Most retirees and prospective retirees are in a tricky environment in 2026, to say the least. What’s worse is that very few of them are holding iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO), and Schwab International Dividend Equity ETF (NYSEARCA:SCHY).
Why?
Your portfolio is likely overexposed to certain market sectors, especially tech. It’s very dangerous when you put, say, 50% of your portfolio in the S&P 500 and then another 50% in an “income” ETF like JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI). They may have done well historically, but you’re essentially doubling down on the same ETFs, and by extension, the same stocks. An ETF like JEPI is simply translating the S&P 500’s upside into yield.
Many don’t realize that 7% of the S&P 500 is Nvidia (NASDAQ:NVDA | NVDA Price Prediction) and 13.6% of the Nasdaq-100 is NVDA, and that’s before you add in all the other big tech stocks. If you then go ahead and stack a covered call dividend ETF on this, your portfolio will collapse if tech stocks undergo a severe correction.
Retirees desperately need more diversification, and they need to do it quickly, since 2026 could end up being a transition year for the stock market.
iShares 20+ Year Treasury Bond ETF (TLT)
The iShares 20+ Year Treasury Bond ETF holds long-term U.S. Treasuries, and it is not a fund that holds equity. Now, most people think a 4%-yielding vehicle like TLT keeps them barely above inflation, but there’s a lot to unpack before you make that mistake.
TLT is an excellent buffer and can soften the blow you take if the stock market ever crashes. Not only that, it is the only name in town that can reliably surge during a recession without you having to buy an inverse ETF. Recessions invite rapid interest rate cuts in quick succession. These interest rate cuts then drive a hunger for more yield, especially the safer kind. TLT gives the market just that, because it holds long-term Treasuries.
Since the maturities on these bonds are so long, near-term interest rate fluctuations don’t have a significant impact on their yields.
In 2008, TLT surged from $90 to over $120. In 2020, TLT surged by over 20%. The ETF is back in the $90s range due to interest rate hikes in the past few years, and this has been the historical floor. I see high upside potential and low downside risk from here.
To top it all off, the yield is at 4.33% with a monthly distribution, and the expense ratio is just 0.15%.
Amplify CWP Enhanced Dividend Income ETF (DIVO)
While I did warn about a covered call ETF earlier, DIVO is a different animal. It gives you diversification and a solid yield, with Caterpillar (NYSE:CAT), RTX Corp (NYSE:RTX), and IBM (NYSE:IBM) as its top three holdings. All three are solid cash-generating businesses you’re likely under-exposed to.
What makes DIVO different is that it does not rely entirely on covered calls. The portfolio contains 35 different holdings, with some leaning towards growth, whereas others lean more towards income. The fund then allocates a 20-30% chunk of its portfolio to its options arm. That arm is responsible for the significantly higher yield. And unlike most other ETFs, this contained covered call overlay does not cap the upside potential significantly. DIVO is up 8% in just the past month.
You get a solid 6.17% monthly dividend yield. The expense ratio is 0.56%.
Schwab International Dividend Equity ETF (SCHY)
Your portfolio is likely domestic-oriented, and that can be a bad thing if you overdo it. Schwab International Dividend Equity ETF can tackle this problem since it holds a modified market-cap-weighted portfolio of roughly 100 international stocks selected for their dividend quality. To make the cut, companies must have paid dividends for at least 10 consecutive years. These companies span both developed and emerging markets, with the U.K. contributing a fifth of its holdings.
International stocks genuinely underperformed in the past three years, but trends don’t stay the same forever. Last year was pivotal for these stocks due to the USD losing value rapidly. These stocks climbed so fast that even this dividend stock is up 37% in the past year, and that’s on top of the 3.19% yield.
You’re getting international exposure plus a solid yield with an expense ratio of just 0.08%. It’s a must-have in my book.
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