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5 Best Vanguard ETFs for Retirement

Kiplinger

If you’re looking for a core group of ETFs that you can buy and hold through many years of retirement, check out the following five Vanguard funds. Two are bond ETFs that should provide some insurance against a stock market crash, along with a bit of income on the side. A third pick covers a broad swath of the U.S. stock market, and a fourth does the same for overseas bourses, offering potential for long-term growth. Our fifth ETF focuses on real estate investment trusts—a compelling way to generate above-average yields in an era of ultralow interest rates.

The amount you should invest in each of these ETFs depends on your income needs and other personal factors. Based on the asset allocation in the Vanguard target-date fund designed for investors who retired in 2015, it would be reasonable for recent retirees to hold 46% of their assets in stocks and 54% in bonds. Some advisers recommend much higher percentages of stocks, though, upward of 65% if you can tolerate potentially steeper short-term losses in return for higher long-term growth in your portfolio.

Whatever mix you choose, you won’t pay much in annual fees with these funds, which are among the cheapest on the planet. For example, annual expenses for one of our picks, Vanguard Total Stock Market (symbol VTI), amount to just 0.05% per year, or $5 per $10,000 invested. Many stock ETFs charge considerably more—upward of 0.50% a year—making Total Stock a bargain.

Over time, paying less for ETFs can add up to substantially higher investment gains. None of these ETFs distribute much capital gains, moreover, making them good choices for well-heeled retirees investing in a taxable account.

Our picks are listed in alphabetical order. Returns are as of October 21; 3-year returns are annualized.

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