Retirement planning and generating income retirement boils down to math. Unfortunately, retirement math is getting trickier, but the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is an exchange traded fund that can help in this scenario.

NUSI is an actively managed portfolio of stocks included in the Nasdaq-100 Index and an options collar. Per index rules, the fund only invests in the top 100 largest by market cap, nonfinancial stocks listed on NASDAQ. A collar strategy involves selling or writing call options and buying put options, thus generating income to hedge some downside risk. The strategy seeks to generate high current income monthly from any dividends received from the underlying stock and the option premiums retained.

“The good news for upcoming retirees is that their investments have soared. Large-company stocks have recorded highs, smaller-company and international stocks are approaching their previous peaks, and bonds have never been costlier,” notes Morningstar’s John Rekenthaler. “It has been a great time to own financial assets. The bad news is that as these investments become pricier, their yields have shrunk, which reduces the percentage of their value that retirees can withdraw during retirement.”

NUSI: Simplifying Retirement Math?

NUSI can act as a complement to traditional equity and fixed income allocations or as the ideal protective hedge for investors with heavy exposure to technology and growth stocks because the fund is a “rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index,” according to Nationwide.

Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.

NUSI YTD Performance

Conservative investors looking for added yield, dependable income and downside protection, which NUSI offers, are apt to find the Nationwide ETF to be an attractive addition to income-starved portfolios.

NUSI is also relevant for retirees because they may not be able to bank on equities delivering gains comparable to what’s been seen over the past decade.

“Stock valuations have also become less attractive. In July 2013, as computed by Morningstar (the figures vary according to the data provider), the S&P 500’s trailing 12-month price/earnings ratio was 17 and its price/book ratio was 2.4. Today, those amounts are 27 and 3.7, meaning that equity valuations have ballooned by 50% over the past seven years. All things being equal, those gains reduce the stock market’s future expectations,” according to Rekenthaler.

For more on income strategies, visit our Retirement Income Channel.