3 ETFs to Keep You Invested After Retirement. Boost your income with this high-yield dividend ETF Neha Chamaria (Vanguard High Dividend Yield ETF): Dividend stocks are a great way to supplement retirement income, which is why my ETF pick for retirees also revolves around dividends. Third, no single stock has more than mid-single-digit weightage -- Microsoft, currently the ETF's largest holding, comprises only about 5.5% of its total funds. Get more yield from a low-cost fund Jordan Wathen (iShares Core Total USD Bond Market): When you're drawing money from your retirement accounts, it becomes increasingly important to have fixed-income investments that produce more yield with less downside risk than stocks. With an expense ratio of just 0.08% per year, it is less expensive to hold than a similar fixed-income position made up of a blend of an investment-grade ETF and a junk-bond ETF. With a reasonable expense ratio and current yield of 2.5% per year, this ETF could be used for the entirety of a portfolio's bond exposure. A low-cost, easy-to-understand ETF Steve Symington (Vanguard S&P 500 ETF): As arguably the world's most widely followed stock-market index, the S&P 500 is hard to beat, with historical annual returns of roughly 10%. So if you'd rather not dedicate the time required for picking individual stocks during your retirement, but you still want to benefit from the wealth-generating machine that is our stock market, I think you should consider buying shares of the Vanguard S&P 500 ETF. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool owns shares of ExxonMobil.
If you’re like most people, you know you must save something for retirement — but you probably don’t know exactly how much. As many as 81% of all Americans don’t know what amount of money they’ll need to retire, which may explain why only around 18% of us are confident we will have enough.
If you want to make sure you don’t run out of money, the first step is setting a savings goal. This simple four-step guide will show you how to determine exactly what you need to save so you can look forward to retirement with the certainty that you won’t run out of cash.
1. Estimate what you’ll need to spend each year during retirement
Your retirement income must provide enough for you to live on — which means you need to know how much you’ll live on. One rule of thumb is to assume you’ll spend 70% of the income you earned when working. If your salary is $80,000 right now, then you’d need $56,000.
However, this rule of thumb typically only works if your mortgage is paid off, you don’t have high medical bills, and you’re not jetting around the globe on a senior world tour. If you’ll still be in debt, if you’re in poor health, or if you plan to move to indulge expensive hobbies, then you actually may end up spending more than when you were working.
To arrive at a reasonable estimate, consider how your current expenses will change and create a “sample budget” for retirement living. If your mortgage will be paid off but you’ll take one costly trip each month, your costs may stay the same. Don’t forget to consider potential health expenses as you get older, as a senior couple with high prescription drug costs could spend as much as $350,000 on medical care during retirement.
2. Figure out what you’ll be getting from your pension and Social Security
Calculating your expected budget is only half the equation. You also need to know how much money you’ll have coming in.
Traditionally, there was a “three-legged” stool that supported seniors during retirement: Social Security, a defined-benefit pension plan from an employer, and savings. Savings are the only variable you can control, so figure out how much support the other two legs will provide.
Only 13% of private-sector workers had a defined-benefit pension plan as of 2013, but if you’re one of the lucky ones with this type of guaranteed retirement income, talk with your plan administrator to find out what your expected pension benefits will be. Your age at retirement and the length of time…