The 5%-Yield Monthly Income ETF That Could Pick Up the Slack if Social Security Runs Out in 2032

The 5%-Yield Monthly Income ETF That Could Pick Up the Slack if Social Security Runs Out in 2032

Tony Dong

Wed, September 9, 2026 at 9:30 PM GMT+3 6 min read

• BINC -0.41%

Quick Read

• Social Security trust fund depletion would mean scheduled benefits could face reductions rather than payments disappearing entirely, increasing the importance of building independent retirement income.

• BINC offers a diversified alternative to Treasury-only fixed income, with its managers able to invest across investment-grade credit, high-yield bonds, mortgages, CLOs, emerging-market debt, bank loans, and other sectors.

• BINC's 5.30% 30-day SEC yield can create substantial taxable income outside a retirement account, making a Roth IRA particularly attractive for reinvesting its monthly distributions and potentially taking qualified withdrawals tax-free later.

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Social Security "running out" doesn't mean retirees suddenly stop receiving checks. The problem is that the program's trust fund reserves are projected to become depleted, at which point incoming payroll taxes would no longer be sufficient to pay 100% of scheduled benefits. Without legislative changes, retirees could therefore face a meaningful reduction in what they were expecting to receive.

That creates a retirement income gap that somebody will have to fill. Congress has several potential levers available, including raising taxes, changing the retirement age, modifying benefits, or some combination thereof. But unless lawmakers can muster the political will to address the shortfall, more of the responsibility for funding retirement will fall on individual investors.

It's one reason retirement accounts have become increasingly important, including the additional $1,100 Roth IRA catch-up contribution currently available to investors age 50 and older. Maximizing tax-advantaged savings while you still have earned income can give you another source of cash flow if Social Security ultimately provides less than expected.

So let's look at why Social Security faces this funding problem in the first place, along with a relatively conservative monthly income ETF from iShares yielding more than 5%, that I think could make sense as a core fixed-income holding inside a Roth IRA for retirees.

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Why Is Social Security Running Short?

The fundamental problem with Social Security is its pay-as-you-go structure. Payroll taxes collected from today's workers are primarily used to pay benefits to today's retirees. When tax revenue exceeds current obligations, the surplus goes into Social Security's trust funds, which by law invest their reserves in special-issue U.S. Treasury securities.

That system worked considerably better when demographics were more favorable. A larger population of workers was supporting a smaller population of retirees, providing a broad base of payroll tax revenue relative to the number of beneficiaries drawing from the system.

But Americans are living longer, birth rates have declined, and the ratio of workers paying into Social Security relative to beneficiaries has fallen. The pay-as-you-go model has therefore run headfirst into an unfavorable demographic trend: fewer workers are being asked to support more retirees for longer periods.

There's also a significant investment constraint. Social Security's trust funds cannot build a globally diversified portfolio of stocks, bonds, infrastructure, private assets, and other investments in pursuit of higher long-term returns. Their reserves are limited to special-issue Treasury securities backed by the federal government.

Compare that with the Canada Pension Plan (CPP). Its investment assets are professionally managed across public equities, fixed income, private equity, infrastructure, real estate, and other asset classes. That introduces market risk, but it also gives the plan access to the long-term return potential of productive assets rather than restricting its portfolio to government debt.

A 5%-Yield ETF for a Roth IRA

If you're trying to supplement future Social Security benefits, one place I'd consider building additional income is inside a Roth IRA. That's particularly useful for fixed-income investments because bond interest would generally be taxed as ordinary income in a taxable brokerage account. Qualified Roth IRA withdrawals, by comparison, are tax-free.

One ETF I like for this purpose is the iShares Flexible Income Active ETF (BINC), an actively managed multi-sector bond ETF run by BlackRock's Rick Rieder, once a front-runner for Fed chair. Despite the active management, BINC remains reasonably affordable at a 0.40% expense ratio. After expenses, it currently offers a 5.30% 30-day SEC yield and makes distributions monthly.

Part of the reason BINC can generate that level of consistent income is because its investment universe is much broader than Treasuries and investment-grade corporate bonds. As a flexible multi-sector strategy, Rieder can allocate across agency residential mortgage-backed securities, U.S. high-yield bonds, emerging-market debt, non-agency commercial mortgage-backed securities, collateralized loan obligations (CLOs), asset-backed securities, foreign government bonds, and floating-rate bank loans.

Those allocations aren't static. Rieder and his team can move around the fixed-income market as valuations, credit spreads, interest rates, and economic conditions change. Currently, BINC has relatively modest interest-rate sensitivity, with an effective duration of approximately 3.56 years. Its credit exposure is also split fairly evenly between investment-grade securities, rated BBB or higher, and non-investment-grade debt. That combination gives the portfolio more income potential than a Treasury-only strategy without making it entirely dependent on junk bonds.

Over the trailing three years, BINC produced a 7.23% annualized total return with distributions reinvested. BlackRock estimates that return would have fallen to 4.73% after taxes on distributions. That's a substantial difference for an income-oriented investment. Holding BINC inside a Roth IRA allows those monthly distributions to compound without annual tax drag, while qualified withdrawals in retirement can eventually come out tax-free.

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