Boost Your Retirement Savings, No Matter Your Age, With This ETF

Boost Your Retirement Savings, No Matter Your Age, With This ETF  | Sep 17, 2020 12:09

In many countries, individuals are increasingly taking on responsibility for securing their own financial well-being in their retirement years. Saving and investing wisely while working makes it possible to fully enjoy the golden years.

Today, we will look at exchange-traded funds (ETFs) that can help readers at different life stages to invest for retirement.

Making A Plan

Many wonder how they’ll be able to afford retirement, leading the type of lifestyle they have become accustomed to. Suggestions for what percentage of one's salary is needed for retirement vary from country to country. In the US 70-80% of the salary earned before retirement is often cited, while in the UK, experts suggest between a half and two-thirds.

While cost of living and spending habits may differ significantly based on geographic location and personal inclination, we will offer scenarios which can be adjusted to readers' specific circumstances.

For example, someone with a salary of $50,000 per year may determine they need around $25,000-$33,000 annually, assuming that they do not have any mortgage or rental payments to make in retirement.

One way to calculate how much savings would be needed, leaving potential Social Security or other private pensions aside, is to multiply the amount needed by the years expected to live in retirement.

Assuming that starting at age 65 an individual will need $30,000 per year and expects to live for another 25 years after retirement, they would need $750,000—a calculation that further assumes that the $750,000 will earn no interest income.

The important takeaway: be realistic about how much money you will actually require.

Saving $750,000 By Age 65

To take maximum advantage of the powerful effect of compound interest, it's important to start saving and investing early.

Examining the S&P 500 index's returns over decades, it's clear the number of positive years far outweighs negative years, with different sources suggesting that annualized returns over longer periods of time stand at around 8%-10% for the benchmark.

S&P 500 10 Year Chart

Assume we're working with a 35-year-old investor who has only $100 in savings and plans to retire at 65.

If this investor now buys the SPDR S&P 500 ETF (NYSE:SPY), which is based on the index's performance, and makes an additional $7,500 in contributions annually at the start of each year for 30 years, here's the result: using an average annual return of a conservative 7%, compounded once a year, this investor will now have savings of over $758,000 at the end of 30 years.

Saving $7,500 a year would mean putting aside almost $625 a month or about $21 a day. Although the amount may look daunting at first, most people would be surprised at how much they could save if they paid attention to their monthly outgoings.

An ETF For The Golden Years

To date, in addition to SPY, we've discussed a range of ETFs that could potentially provide a 7% (or higher) return for buy-and-hold long-term investors.

They've included funds with an emphasis on semiconductors, biopharma and dividends as a focus on small-caps, consumer staples, Dow 30 heavyweights, tech shares for the new decade and many more.

The bottom line: equity markets offer plenty of choices for devising balanced and diversified portfolios for the long-run.

Below is another ETF that may be appropriate for retirement years, the iShares Core Moderate Allocation ETF (NYSE:AOM).

AOM Weekly Chart

AOM's objective is to generate current income, achieve some capital preservation and provide an opportunity for moderate to low capital appreciation. It tracks the S&P Target Risk Moderate index, which is composed of a range of US and global equity as well as fixed-income funds.

Net assets of about $1.3 billion are currently held in seven holdings. Sectoral allocations are Fixed Income (54.97%), Equity (44.13%) and the rest is in cash and/or derivative products.

The dividend yield and net expense ratio stand at 2.31% and 0.25%, respectively. Many retirees favor dividend-paying stocks and ETFs in their portfolios, as they could enhance retirement savings.

The fund’s beta of 0.39 indicates it is less volatile than the market, which, by definition, has a beta of 1. Year-to-date, AOM is up 3.39%. We'd consider buying the dips, especially if there is a short-term decline toward the $40-level, or below. Long-term investors, especially retirees, who seek a balanced approach may find AOM an appealing choice.

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Hussein Choshman
Hussein Choshman

I trading with robot I q option company and company also so fast profits all times  ... (Read More)

Sep 17, 2020 12:15 GMT· 1 · Reply
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Polski Português (Portugal) Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors. is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.