There’s a reason I spend so much time managing my retirement portfolio. I know that Social Security is not going to pay for the retirement I really want.
I’m expecting some of my costs to decrease in retirement. I may, for example, not need such a big house, and I may have the option to ditch my current ZIP code for a remote part of the country where costs are lower on a whole.
But I also know that certain expenses, like healthcare, might increase in retirement. And I also don’t want to end up in a situation where there’s no room in my retirement budget to travel or pursue fun activities.
For these reasons, I can’t just rely on Social Security to cover my bills. Instead, I’m actively saving and investing money so I’m able to supplement those benefits.
One asset I added to my portfolio some time ago is the Schwab U.S. Dividend Equity ETF (SCHD). It’s not the most lucrative asset you’ll find, and I wouldn’t recommend investing solely in SCHD if you’re trying to build retirement wealth.
But there’s a big reason why this investment works well for me, and why I intend to hang onto it even in retirement.
How the Schwab U.S. Dividend Equity ETF works
First, if you’re not familiar with ETFs, or exchange-traded funds, they’re funds that invest in a bucket of assets. In the case of SCHD, the fund tracks the Dow Jones U.S. Dividend 100 Index.
That index is comprised of high-quality U.S. businesses with at least 10 years of consistent dividend payments, and dividend payments that are deemed to be sustainable. All told, the companies SCHD invests in are also solid businesses with strong financial health.
Because of SCHD’s focus on steady dividends, it’s a reliable source of portfolio income. And because it weeds out companies with weak financial or unstable dividends, it’s less risky than other assets.
Why SCHD works well for me
As someone who’s not yet retired, I want to be clear that SCHD is one of numerous assets I own. I’m a fan of SCHD for the consistent income it adds to my portfolio. But there are definitely other funds that could produce stronger dividend yields or returns.
However, SCHD fulfills my need to have some stable income in my retirement portfolio. And that’s a good way to hedge against market volatility.
Plus, because I’m not retired, I can reinvest the dividends SCHD pays me to grow my portfolio even more. And remember, SCHD focuses on companies that not only pay dividends, but are likely to increase their dividends. That’s a win for me.
But while I consider SCHD a great wealth-building option, I also plan to hold onto it during retirement. It’s important for retirees to own assets that can generate steady income, and SCHD fits the bill.
Whether you’re trying to build savings for retirement, or you’ve stopped working and are looking for an investment that can provide steady, reliable income, SCHD is worth exploring. And like many other ETFs, it has a fairly low expense ratio, which should help you keep more of your returns rather than lose them to fees.
To be clear, though, SCHD isn’t the only dividend ETF out there. Other options include the Vanguard High Dividend Yield ETF and iShares Core High Dividend ETF, which have similar strategies.
It pays to research each investment you’re looking at carefully, and also, to compare it to similar ones to see what’s best for you. But you may, like me, find that SCHD checks off the right boxes.
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