Top 3 Income ETFs for Retirement Portfolio Growth

The JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) stands out with its impressive 9.38% yield, achieved through a sophisticated strategy that combines Nasdaq-100 equity exposure with a covered-call overlay. This actively-managed U.S. equity ETF sells one-month, slightly out-of-the-money call options on the Nasdaq-100 Index, generating premiums that are distributed monthly alongside any ordinary dividends from the underlying stocks. This approach not only provides substantial income but also benefits from the current surge in retail options trading, which keeps premiums elevated.

With an expense ratio of just 0.35%, or $35 per $10,000 invested, JEPQ is remarkably cost-effective for an ultra-high-yield ETF. Its performance has been strong year-to-date, positioning it as a top choice for investors seeking both growth and income. The fund’s strategy is particularly advantageous in volatile markets, where the additional income can help cushion against downturns while still offering exposure to the tech-heavy Nasdaq-100.

Diversifying beyond U.S. markets is a prudent strategy for retirement portfolios, and the FlexShares International Quality Dividend Dynamic Index Fund (IQDY) excels in this regard. This ETF tracks the Northern Trust International Quality Dividend Dynamic Index, focusing on international companies with high dividends supported by robust cash flows. Year-to-date, IQDY has delivered a stellar 25% return, significantly outperforming the SPY’s 12.9% gain, thanks in part to the recent decline in the U.S. dollar.

IQDY offers a yield of 6.12% with an expense ratio of 0.51%, or $51 per $10,000. Its holdings are highly diversified, with Taiwan Semiconductor Manufacturing Company (NYSE:TSM) as the largest position at just 2.5225%, ensuring minimal concentration risk. This international exposure not only enhances yield but also provides a hedge against domestic market fluctuations and currency movements, making it an essential component for a resilient retirement portfolio.

For investors prioritizing raw performance, the Avantis International Small Cap Value ETF (NYSEARCA:AVDV) is the standout choice, with a remarkable 35.86% year-to-date gain. This actively managed ETF invests in small-cap companies outside the U.S. that trade at low multiples relative to their profits, emphasizing profitability to avoid value traps. Its focus on industrials (22%) and materials (17.43%) sectors has paid off handsomely, driven by the weakening U.S. dollar and surging gold prices.

While AVDV’s yield of 3.29% is lower than the other two ETFs, its growth potential is unparalleled. With 1,515 holdings and no single stock exceeding a 0.93% weighting, the fund offers exceptional diversification. The expense ratio is a low 0.36%, or $36 per $10,000, making it an efficient vehicle for accessing undervalued international small-caps. This ETF is ideal for those who seek aggressive portfolio expansion while still receiving a steady income stream.

These three ETFs—JEPQ, IQDY, and AVDV—address the critical challenges facing soon-to-be retirees: the need for yields that outpace inflation, protection against market volatility, and the necessity for portfolios to outlive their owners. With life expectancies extending into the eighties and healthcare costs rising faster than the CPI, the traditional 2% yield is no longer sufficient. These funds offer a solution through their combination of high income, strong performance, and diversification.

Moreover, the current economic landscape, characterized by rapid changes in trade policies and potential administrative shifts, underscores the importance of resilient investment strategies. By incorporating these ETFs, investors can build a portfolio that not only generates substantial monthly distributions but also positions itself for growth, ensuring financial stability throughout retirement. Consulting with a vetted financial advisor, as suggested by SmartAsset, can further personalize this strategy to individual needs.