Retired Money: What ETFs are appropriate for retirees?

Photo by Alena Darmel from Pexels, via

My latest MoneySense Retired Money column looks at what ETFs might be appropriate for retirees and near-retirees. You can find the full column by clicking on the headlined text here: The Best ETFs for Retirement Income.

I researched this topic as part of a MoneyShow presentation on the ETF All-Stars, scheduled early in September, to be conducted by myself and MoneySense editor Lisa Hannam. Regular MoneySense and some Hub readers may recall that I was the lead writer for the annual ETF All-Stars package but after almost a decade decided to pass the reigns to new writers: this year’s edition was spearheaded by Michael McCullough.

While the ETF All-stars (which are selected now by a panel of seven Canadian ETF experts) are appropriate for all ages and stages of the financial life cycle, a solid subset of the picks can safely be considered by retirees. A prime example are the Asset Allocation ETFs, many of which have been All-Star picks since Vanguard Canada launched them several years back, and since matched by BMO, iShares, Horizons and others.

Generally speaking, young people can use the 100% growth AA ETFs like VEQT etc., or (which I’d be more comfortable with), the 80% growth/20% fixed income vehicles like VGRO. Near-retirees might go with the traditional 60/40 stocks/bonds mix of classic balanced funds and indeed pension funds: VBAL, XBAL, ZBAL, to name three.

Those fully in Retirement who want less risk but a bit of growth could flip to the 40/60 stocks/bonds mix of VCNS, XCON (check) and ZCON (check.).

In theory all you need is a single asset allocation ETFs, no matter where you are in the financial life cycle. After all, all these ETFs are single-ticket highly diversified global plays on the stock market and bond market, covering all or most geographies and asset classes. And their MERs are more than reasonable: 0.2% or so.

A single Asset Allocation ETF can suffice, but consider adding some tactical layers

In practice, most investors (whether retired or not) will want to do a bit more tinkering than this. For one, the asset allocation ETFs tend to have minimal exposure to alternative asset classes outside the stocks and bonds realm. They will include gold stocks and some real estate stocks or REITs, but little or no pure exposure to precious metals, commodities or indeed cryptocurrencies. (Maybe that’s a good thing!).

The MoneySense article bounces my ideas for adding tactical layers to an AA ETF. For example, you might use the 40/60 VCNS instead of 60/40 VBAL, for 80% of your investments, reserving the other 20% for more tactical mostly equity specialized ETFs. You’d aim for a net 50/50 asset mix after blending the AA ETF and these tactical ETFs.

What tactical ETFs? Hub readers will have seen a couple of Dale Roberts blogs (Dale is also on the ETF All-star panel) republished from his Cutthecrapinvesting site. They describe Dale’s ideas for what he calls “Retirement ETFs” or “Defensive ETFs.” As you can see here, he is especially fond of consumer staples ETFs  as well as health care/pharmaceutical ETFs and utilities ETFs, all available on both sides of the border. The actual ETFs are listed in the MoneySense version of this blog, but be assured I’ve invested in most of these myself.

The panel also likes so-called Low-Volatility ETFs, especially for a slice of the tactical overlay. For taxable accounts, you might go with something like ZLB for Canadian equities, or ZLU for U.S. equities. Retirees may well feel comfortable taking a bit more equity risk with such funds, which also provide decent expected annual yields.

The final piece of the Retirement ETF puzzle might be filled by ETFs that provide some inflation hedges. Roberts has long championed one I also own: the Purpose Real Asset ETF, or BMO’s Global Infrastructure ETF. Some may choose pure gold bullion plays like GLD.

While it’s beyond the scope of the aforementioned MoneySense article, consider too the Purpose Longevity Fund and Guardian Capital’s GuardPath offering, to which we have devoted past columns (here and here.) 

Leave a Reply