Which ETFs are best for people in or near retirement?

Americans are retiring at a record pace amid the aging of the baby boom generation exchange traded funds (ETFs) have become a popular way for retirees to invest in ways that suit their risk tolerance and diversification needs.

A recent report from the Alliance for Lifetime Income shows that approximately 4.1 million Americans are expected to turn 65 annually between 2024 and 2025. That has resulted in the number of Americans turning 65 every day increasing from about 10,000 in the past decade to more than 10,000. 11,200 this year.

ETFs can give investors access to a variety of investment themes of interest to retirees, from stock ETFs optimized for dividend yields to bond ETFs that earn interest on government and corporate bonds, as well as ETFs modeled after broader indices such as the S&P 500 or that have international indexes. exposure. Some may also include built-in hedging strategies to protect against downside risks.

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“Investments are personal, and the ‘best’ ETFs for someone in or near retirement can vary widely depending on their situation. Those in or near retirement should assess their situation in terms of their overall allocation, the time horizon for deleveraging or growing their assets, and what level of risk they are comfortable with,” said Lawrence Sprung, CFP and founder of Mitlin Financial.

Retirees can use ETFs to generate income in retirement by focusing on dividend or interest-paying ETFs, or can use them to diversify their portfolios. (iStock / iStock)

“Investors with higher risk levels and longer time horizons will be engaged to invest in more growth-oriented ETFs. On the other hand, investors today who require income from these assets with a lower risk tolerance will see their portfolios move more toward income-oriented investments,” Sprung added. another.”

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ETFs can be broadly diversified or narrowly focused on a particular part of the market. (Angela Weiss/AFP for Getty Images/Getty Images)

Some ETFs offer retirees and future retirees some protection against downside risk, says Faron Daugs, the CEO of Harrison Wallace Financial Group.

‘These are often mentioned buffered ETFs. They are generally linked to a stock index and offer varying levels of downside protection in the event of a market downturn.” parachute in the event of a recession.”

Another option to consider is an ETF that invests in dividend-producing stocks. Typically, having a portfolio can give you a return via a dividend regardless of the stock’s performance. It can serve as an attractive way to gain some growth potential and potential for returns in some form – even if the share price declines,” Daugs added.

ETFs can help investors diversify their portfolios by targeting specific types of assets more efficiently. (iStock / iStock)

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If a retiree needs income during their golden years, an ETF that pays dividends or interest can be a wise investment, says Ted Jenkin, co-founder and consultant at oXYGen Financial.

“SPDR Portfolio S&P 500 High Dividend ETF (SPYD), Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and iShares Select Dividend ETF (DVY) are just a few to look at,” he said.

Jared Levy, chief markets strategist at Peak American Financial, said investors need to be “extremely careful as they get closer to retirement” because they typically shift from “prioritizing growth to prioritizing protection.” Levy added that it’s “critical to have an all-weather portfolio that is not only balanced with respect to your risk tolerance, but also one that doesn’t get mixed up if things start to fall apart.” traps.”

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He said one of his firm’s all-weather portfolios includes the Protected S&P 500 ETF (BUFR), along with a mix of corporate and government bond ETFs; Bitcoin, Gold and Precious Metals ETFs, a small-cap ETF based on the Russell 2000 and other investment vehicles.