The 10 Best ETFs for Retirement Portfolios in 2024

Retirees have unique needs when it comes to their investment portfolios. Here I’ve assembled what I think are the best ETFs for retirement portfolios in 2024.
► Sample retirement portfolio: optimizedportfolio.com/go/sam...
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// TIMESTAMPS:
00:00 - Intro - What Retirees Need
02:10 - VT
02:34 - AVUV
03:22 - AVDV
03:40 - GOVT
04:57 - FUTY
05:50 - FSTA
06:16 - STIP
07:05 - SCHH
07:57 - VNQI
08:24 - GLDM
08:59 - Sample Retirement Portfolio
11:01 - Outro
// SUMMARY:
Many ETFs are perfectly suitable for both the young investor at age 20 and the retiree at age 60. But the latter has fundamentally different needs. If you’re already using a target date fund, you probably don’t need anything from this list.
Diversification and de-risking of the portfolio become more important when entering retirement. Provided they’ve accumulated enough to cover expenses in retirement, the retiree should almost certainly be sacrificing some returns to lower the portfolio’s volatility and risk. This is due to what’s called sequence risk, which refers to the risk that the retiree encounters a bad “sequence” of returns in their first few years, which can derail their entire plan. Since the retiree is withdrawing from the portfolio every year, they don’t have time to recover from protracted bear markets.
So how exactly does that translate into ETFs to use in retirement? We’re specifically looking for:
- Maximum diversification (particularly, assets that offer a demonstrable diversification benefit) in order to mitigate volatility and risk.
- High credit quality bonds, so U.S. treasury bonds. No room for the credit risk, liquidity risk, and default risk of corporate bonds. I explained this here. Even target date funds tend to miss the bullseye here.
- “Defensive” stocks.
- Low fees.
- Direct inflation protection from TIPS. Young investors probably don’t need this.
- “Income” funds, maybe. This one hinges on whether the retiree simply wants to sell shares as needed (my preferred method) or use funds with a high dividend/distribution yield to generate “income.” Aside from bond interest, this could be in the form of dividend stocks, REITs, CEFs, covered call option premiums, etc. Thankfully, the ETFs below should satisfy both audiences.
I’ve assembled the list of retirement ETFs below based on the specific needs I listed above:
VT
AVUV
AVDV
GOVT
FUTY
FSTA
STIP
SCHH
VNQI
GLDM
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#retirement #retirementsavings #retirementplanning
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Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: www.optimizedportfolio.com/te...
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[@OptimizedPortfolio]

What ETFs (or mutual funds) are in your retirement portfolio? Let me know in the comments.

[@seanharrington4768]

Fantastic segment !!

[@OptimizedPortfolio]

Thanks, Sean!

[@gregvandemark9908]

Great concept explanations and ETF ideas. Thanks!

[@NATOnova]

Another great analysis!

[@OptimizedPortfolio]

Thanks, Christian!

[@davidfolts5893]

Leverage was a significant issue with people using margin when buying stock when the U.S. Stock Market plummeted in 1929.Thanks for another great video.

[@OptimizedPortfolio]

Thanks, David!

[@davidfolts5893]

@@OptimizedPortfolio You are most welcome!

[@doomshallot4203]

The only 2 ETF's i ever need are VT and BNDW. They cover both stocks and bonds, and give me maximum diversification, all at market cap weight. It's beautiful

[@OptimizedPortfolio]

Indeed, simplicity is nice. I actually discussed that exact portfolio here: kzbin.info/www/bejne/lZulmXZuaN6cfpo

[@doomshallot4203]

@@OptimizedPortfolio oh wow! right on man, we think alike!! I can't say every boglehead or index fund investor likes these.

[@OptimizedPortfolio]

@@doomshallot4203 Agreed, I think they get overlooked too often.

[@rajk9634]

What the heck. You deserve at least 100k subs.

[@OptimizedPortfolio]

Hah thanks, Raj! :)

[@andreattai7481]

Excellent 🙏🏼🙏🏼

[@OptimizedPortfolio]

Thanks, Andre!

[@andreattai7481]

@@OptimizedPortfolio one question, JEPI and JEPQ make money if market is going side ways. what happens at a 10-20% crash? it will crash as well or goes sideways since it is covered calls?

[@OptimizedPortfolio]

@@andreattai7481 Goes down also. See my video posted today about covered call funds.

[@RetirementReadyPortfolio]

I found this video to be quite informative.

[@OptimizedPortfolio]

Glad to hear it!

[@dividenddepot]

I found this video to be quite educational

[@OptimizedPortfolio]

Glad to hear it!

[@OpenDoorEnglish]

What's your opinion of the Vanguard Life Strategy Etfs? You can do 80/20 60/40 or 40/60 dist or acc. Looks pretty handy. Also what about the new ishares ibonds? Pretty easy to build a bond ladder although the composition tends to lean more towards corporate bonds.

[@OptimizedPortfolio]

I like those products for simplicity. iShares also recently launched the first target date ETFs that I did a video on. I also did one on their asset allocation fund AOR.

[@swenpintat7331]

What about schd / VYM / and VIG ?

[@girldaddividendinvestor]

VT, SCHD, VOO

[@OptimizedPortfolio]

Thanks for watching!

[@EmmanuelChaves92]

Great video!! Do think is it going be a good option for a Roth IRA portfolio? How do you consider balancing 60/40 in case of young investor?

[@OptimizedPortfolio]

Thanks! These will be fine in a Roth IRA. I'm not sure I understand your 2nd question.

[@EmmanuelChaves92]

I was just wondering instead of 60/40, use this as 90/10 portfolio.. do you think that make sense this change for a young investor?

[@OptimizedPortfolio]

@@EmmanuelChaves92 Depends on your personal goal(s), risk tolerance, and time horizon. I delved into asset allocation in a separate video here: kzbin.info/www/bejne/fmTbmIN9hs5_j9E

[@djayjp]

What about the income funds? A comparison between income funds and selling shares would be interesting.

[@OptimizedPortfolio]

I've sort of compared those tangentially in the videos I did specifically about some of those individual covered call funds like QYLD, JEPI, etc. I'll also do a video on dividends sometime on the future that will touch on this idea.

[@djayjp]

@@OptimizedPortfolio Great looking forward to it!

[@g.ajemian4968]

Thanks for the hard work. What is the 10 year average return for this simple portfolio thank you.

[@OptimizedPortfolio]

Thanks for watching! Average 10-year rolling return of roughly 6.8% over the past 25 years for the complex one and 6.4% for the simplified version.

[@redchevy3307]

@@OptimizedPortfolio What mutual funds or ETFs did you use to get this result? The ETFs you gave in your example aren't that old.

[@redchevy3307]

I switched to gld from gldm and vfitx for govt and got the time frame back to 2011, honestly the returns and metrics are pretty bad compared to vanguard's Wellesley and retirement fund vtinx, which funds did you use to get 10 and 25 year returns? Thanks

[@redchevy3307]

???

[@sgtfish49]

SCHD income, VTI core and QQQM growth. % as follows. 50, 40, 10. I'm 74 and have been investing in stock mkt for 50 yrs. This is my actual portfolio since retiring in 1999. Good investing to all. Fish.

[@OptimizedPortfolio]

With some hand waving, SCHD (effectively US large cap Value) + QQQM (effectively US large cap Growth) = VTI (effectively US large cap blend). Not going to hurt anything, but it makes little sense to hold all 3. We actually jokingly refer to this as the "KZbin 3 Fund Portfolio" because the accidental mental accounting is so rampant.

[@keithmarple7029]

Nice to know the fees but would be VERY NICE to also KNOW the DIVIDENDS being PAID?

[@OptimizedPortfolio]

Dividend yield changes constantly and dividends are a net zero event, but thanks for the feedback.

[@mmabagain]

Why not use the Vanguard small cap value funds? Much lower fees.

[@OptimizedPortfolio]

www.optimizedportfolio.com/small-value-showdown/

[@dbclower]

Why do you recommend short-term TIPs but intermediate term (non-TIP) Treasuries?

[@OptimizedPortfolio]

Because inflation is experienced over the short term.

[@Compounddeznuts]

Never sleep on the small value!

[@OptimizedPortfolio]

:)

[@keithmarple7029]

Retires need higher dividends, not growth?

[@jhonnleonardo]

How about QYLD or covered call ETFs?

[@OptimizedPortfolio]

I've covered some of those in other videos on the specific funds themselves, like QYLD here: kzbin.info/www/bejne/ip2cY5qQbpKVf6c

[@dividenddepot]

Not a fan personally.

[@robertsmith6408]

I have JEPI, JEPQ, BSTZ and going to add SVOL and TLTW for massive dividends. Last I will add SPHD, DIVO and QQQ. I am then done and will never touch it again. Makes my house payment now!

[@OptimizedPortfolio]

Thanks for sharing, Robert!

[@DK-pr9ny]

VOO, SCHD, VGT, AVUV, AVIV, VICI, FBND. You need to add a little tech in your breakdown.

[@OptimizedPortfolio]

The market is already over 1/4 tech and sector bets are just stock picking lite. No thanks.

[@DK-pr9ny]

@@OptimizedPortfolio Hard to deny the returns you get from VGT vs. VOO though..

[@OptimizedPortfolio]

@@DK-pr9ny Got*. Recency bias. Both large cap value and small cap value have greater expected returns than large cap growth. Plus, again, VGT is already inside VOO at a relatively huge weight. No need to overweight it further, particularly for a retiree. I personally actually diversify AWAY from tech because that's what my human capital is in. Lastly, remember past returns do not indicate future performance.

[@johnc7279]

Vtsax

[@OptimizedPortfolio]

Thanks for watching!

[@humblesojourner5246]

VGSH over GOVT.

[@eldersprig]

why? why short instead of intermediate? he has always said that duration of bonds should match duration of portfolio

[@OptimizedPortfolio]

2 different things. One is short and the other intermediate.

[@FrankBatistaElJibaro]

I wish youtube would allow showing downvote count. I'm curious.

[@OptimizedPortfolio]

98% Likes and 364 of those so that makes 7 Dislikes.

[@sss1st]

These videos don’t have a lot of purpose if you’re 60 years old ready to retire you have a portfolio filled with positions that if you sell you get killed in Taxes how are you able to utilize this strategy without getting slaughtered in taxes?

[@OptimizedPortfolio]

How's that? 1) Most retirees are in a low tax bracket, which would apply for a Traditional IRA. 2) A Roth IRA would have no tax implications. 3) In a taxable account, qualified dividends and sold positions would be taxed as long term capital gains. 4) Interest from treasury bonds is free from state taxes. What assets and account types did you have in mind with a lower tax burden?

[@sss1st]

@@OptimizedPortfolio not true on the los tax bracket come visit Florida. And your stating the obvious about IRAs. And why would you put all your money in low tax products in a IRA? And some of your ideas don’t leverage an IRA. Two topics existing investment strategy and new cash. And why would someone sell great positions in a ira paying big dividends for these ideas?

[@OptimizedPortfolio]

@@sss1st Use more precise verbiage and complete sentences. Can't understand what you're saying. Again, if you have assets or account types in mind that magically have a lower tax burden, let me know. Best of luck.

[@sss1st]

@@OptimizedPortfolio you video is ok some interesting positions but the strategy would be awful on many levels. You are over simplifying it when you could make more realistic content.

[@OptimizedPortfolio]

@@sss1st For the 3rd time, feel free to enlighten me with your specific ideas of why my proposed ideas are "awful on many levels" and what would be superior instead of just making vague criticisms. You're also obviously welcome to simply not watch my videos and make your own that are "more realistic."

[@gregvandemark9908]

Great concept explanations and ETF ideas. Thanks!

[@OptimizedPortfolio]

Thanks so much, Greg!