3 ETFs to Secure Retirement as Americans Face Savings Shortfall

The recently released John Hancock Longevity Preparedness Index paints a concerning picture of American retirement readiness, with the nation scoring just 60 out of 100 in preparedness for longer lifespans. The survey specifically identifies finances as the glaring weak spot, revealing that many Americans face the genuine risk of outliving their savings. This financial vulnerability comes at a critical time when demographic shifts are accelerating – the 65+ population is projected to potentially double to 82 million by 2050, creating unprecedented challenges for retirement planning.

The survey underscores the urgent need for robust retirement portfolios that can sustain decades of withdrawals while effectively combating inflation. Traditional retirement approaches that might have sufficed for shorter life expectancies are no longer adequate. The combination of rising healthcare costs, increasing life expectancy, and inflation pressures creates a perfect storm that demands more sophisticated financial strategies. This reality has pushed many investors toward seeking professional guidance through services like SmartAsset’s financial advisor matching tool to navigate these complex challenges.

Exchange-traded funds (ETFs) emerge as an ideal solution for investors seeking to build retirement nest eggs that can withstand the test of time. These investment vehicles offer three critical advantages: low costs, broad diversification, and the flexibility to balance growth and income needs. Unlike individual stocks, ETFs spread risk across many assets, reducing vulnerability to company-specific setbacks while their low fees preserve wealth over decades of compounding.

The cost efficiency of ETFs cannot be overstated in retirement planning. With expense ratios as low as 0.03% for funds like Vanguard’s VTI compared to actively managed mutual funds that often charge 1% or more, the savings compound significantly over a 30-year retirement horizon. This cost advantage directly translates to more money remaining in investors’ pockets rather than going to fund managers. The diversification benefits are equally important – by holding hundreds or thousands of securities across multiple sectors, ETFs provide built-in risk management that’s crucial for retirement portfolios that cannot afford significant losses.

The Vanguard Total Stock Market ETF (VTI) serves as the growth engine for retirement portfolios needing to outpace inflation over extended time horizons. Tracking the CRSP US Total Market Index, VTI holds approximately 4,000 U.S. stocks across large, mid, and small capitalization companies, from technology giants like Apple (AAPL) to smaller emerging firms. This comprehensive exposure has delivered historical annualized returns exceeding 10%, driven by the U.S. market’s long-term upward trajectory. With an exceptionally low 0.03% expense ratio, VTI ensures minimal fees erode returns, maximizing the power of compounding over decades.

The Schwab U.S. Dividend Equity ETF (SCHD) provides the crucial balance between income and growth that retirees need for extended lifespans. Tracking the Dow Jones U.S. Dividend 100 Index, SCHD invests in 100 high-quality companies with consistent dividend growth, including established names like Chevron (CVX) and Home Depot (HD). Its 3.9% yield delivers reliable cash flow for living expenses while its focus on fundamentally strong companies has yielded 12.4% annualized returns since its 2011 inception. The fund’s 0.06% expense ratio maintains cost efficiency while its diversified holdings across sectors like energy and consumer staples reduce risk compared to single-stock dividend strategies.

The JPMorgan Equity Premium Income ETF (JEPI) completes the triad by addressing retirees’ need for consistent income without sacrificing growth potential. JEPI employs a sophisticated strategy of investing in S&P 500 stocks while using an options overlay to generate monthly payouts, resulting in a substantial 8.4% yield. This high income stream proves invaluable for covering retirement expenses from healthcare to daily living costs without depleting principal. Since its 2020 launch, JEPI has achieved 11.6% total returns with lower volatility than pure equity ETFs, thanks to its options approach that cushions market downturns. While its 0.35% expense ratio is higher than the other recommendations, it’s justified by the active management and income generation capabilities.

While these three ETFs – VTI, SCHD, and JEPI – provide excellent foundational elements for retirement portfolios, they represent starting points rather than complete solutions. The John Hancock survey’s findings emphasize that successful retirement planning requires personalized approaches that consider individual risk tolerance, age, financial situation, and retirement timeline. The combination of these ETFs offers yields ranging from VTI’s 1.1% to JEPI’s 8.4%, with historical returns consistently exceeding 10% annually across the trio.

The critical takeaway from both the survey data and ETF analysis is that Americans must take proactive steps to address the longevity risk highlighted by John Hancock’s research. Building a retirement portfolio that incorporates growth-oriented funds like VTI, balanced income-growth vehicles like SCHD, and high-yield options like JEPI can create the diversified foundation needed to weather extended retirement periods. However, as the original analysis notes, consulting with a financial advisor to align these investments with specific personal circumstances remains an essential step in transforming these tools into a truly secure financial future.