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Portfolio > ETFs

The Role of ETFs in Retirement Income

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ETFs can play a major role in retirement planning, especially with income-generation issues stemming from rising interest rates — something Ron DeLegge calls a major problem.

“We had a 55% surge in the 10-Year Treasury yield in the past year,” the editor of the ETF Guide notes with a shake of his head. “We’ve gone form 1.6% to over 2.5%. Despite the increase, people are still scraping for yield.”

According to DeLegge, it all comes down to a need for income alternatives to dividends from stocks and bonds, and he has a few suggestions as to where said alternatives can be found.

“Selling covered calls are one,” he begins. “Advisors should be familiar with them and have them in their arsenal. They are an incredibly powerful tool that are certainly not for every client, but can be effective when combined with, say, fixed income.”

One strategy he decidedly does not like involves target-date funds, noting they’re sold as a “panacea” for everyone.

“I like taking on the consensus with this one,” he chides. “We’re told to simply pick one or a couple of target-date funds and you’ll be fine. Nothing could be further from the truth.”

Target-date funds, he argues, “totally undermine the role of the advisor. Asset allocation is the job of the advisor, not some fund company. Advisors should be building customized ETF portfolios for each client.”

Doing so, he adds, shows that the advisor isn’t lazy and is actually working on behalf of the client.

“They have the tools to help, like covered calls in an ETF format of ETFs that pay dividends,” DeLegge concludes. “Now it’s just a question of showing advisors how and when to use them.”

Ron DeLegge will be a speaker at this year’s Think Retirement Income Conference in Boston on Oct. 10 and 11. For more information and a list of other speakers, please visit


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