Here is the retirement math no one wants to run. About seven in 10 people over age 65 will need some form of long-term care, and Medicare largely does not pay for the custodial part — the daily help with bathing, dressing, meals, and supervision that dominates real-world care costs. That bill lands on you. If you are trying to build a dedicated fund for it, three exchange-traded funds tackle the problem from three different directions: Vanguard Health Care ETF (NYSEARCA:VHT) for direct exposure to the industry setting the prices, Schwab U.S. Large-Cap Growth ETF (NYSEARCA:SCHG) to compound the pot before you need it, and Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) to spin off rising income once the bills start.
The Problem You Are Actually Solving
Custodial care is expensive and gets more expensive every year. Meanwhile, Social Security is doing its best but not keeping pace. The 2027 cost-of-living adjustment is tracking around 3.1%, and average annual household expenditures already ran to $78,535 in 2024 before any heavy care costs. A long-term care fund needs to do three jobs at once: (1) grow ahead of healthcare inflation, (2) own a piece of the sector charging the prices, and (3) generate reliable cash when care actually starts.
VHT: Own the Cost Curve
VHT is Vanguard’s healthcare sector index ETF, holding U.S. drugmakers, insurers, device makers, and hospital operators. If the price of care keeps climbing, you want to own the earnings stream that climbs with it. The expense ratio is 0.09%, meaning you keep about $999.10 of every $1,000 working for you each year. Performance has done its part lately: VHT is up 28.77% over the past year and 168.62% over the past decade. It also pays a quarterly dividend, with a trailing 12-month total of $4.72 per share. This is your hedge against your own future invoices.
SCHG: Compound the Balance
If care is 10, 15, or 20 years away, you need growth doing the heavy lifting now. SCHG tracks large-cap U.S. growth stocks with about $61.08 billion in net assets and a portfolio anchored by the biggest compounders in the market: NVIDIA at 11.01%, Apple at 9.83%, Microsoft at 7.17%, Amazon at 5.67%, plus Alphabet, Meta, Broadcom, and Eli Lilly. Long-run results reflect the growth tilt: SCHG has returned 92.37% over five years and 451.69% over 10 years. This is the fund doing the compounding math so a five-figure contribution today has a shot at becoming the six-figure cushion you need later.
VIG: Rising Income When the Bills Arrive
Once care starts, you want cash flow that you do not need to sell shares to create, and cash flow that grows. VIG tracks the S&P U.S. Dividend Growers Index, screening for companies with long histories of raising payouts. It currently has around $124.65 billion in net assets and has returned 18.72% over the past year and 246.58% over the past decade. The dividend story is the point: VIG’s most recent quarterly payout was $0.9988, up from $0.8334 the quarter before, with a trailing 12-month total of $3.58 and an annualized forward estimate near $4.00 per share. Fees are tiny, and payments arrive on a reliable quarterly cadence that you can drop into the same monthly budget line as the care invoice.
The Real Trade-Offs
None of these funds come without trade-offs. VHT is a single-sector bet, so a bad regulatory cycle, drug-pricing crackdown, or hospital-margin squeeze can hit it harder than a broad index. SCHG is growth-tilted and mega-cap concentrated, with the top six holdings roughly 40% of the portfolio, which means sharper drawdowns in a tech-led selloff. VIG’s dividend yield is modest by design; the appeal is dividend growth over time rather than headline income today, so early on the payouts will feel small next to a bond ladder. That said, sized together, VHT hedges the cost curve, SCHG builds the balance, and VIG converts it into rising income exactly when a 70% probability event finally comes due.
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