How Three ETFs Can Cover the Income Shortfall After Cutting Back to Three Workdays a Week at 62

Quick Read

• VUSB pays monthly and produced $2.12 per share over the past 12 months, making it a practical choice for covering a regular paycheck gap.

• The Social Security earnings test can withhold benefits on income above $24,480 in 2026, so using a portfolio bridge may be smarter than claiming early while still employed.

• VO delivered a 205% return over 10 years, giving long-term money more room to grow as later-life costs continue to rise.

Why Early Social Security May Not Close the Gap

Claiming Social Security early may seem like the easiest answer, but part-time work complicates the picture. Under Social Security Administration rules, people below full retirement age face the retirement earnings test. For 2026, the annual exempt amount is $24,480, and earnings above that level can reduce part of a benefit. Once full retirement age is reached, the earnings limit no longer applies. If you claim early while still drawing a paycheck, the result may be less helpful than it first appears, which is why a portfolio may need to cover the difference instead.

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Learn 13 Major Retirement Mistakes and How to Avoid Them

One investment mistake can create major risks for retirement. Many investors fall into the same traps: being too cautious, making large bets on supposed sure things, or paying high fees. Any of those errors can put hard-earned savings at risk.

You can also learn the mistakes even experienced investors make, along with ways to avoid them before it is too late, in this guide: 13 Retirement Mistakes and How to Avoid Them from Fisher Investments. Access your complimentary copy here (sponsor).

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Two additional issues belong on the checklist. Reducing your hours can affect eligibility for employer health coverage, so it is important to confirm the rules before changing your schedule. Phasing out of work can also create tax complications that many people do not anticipate, including the four biggest semi-retirement traps highlighted in a free guide here: Retire Twice. And any portfolio withdrawal, even a small one, brings the drawdown period forward compared with full retirement. Each withdrawal should be tied to the actual income gap.

VUSB Helps Stabilize the Short-Term Gap

This fund functions as the spending bucket. It uses active management to invest mainly in high-quality bonds and, to a lesser extent, medium-quality bonds, aiming to generate current income with limited price swings, according to its fund summary. Net assets were about $8.9 billion as of late June 2026.

Looking inside the portfolio reveals corporate bonds from Bank of America, AT&T, and Bank of Montreal, along with auto-loan and consumer-receivables trusts such as AmeriCredit and Affirm, based on its latest holdings filing. That means investors are taking on corporate credit risk.

VUSB pays monthly, which fits a regular paycheck shortfall. Its latest distribution of $0.1826 per share is payable in early November, and payouts over the trailing 12 months totaled $2.12 per share. Shares recently traded near $49.63 and had gained 3.7% over the prior year. Because a fund like this never matures, its price can still move and it can lose value. Its role is to help cover the gap during a market decline without forcing stock sales at a loss.

FDL Provides a Second Income Stream From Established Dividend Stocks

FDL tracks the Morningstar Dividend Leaders Index, which uses a proprietary Morningstar screen to select high-yield stocks with steady and sustainable dividend policies, according to First Trust. Distributions came to $0.4005 per share in March, $0.4732 in June, and $0.5139 in September. That totals $1.9375 over the trailing 12 months, compared with a recent share price of $53.81.

Price appreciation has also helped. FDL rose 31.77% over the past year. Still, it remains a stock fund that can decline when the market falls; payouts change each quarter, and companies can reduce dividends.

VO Gives Longer-Term Money Room to Compound

VO invests in mid-sized U.S. companies. Since this money is not expected to be tapped until full retirement and beyond, it has the longest time horizon. It returned 14.15% over the past year and 205.65% over 10 years.

That growth matters because inflation does not stop when work hours do. The Bureau of Labor Statistics' research price index for Americans 62 and older reached 368.066 in September 2026, up 0.5% from the previous month. Older households also devote more of their budgets to housing and medical care. VO pays quarterly dividends, but the amounts vary, so it should be treated as the growth engine rather than the income source.

What to Consider Before Cutting Back Hours

Each fund comes with trade-offs. VUSB's income will move with interest rates. Its monthly payouts in 2026 were below those of the prior year; the highest payment reached $0.2123 in February 2025, and short-term yields will influence what comes next. Treasury yields ranged from 4.06% at one month to 4.36% at one year on October 30. Cash-like holdings also leave limited room to outpace inflation. FDL's strong performance may not repeat on a predictable schedule, and its income is not fixed. Mid-cap stocks typically swing more sharply than large companies, so VO may need years to recover after a weak stretch.

For a 62-year-old covering a defined gap for a defined period, the structure is what makes these funds useful. VUSB handles the near-term shortfall, FDL adds another income layer, and VO continues compounding for the retirement that follows. Giving each dollar a clear purpose can make it easier to work three days a week without worrying that a bad month in the market will force a change in plans.

Help Avoid These 13 Retirement Mistakes Before They Derail Your Future

One investment mistake can create major risks for retirement. Many investors fall into the same traps: being too cautious, making large bets on supposed sure things, or paying high fees. Any of those errors can put hard-earned savings at risk.

You can also learn the mistakes even experienced investors make, along with ways to avoid them before it is too late, in this guide: 13 Retirement Mistakes and How to Avoid Them from Fisher Investments. (sponsor)