.S. Quality Dividend Growth Fund (DGRW).
The average Social Security benefit of $2,082 per month equals roughly $24,984 annually before taxes. While this income helps cover basic expenses, it often falls short of total household spending.
According to recent consumer spending data, the average U.S. household spent approximately $78,535 during 2024. Although spending varies widely by household, the figures illustrate why many retirees seek additional income sources alongside Social Security.
At the same time, inflation has continued to affect purchasing power. Consumer Price Index (CPI) data increased from 322.169 in July 2025 to 332.568 in June 2026, highlighting the ongoing rise in prices for everyday goods and services.
Why ETFs?
Income-focused ETFs combine multiple securities into a single investment, helping investors diversify while generating dividend or income payments.
Different ETFs focus on different strategies. Some emphasize high dividend stocks, others generate income through options, while some invest in preferred shares or companies expected to grow their dividends over time.
Each strategy comes with different levels of income potential and investment risk.
SPYI
The NEOS S&P 500 High Income ETF (CBOE: SPYI) seeks to generate monthly income by investing in S&P 500 companies while using a covered call strategy.
The fund manages approximately $6.9 billion in assets and has an expense ratio of 0.68%.
Based on recent distributions:
| SPYI Highlights | Value |
|---|---|
| Assets Under Management | $6.9 Billion |
| Expense Ratio | 0.68% |
| July 2026 Distribution | $0.53 per share |
| Trailing 12-Month Distribution | $6.31 per share |
| Forward Annualized Distribution | $6.36 per share |
| Recent Share Price | $52.26 |
Covered call strategies can generate attractive monthly income, but they may limit gains during strong stock market rallies because part of the upside is exchanged for option premium income.
HDV
The iShares Core High Dividend ETF (NYSEARCA: HDV) focuses on established companies with strong dividend histories.
Its largest holdings include well-known businesses such as Exxon Mobil, Chevron, Johnson & Johnson, AbbVie, and Procter & Gamble. These companies operate primarily in sectors like energy, healthcare, and consumer staples that have historically remained relatively resilient during changing economic conditions.
| HDV Top Holdings | Portfolio Weight |
|---|---|
| Exxon Mobil | 8.42% |
| Chevron | 6.43% |
| Johnson & Johnson | 5.68% |
| AbbVie | 5.44% |
| Procter & Gamble | 4.46% |
The fund has delivered solid recent performance, although investors should note that its portfolio is relatively concentrated, with the top ten holdings representing more than half of total assets.
PFFD
The Global X U.S. Preferred ETF (NYSEARCA: PFFD) invests primarily in preferred stocks.
Preferred securities generally pay fixed distributions and rank above common stock in a company’s capital structure. They often provide more stable income than common shares but typically offer less price appreciation.
| PFFD Highlights | Value |
|---|---|
| Assets Under Management | $2.25 Billion |
| Holdings | 200+ |
| Monthly Distribution | $0.10 per share |
| Annualized Distribution | $1.20 per share |
| Recent Share Price | $18.39 |
Because preferred stocks are sensitive to interest rate changes, their prices may fluctuate when market interest rates move higher or lower.
DGRW
The WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ: DGRW) takes a different approach by focusing on companies with strong financial quality and expected dividend growth.
Rather than seeking the highest current yield, the fund aims to build long-term income through growing dividends.
| DGRW Performance | Value |
|---|---|
| Share Price | $95 |
| Trailing 12-Month Distribution | $1.22 |
| Forward Annualized Distribution | $1.92 |
| One-Year Return | 12.20% |
| Five-Year Return | 69.02% |
| Ten-Year Return | 252.88% |
This strategy may appeal to investors seeking long-term growth alongside increasing dividend income that can help offset inflation over time.
Considerations
Each ETF serves a different purpose within an income-focused portfolio.
SPYI emphasizes monthly income through options strategies but may underperform during strong bull markets. HDV focuses on large dividend-paying companies but has meaningful exposure to a limited number of holdings. PFFD offers relatively stable income through preferred securities, although returns may be affected by changing interest rates. DGRW provides lower current income but places greater emphasis on dividend growth and long-term capital appreciation.
Choosing among these funds depends on an investor’s income needs, investment objectives, and tolerance for market risk.
Planning
Retirees considering income investments should evaluate how additional investment income fits within their overall retirement strategy. Social Security remains an important foundation for retirement income, but investment portfolios may help supplement monthly cash flow when managed appropriately.
Before investing, individuals should consider their financial goals, time horizon, tax situation, and risk tolerance. Consulting a qualified financial professional may also help determine whether income-focused ETFs are appropriate for a retirement portfolio.
The average Social Security benefit provides valuable financial support, but it may not fully keep pace with household expenses as living costs continue to rise. Income-oriented ETFs such as SPYI, HDV, PFFD, and DGRW offer different approaches to generating income and pursuing long-term growth. While each fund carries its own risks and potential benefits, understanding how these investment strategies work can help retirees make more informed financial decisions as they plan for the future.
FAQs
What is the average Social Security benefit?
The average monthly benefit is about $2,082.
Why are retirees considering income ETFs?
They may provide additional income beyond Social Security.
Which ETF focuses on monthly income?
SPYI uses a covered call strategy for monthly distributions.
What does PFFD primarily invest in?
It mainly invests in preferred stocks.
