Social Security's future looks increasingly uncertain. According to the latest trustee report, the program's trust funds will be depleted by 2037, a timeline that could significantly affect anyone still decades away from retirement. At that point, payable benefits would drop to just 76% of scheduled amounts.
This means workers in their 50s and younger need to approach retirement planning with the assumption that Social Security may play a smaller role in their financial future. Taking concrete steps today to build additional retirement income streams isn't just prudent; it's becoming essential for securing true financial independence.
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Fortunately, a carefully constructed income portfolio can help bridge this potential gap. Let's examine three investments that could provide reliable passive income to supplement reduced Social Security benefits.
Rithm Capital offers steady mortgage income
Rithm Capital (RITM 1.91%), a real estate investment trust (REIT), stands out for both its high yield and financial strength. The company has delivered 87% price appreciation since May 2020, with total returns reaching 187% when including reinvested dividends in a tax-advantaged account. At current prices, investors can lock in a 9.38% yield that's well-supported by the company's operations.
NYSE: RITM
Key Data Points
That attractive yield rests on solid financial footing. In the third quarter of 2024, Rithm Capital generated $270.3 million in earnings available for distribution, or $0.54 per share, more than double its $0.25 quarterly dividend payment.
The REIT's financial stability stems from its diversified business model across mortgage servicing, asset management, and real estate lending. This broad platform has proven capable of generating steady income through different market cycles, making Rithm Capital particularly attractive for retirement portfolios seeking reliable quarterly income.
Chevron powers portfolios with energy dividends
Chevron Corporation (CVX 1.42%) brings both growth and income stability to retirement portfolios through its integrated energy operations. Over the past 10 years, the oil giant has rewarded shareholders with a 36.9% share price increase, while delivering a 109% total return when including reinvested dividends. Today's investors can secure a 4.02% yield backed by decades of operational excellence.
NYSE: CVX
Key Data Points
The company maintains a sustainable 70.3% payout ratio, meaning it pays out about $0.70 in dividends for every dollar of earnings. At 13.4 times forward earnings, Chevron trades at a significant discount to the S&P 500's 23 multiple, offering both dividend reliability and compelling value. Chevron's integrated business model, spanning oil production to retail gas stations, provides natural hedges against energy price swings. This operational diversity helps maintain dividend stability even when oil prices fluctuate.
International diversification through Vanguard's dividend ETF
The Vanguard International High Dividend Yield ETF (VYMI +0.64%) rounds out a retirement income strategy by tapping into global dividend streams. Since its 2016 launch, this fund has provided access to established dividend payers across developed and emerging markets at a fraction of the cost of actively managed funds. With an expense ratio of just 0.22% compared to the category average of 0.96%, more dividend income flows through to investors.
The Vanguard International High Dividend Yield ETF broad reach spans nearly 1,500 stocks across multiple regions and sectors. European dividend payers make up 44.3% of assets, while Pacific region stocks contribute 25.7% and emerging markets add 21.5%. This geographic diversity helps insulate retirement income from any single country's economic challenges.
Building a resilient retirement portfolio
These three investments create multiple streams of retirement income through complementary approaches. Rithm Capital delivers high current yield through real estate finance, Chevron provides growing energy dividends backed by hard assets, and the Vanguard International High Dividend Yield ETF adds global diversification at low cost.
While Social Security's future may be uncertain, this balanced portfolio approach can help protect retirement lifestyles. By combining Rithm's high yield, Chevron's steady growth, and the Vanguard International High Dividend Yield ETF's international exposure, retirees can build a resilient income stream for the decades ahead.
