Finance

What ETFs are the best for those in or near retirement?

Published

4 months ago

November 22, 2024

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

A recent report by the Alliance for Lifetime Income found that about 4.1 million Americans are projected to turn 65 on an annual basis from 2024 through 2025. That has pushed the number of Americans turning 65 each day from roughly 10,000 in the past decade to more than 11,200 this year.

ETFs can offer investors access to a variety of investment themes of interest to retirees, from equity ETFs optimized for dividend yields to bond ETFs yielding interest on government and corporate debt, as well as those modeled on broader indices like the S&P 500 or that have international exposure. Some can also include built-in hedging strategies to guard against downside risk.

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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 evaluate their situation in terms of their overall allocation, the time horizon for drawing down or growing their assets, and what level of risk they’re comfortable with,” said Lawrence Sprung, CFP and founder of Mitlin Financial.

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

“Investors that have a higher risk level and longer time horizon will be included to invest in more growth-oriented ETFs. On the other hand, investors who require income today from these assets with a lower risk tolerance will have their portfolios allocated more toward income-oriented investments,” Sprung added. “The ETFs that may be best for one investor may not be the best for another.”

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

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

“Often, these are referred to as buffered ETFs. They are generally tied to a stock market index and have various downside percentage protection in the event of a downturn in the market,” he said. “This type of ETF allows you to participate in potential growth opportunities but offers individuals a little bit of a parachute in the event of a downturn.”

“Another option to consider would be an ETF that invests in dividend-producing stocks. Typically, having a portfolio can generate you a return via a dividend, regardless of the stock performance, can serve as an attractive way to gain some growth potential and offer potential for return in some form – even if the price of the stock 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, said 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.

Ticker	Security	Last	Change	Change %
SPYD	SPDR® PORTFOLIO S&P 500® HIGH DIVIDEND ETF – USD DIS	46.40	+0.53	+1.16%
VIG	VANGUARD SPECIALIZED FUNDS DIVIDEND APPRECIATION ETF	201.00	+2.26	+1.14%
DIVY	TIDAL ETF TRUST SOUND EQUITY DIV INC ETF	26.88	+0.11	+0.40%

Jared Levy, chief markets strategist at Peak American Financial, said that investors should be “extremely precise the closer they get to retirement” because they typically are shifting from “prioritizing growth to prioritizing protection.” Levy added that it’s “critical to have an all-weather portfolio that is not only balanced for your risk tolerance, but one that doesn’t become correlated if things start to fall apart.”

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He said that one of his firm’s all-weather portfolios features the Protected S&P 500 ETF (BUFR) along with a mix of corporate and Treasury bond ETFs; bitcoin, gold and precious metal ETFs, a small-cap ETF based on the Russell 2000 and other investment instruments.

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How buy now, payer later apps could be crushing your credit

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15 hours ago

April 3, 2025

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‘The Big Money Show’ co-hosts discuss buy now, pay later spending options and the impact it will now have on your credit score.

Small, everyday purchases like a meal from DoorDash are now able to be financed through eat now, pay later options — a practice that some experts deem “predatory.”

“You’ve got to have enough sense to not follow the urge to finance a taco, okay? You have got to be an adult,” career coach Ken Coleman told “The Big Money Show,” Wednesday.

“This is predatory, and it’s going to get a lot of people in deep trouble.”

RISKS OF BUY NOW, PAY LATER: ‘TICKET TO OVERSPENDING,’ EXPERT SAYS

DoorDash and Klarna are now partnering up to extend buy now, pay later options to consumers. (Reuters, Getty / Getty Images)

Financial wellness experts are continuously sounding the alarm to cash-strapped consumers, warning them of the devastating impact this financial strategy could have on their credit score as some lenders will begin reporting those loans to credit agencies.

Consumers may risk getting hit with late fees and interest rates, similar to credit cards.

“So your sandwich might show up on your FICO score, especially if you pay for it late,” FOX Business’ Jackie DeAngelis explained.

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Major players like Affirm, Afterpay, and Klarna have risen to prominence at a time when Americans continue to grapple with persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic.

Ramsey Solutions personal finance expert and ‘The Ramsey Show’ co-host George Kamel discusses the ‘buy now, pay later’ craze and the trend that celebrates the financial benefits of being childless.

“The Big Money Show” co-host Taylor Riggs offered a different perspective, suggesting that company CEOs have a “duty” to attract as many customers as they want.

“Unfortunately for me, this always comes down to financial literacy — which I know is so much in your heart about training people to save now by later,” she told Coleman, who regularly offers financial advice to callers on “The Ramsey Show.”

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Coleman continued to come to the defense of financially “desperate” consumers, arguing that companies are targeting “immature” customers.

“I’m for American businesses being able to do whatever they want to do under the law. That’s fine. But let’s still call it what it is: it’s predatory, and they know who their customers are,” Coleman concluded, “And I’m telling you, they’re talking about weak-minded, immature, desperate people.”

FOX Business’ Daniella Genovese contributed to this report.