10% Yields Every Retiree Should Own: Balancing Risk and Reward in 2025

Retirees seeking steady income often chase high yields, but the quest for 10% returns clashes with the need for safety. While no single investment guarantees both 10% yields and rock-solid principal protection, retirees can construct portfolios that approach this target by combining strategic, medalist-rated ETFs with measured risk-taking. Below, we dissect the highest-yielding, low-risk options and reveal how to maximize returns without overexposing your nest egg.

The ETFs Leading the Pack

The highest-yielding ETFs for 2025 prioritize dividend sustainability and diversification, offering yields between 2.86% and 4.45%. These funds are engineered to avoid “value traps” (firms with unsustainable dividends) and balance risk through sector allocations and market-weighting strategies.

1. Vanguard International High Dividend Yield ETF (VYMI)

• Yield: 4.45% (highest among listed options).
• Risk Profile: Invests in large/mid-cap firms across 40+ countries, with 40% in financial services and 16% in energy—sectors historically less volatile.
• Why It’s Safe: Market-cap weighting avoids overexposure to distressed companies.
• Trade-off: International exposure carries currency and geopolitical risks.

2. Franklin U.S. Low Volatility High Dividend ETF (LVHD)

• Yield: 3.79%.
• Risk Profile: Focuses on U.S. firms with low volatility (25% utilities, 22% consumer defensive).
• Safety Feature: Explicitly designed for retirees, using optimization to minimize risk while maximizing yield.

3. Schwab International Dividend Equity ETF (SCHY)

• Yield: 4.17%.
• Risk Profile: Targets dividend-paying firms with strong profitability, limiting emerging-market exposure to 15%.

The 10% Yield: Myth or Strategy?

No ETF or bond alone will deliver 10% yields safely, but a combination of high-quality assets can approach this target with careful planning:

Step 1: Anchor with Low-Volatility ETFs

• LVHD (3.79%) and VYM (2.86%) provide a stable foundation. Their sector allocations (utilities, consumer defensive) shield against downturns.

Step 2: Add International Exposure (With Caution)

• VYMI and SCHY boost yields to ~4%, but retirees must monitor geopolitical risks (e.g., currency fluctuations in emerging markets).

Step 3: Strategic Allocations to High-Yield Bonds

• High-Yield Corporate Bonds (e.g., iShares iBoxx $ High Yield Corporate Bond ETF (HYG)) can yield 5–7%, but default risks rise in recessions.
• Morningstar analysts advise: Limit allocations to 5–10% of a portfolio and prioritize diversified bond funds.

Step 4: Consider Dividend Growth Stocks

• Firms with 10+ years of dividend growth (e.g., those in Schwab U.S. Dividend Equity ETF (SCHD)) average 3.72% yields. Pair these with capital appreciation potential to target 8–10% total returns.

The Safety Net: Diversification and Defensive Assets

Even aggressive strategies require a safety cushion:

• CDs and Treasurys: FDIC-insured CDs (e.g., 5% rates at online banks) and TIPS (adjusting for inflation) ensure principal safety.
• Fixed Annuities: Provide predictable income, though yields rarely exceed 5%.

Conclusion: A 10% Yield is Possible—If You’re Willing to Accept Risk

Retirees can achieve near-10% returns by blending:
1. LVHD (3.79%) and VYMI (4.45%) for dividend stability.
2. HYG (5–7%) for incremental yield, capped at 10% of assets.
3. SCHD (3.72%) paired with growth-oriented equities for total return potential.

However, this requires accepting some risk:
- International ETFs may underperform during geopolitical crises.
- High-yield bonds could face defaults if economic growth stalls.

The Morningstar Gold Medalist-rated LVHD and VYMI—with their explicit risk controls—offer the best balance. Retirees should allocate no more than 20% of their portfolio to high-yield instruments, while keeping 60–80% in low-volatility ETFs, CDs, and TIPS.

As of 2025, the VYMI has outperformed the MSCI ACWI ex-USA Value Index by 1.2% annually over five years, while LVHD has maintained its low-volatility promise with a beta of 0.85 (vs. the S&P 500). These metrics underscore the power of combining yield with strategic diversification—proving that 10% is achievable for retirees willing to manage risk thoughtfully.

Final Note: Always consult a financial advisor before adjusting your portfolio. Past performance does not guarantee future results.