3 Passive Income ETFs for Your Retirement Strategy

Market uncertainty and growing concerns about the future of Social Security have investors increasingly focused on creating reliable sources of income. Projections from the Social Security Administration suggest that the program’s trust funds may face challenges in delivering full benefits in the coming decades, underscoring the importance of developing independent sources of income for retirement.

Personal retirement planning has never been more important as demographic shifts put pressure on traditional safety nets. While Social Security has served as the cornerstone of retirement planning for generations of Americans, changing financial realities require a more proactive approach to income generation.

Exchange-traded funds (ETFs) offer an efficient way to create diversified income streams without the complexity of managing individual securities. Here are three ETFs designed to create reliable sources of income for retirement portfolios.

Creating Value-Driven Cash Flow

ETF Pacer US Cash Cows 100 (KOVZ 0.52%) uses a specific strategy aimed at maximizing shareholder value through cash flow generation. The Pacer US Cash Cows 100 ETF identifies companies with high free cash flow yield, a critical metric that typically signals both financial strength and the ability to maintain consistent dividend payments.

The ETF provides investors with a modest yield of 1.89%. While its expense ratio of 0.49% is higher than many comparable funds in the industry, its unique investment approach helps justify the premium.

This ETF’s methodology targets companies that generate significant cash flow in excess of their operating needs. The portfolio’s largest positions demonstrate this approach, featuring prominent names such as Hewlett Packard Enterprise, Airbnb, Nukor, QualcommAnd Chevron.

Over the past five years, excluding fees, the ETF has slightly outperformed S&P 500 Index based on total return.

^ SPX data from YCharts

Traditional approach to increasing dividends

iShares Core Dividend Growth ETF (DGRO 0.50%) prioritizes companies that demonstrate consistent dividend growth over time. The fund maintains a competitive expense ratio of 0.08%, allowing investors to retain most of their gains while gaining exposure to quality dividend-paying companies in the U.S. market.

The iShares Core Dividend Growth ETF has a minimum requirement of five consecutive years of dividend growth to be included in the portfolio. This disciplined approach is reflected in the company’s five largest assets: ExxonMobil, Microsoft, Apple, JP Morgan ChaseAnd Chevron — all recognized market leaders with a strong dividend history. The ETF currently offers investors a solid 2.2% yield.

The fund’s main strength lies in its commitment to companies that regularly increase their dividend payouts. This strategy is consistent with historical market data showing dividend growing companies have superior long-term results. This sustained distribution growth often indicates strong business fundamentals and an expanding market presence.

The fund had underperformed the S&P 500 over the previous five years, but still achieved strong stock price growth and stable dividends over that period.

^ SPX data from YCharts

Income Increasing Strategy

JPMorgan Equity Premium Income ETF (ZEPI 0.22%) uses an innovative approach to generating income. The JPMorgan Equity Premium Income ETF combines high-dividend stocks with an options overlay strategy designed to provide enhanced monthly income while managing portfolio volatility.

The ETF’s complex approach has attracted significant investor attention, particularly due to its ability to generate above-average returns. The portfolio’s largest positions reflect this strategy and include such notable names as Tran Technologies, Meta platforms, Progressive, Southern CompanyAnd EbbVee.

The fund currently offers investors a significant yield of 7% while maintaining a moderate expense ratio of 0.35%. Since its launch in 2020, the ETF has delivered lower total returns than the S&P 500 but has maintained its focus on delivering stable income, making it an ideal vehicle for a retirement portfolio.

^ SPX data from YCharts

An Important Part of Retirement Planning

Creating multiple streams of passive income is a smart approach to retirement. These ETFs offer a variety of income methods, from traditional dividend growth to more complex options-based strategies.

Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. George Badwell holds positions at AbbVie, Chevron, JPMorgan Chase, Microsoft and the iShares Trust-iShares Core Dividend Growth ETF. The Motley Fool has positions in and recommends AbbVie, Airbnb, Chevron, JPMorgan Chase, Meta Platforms, Microsoft, Progressive and Qualcomm. The Motley Fool recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has a disclosure policy.