Additionally, the portfolio holds a quarter of its assets in government bonds that try to limit the negative effects of inflation, such as iShares Barclays TIPS Bond (NYSEArca: TIP) at 17%, Vanguard Short-Term Bond ETF (NYSEArca: BSV) at 9%, and a smaller allocation in SPDR DB International Government Inflation-Protected Bond (NYSEArca: WIP) at 2%.
Morningstar advises taking on larger weighting in mega-caps, like the Vanguard Mega Cap 300 Index (NYSEArca: MGC) at 27%, and smaller weightings in mid- and small-caps, such as the Vanguard Mid-Cap ETF (NYSEArca: VO) at 9% and Vanguard Small-Cap ETF (NYSEArca: VB) at 3%, or take on a broad market index exposure, like Vanguard Total Stock Market ETF (NYSEArca: VTI). Additionally, it would be prudent to diversify with international holdings, including the European iShares MSCI EAFE Index (NYSEArca: EFA) at 9% and the Vanguard Emerging Markets ETF (NYSEArca: VWO) at 2%.
Lastly, Benz suggests holdings 4% in cash equivalent for two to five years’ worth of living expenses, or investors may consider holding cash in money markets, certificates of deposit and high-quality short-term bond ETFs.
For more information on ETFs for retirees, visit our retirement category.
Max Chen contributed to this article.