One of You Retires at 62 and the Other Keeps Working? These 3 ETFs Cover the Overlap Years

Your partner just walked out of the office for the last time at 62. You still have a few years of paychecks left. That split puts your household in an unusual spot. One of you needs spending money now.

Your salary still keeps you in a high tax bracket. And the portfolio has to keep growing for the decades you’ll both spend in retirement. Three funds line up with those three jobs: the JPMorgan Ultra-Short Income ETF (NYSEARCA:JPST), the Vanguard Tax-Exempt Bond ETF (NYSEARCA:VTEB), and the Schwab U.S. Mid-Cap ETF (NYSEARCA:SCHM).

Why Overlap Years Upend the Standard Retirement Playbook

Most retirement plans assume both partners stop working simultaneously. Retirees may delay Social Security for a bigger check later, living off savings in the meantime. However, selling stocks to cover bills during a bad month locks in losses. Additionally, every dollar of taxable interest lands on top of your W-2 income. For 2026, a married couple filing jointly pays 24% on taxable income above $211,400 and 32% above $403,550.

Phasing out of work in stages carries four tax traps of its own, which we walked through in a free semi-retirement guide.

JPST Holds the Retiree’s Spending Money Steady

JPST is actively managed and buys short-term, investment-grade debt. Its holdings include bank notes, corporate bonds, and asset-backed securities. As of May 31, 2026, positions from issuers like Capital One and AbbVie each made up less than 0.6% of the fund, so no single borrower can do much damage. The fund manages about $38.4 billion.

It pays out monthly. Over the past 12 months, it paid $2.10 per share, roughly 4.2% at today’s price. On $100,000, that’s about $4,160 a year. JPST’s price held steady as the 10-year Treasury yield rose to 5.17%. It’s up 3.47% over the past year. That steadiness is why many couples keep the next year or two of withdrawals in a fund like this.

VTEB Turns Your Paycheck’s Tax Bite Into an Advantage

VTEB tracks the S&P National AMT-Free Municipal Bond Index, which covers the investment-grade part of the U.S. municipal bond market. Interest from municipal bonds is generally exempt from federal income tax. Because your household still earns a paycheck, that exemption is worth more to you than it will be after you both retire (the household still has earned income, which is why the muni sleeve fits).

VTEB also pays monthly. Over the past 12 months, it paid $1.70 per share, or about 3.6%. In the 24% bracket, a taxable bond would have to yield roughly 4.8% to leave you the same amount after tax. In the 32% bracket, a taxable bond would need about 5.3%. Compare that with JPST: after a 24% federal tax, its yield drops to around 3.2%. Your tax bracket decides which bond fund leaves you with more money.

SCHM Keeps the Nest Egg Compounding

Your spouse’s retirement could last 30 years, and your own is still ahead of you. That long runway still calls for stocks. SCHM tracks the Dow Jones U.S. Mid-Cap Total Stock Market Index. Mid-size companies usually have more room to grow than mega-caps and are more established than small caps.

The fund holds about $14.6 billion. Its largest disclosed positions include Ciena at 1.5%, Bloom Energy at 1.4%, and Coherent at 1.3%. It also owns industrial, healthcare, financial, and consumer stocks.

SCHM is up 17.03% over the past year and 173.46% over the past decade. It pays a small quarterly dividend that yields about 1.3%. You can reinvest that while your paycheck covers the working spouse’s expenses.

Trade-Offs to Weigh Before You Build This Mix

• Muni prices move with interest rates. VTEB is down 4.54% this year as long-term Treasury yields rose. Only a small part of that is offset by monthly income.
• JPST’s income rises and falls with near-term interest rates. Its monthly payout fell from $0.188 last October to $0.172 in September. If the Fed cuts, the payout falls again.
• Mid-caps can swing hard. SCHM dropped 3.55% in the past month alone. That’s why it holds the long-term money, and JPST holds next year’s bills.
• VTEB’s tax edge shrinks when your paycheck stops. Once you both retire and drop into a lower bracket, a taxable bond fund may leave you with more income. Plan to review the mix then.

Right now, though, your household needs three things at once: cash for the retiree, tax relief for the worker, and growth for both of you. JPST keeps withdrawals steady, VTEB keeps more of your bond income away from federal tax, and SCHM keeps the portfolio growing. Together, they cover the years when one of you is retired and the other is still working.

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