The future of social security looks increasingly uncertain. According to the latest trustee report, the program’s trust funds will be depleted by 2037, a timeline that could have significant consequences for anyone still decades away from retirement. At that point, benefits payable would drop to just 76% of the planned amounts.
This means that workers in their 50s and younger should approach retirement planning with the assumption that Social Security may play a smaller role in their financial future. Taking concrete steps today to build up additional pension income is not only wise; it becomes essential to securing true financial independence.
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Fortunately, a carefully constructed income portfolio can help bridge this potential gap. Let’s explore three investments that can provide reliable passive income to supplement reduced Social Security benefits.
Rhythmic Capital (NYSE:RITM)a real estate investment trust (REIT), stands out for both its high returns and its financial strength. The company has seen a share price increase of 87% since May 2020, with a total return of 187% when dividends reinvested in a tax-advantaged account are included. At current prices, investors can lock in a 9.38% yield, which is well supported by the company’s operations.
This attractive return is based on a solid financial basis. In the third quarter of 2024, Rithm Capital generated $270.3 million in profit available for distribution, or $0.54 per share, more than double its quarterly dividend payment of $0.25.
The REIT’s financial stability comes from its diversified business model in mortgage servicing, asset management and real estate lending. This broad platform has proven its ability to generate stable income across market cycles, making Rithm Capital particularly attractive for retirement portfolios seeking reliable quarterly income.
Chevron Corporation (NYSE: CVX) brings both growth and income stability to pension portfolios through its integrated energy activities. Over the past decade, the oil giant has rewarded its shareholders with a 36.9% share price increase, while delivering a total return of 109%, including reinvested dividends. Today’s investors can secure a 4.02% return, backed by decades of operational excellence.
The company maintains a sustainable payout ratio of 70.3%, meaning it pays out approximately $0.70 in dividends for every dollar of earnings. At 13.4 times forward earnings, Chevron is trading at a significant discount to the S&P500‘s 23 multiple, which offers both dividend reliability and compelling value. Chevron’s integrated business model, which spans oil production through small gas stations, provides natural protection against energy price fluctuations. This operational diversity helps maintain dividend stability even as oil prices fluctuate.
The Vanguard International ETF with high dividend yield (NASDAQ: VYMI) completes a retirement income strategy by leveraging global dividend streams. Since its launch in 2016, this fund has provided access to established dividend payers in 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’s broad reach includes nearly 1,500 stocks across multiple regions and sectors. European dividend payers represent 44.3% of assets, while Pacific equities contribute 25.7% and emerging markets 21.5%. This geographic diversity helps insulate retirement income from the economic challenges of each individual country.
These three investments create multiple streams of retirement income through complementary approaches. Rithm Capital delivers high current returns through real estate financing, Chevron offers growing energy dividends backed by hard assets, and the Vanguard International High Dividend Yield ETF adds global diversification at a low cost.
While the future of Social Security may be uncertain, this balanced portfolio approach can help protect the retirement lifestyle. By combining Rithm’s high returns, Chevron’s steady growth, and the Vanguard International High Dividend Yield ETF’s international exposure, retirees can build a resilient income stream for decades to come.
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George Budwell has positions in Chevron, Rithm Capital and Vanguard International High Dividend Yield ETF. The Motley Fool holds positions in and recommends Chevron. The Motley Fool has a disclosure policy.
2 Dividend Stocks and 1 ETF to Prepare for Social Security’s Uncertain Future was originally published by The Motley Fool
