When you reach retirement, investing priorities tend to shift.
While growth still matters, reliability, diversification, and dependable income usually take centre stage.
For many retirees, exchange-traded funds (ETFs) can be an ideal solution, offering exposure to dozens or even hundreds of shares while delivering regular distributions without the need to manage individual shares.
With that in mind, here are three ASX ETFs that could play a role in generating passive income throughout retirement.
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Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF is a popular choice among income-focused investors, and it is easy to see why.
This ASX ETF invests in Australian shares with above-average forecast dividend yields, providing exposure to some of the ASX's most established dividend payers.
Its portfolio includes major names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and Telstra Group Ltd (ASX: TLS). These are businesses with long histories of generating strong cash flows and returning capital to shareholders.
For retirees, the Vanguard Australian Shares High Yield ETF offers a relatively straightforward way to access a diversified stream of Australian dividends, with the added benefit of franking credits.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
The Betashares S&P Australian Shares High Yield ETF is another option for income investors to consider in retirement. It targets a basket of ASX shares with high forecast dividend yields, while applying screens designed to avoid dividend traps.
This includes avoiding companies that are projected to pay unsustainably high dividend yields, as well as those that exhibit high levels of volatility relative to their forecast dividend payout.
Current holdings include the banks and blue chips such as QBE Insurance Group Ltd (ASX: QBE), Transurban Group (ASX: TCL), and Woodside Energy Group Ltd (ASX: WDS). It was recently recommended by analysts at Betashares.
Betashares Australian Quality ETF (ASX: AQLT)
While the Betashares Australian Quality ETF may not look like a traditional income ETF, it can still play an important role in a retirement portfolio.
This ASX ETF focuses on high-quality Australian shares with strong balance sheets, consistent earnings, and sustainable business models. Its holdings include Wesfarmers Ltd (ASX: WES), Telstra Group Ltd (ASX: TLS), ANZ Group Holdings Ltd (ASX: ANZ), and Macquarie Group Ltd (ASX: MQG).
The fund pays distributions semi-annually and currently offers a 12-month distribution yield of 3.4%, or 4.3% on a grossed-up basis. Importantly for retirees, around 61% of those distributions are currently franked. It was also recently recommended by analysts at Betashares.
