This decade continues to prove an unpredictable one, marked by pandemic, geopolitical risk, and the threat of recession. It’s put a lot of pressure on retirees and those near-retirement, who report less savings for retirement and less confidence in how long their savings will last.
Retirement savings continue to fall well short of what is necessary to live comfortably throughout the length of retirement. The average cost for retirement in America throughout a lifetime is around $1 million. For individuals in or nearest retirement (ages 65-74), the average amount saved for retirement is $164,000. The number falls to $134,000 for the next age bracket of 55-64, according to a survey by the Harris Poll.
Over 7,000 Americans and Canadians in or within ten years of retirement were surveyed in January 2023 by the Harris Poll in partnership with Edward Jones. The survey found that 59% of respondents believe they have enough to live comfortably in retirement for ten years or longer. That number drops to just 30% when looking 20 years out. Only 15% believe they’ve saved enough to retire comfortably for more than 30 years.
Image source: Edward Jones
Financial surprises and setbacks can create major retirement disruptions. The highest on the list of reported financial challenges to retirement were inflation and the increasing cost of living. 67% of retirees reported the twin specters as the top financial shock in retirement. It’s not unsurprising, particularly given the challenges of the last several years.
Advisors continue to instill confidence in retirees and those near retirement, however. Of those surveyed, 30% of individuals near retirement and 27% of those in retirement currently work with a financial advisor. Individuals that work with an advisor report a 94% confidence rate in navigating finances in retirement.
Maximize Monthly Income Potential for Retirees
Advisors looking to instill confidence in clients while also generating high monthly income potential within equities may want to consider the Nationwide suite of ETFs.
The Nationwide Nasdaq-100® Risk-Managed Income ETF (NUSI) follows a rules-based options trading strategy. The Fund seeks to generate high monthly income and invests in stocks included in the Nasdaq-100® Index. The Nasdaq-100® Index consists of 100 of the largest non-finance securities traded on the Nasdaq exchange. It’s a rules-based, market capitalization-weighted index. NUSI carries an expense ratio of 0.68%.
The Nationwide S&P 500® Risk-Managed ETF (NSPI) is an actively managed fund that invests in a portfolio of securities included in the S&P 500® Index. The S&P 500® Index is weighted by market capitalization. The Index comprises approximately 500 of the top U.S.-listed companies that comprise the majority of the U.S. equity market cap (80%). NSPI has an expense ratio of 0.68%
The Nationwide Dow Jones® Risk-Managed Income ETF (NDJI) is actively managed and invests in a portfolio of securities included in the Dow Jones® Industrial Average. The Dow Jones® utilizes a price-weighted methodology, making it unique among the major equity indexes. The Index comprises 30 well-established U.S. companies, referred to as blue-chip companies. NDJI has an expense ratio of 0.68%.
The Nationwide Russell 2000® Risk-Managed Income ETF (NTKI) is an actively managed fund that invests in a portfolio of securities included in the Russell 2000® Index. The Russell 2000® tracks approximately 2,000 U.S. small-cap companies. NTKI has an expense ratio of 0.68%.
Mitigating for Volatility and Risk
The funds employ a strategy that seeks to mitigate volatility and offer a measure of downside protection. This potentially preserves capital when markets fall while providing exposure to the core equity indexes.
All the funds utilize an options collar to generate monthly income. A collar strategy entails holding shares of the underlying security. Simultaneously, the strategy entails buying protective put options as well as writing calls for the same security.
A put option gives its owner the right but not the obligation to sell the underlying asset until the put expires. In contrast, a call option gives its owner the right but not the obligation to buy the asset instead.
The options collar intends to reduce the fund’s volatility and provide a measure of downside protection.
For more news, information, and analysis, visit our Retirement Income Channel.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying Index.
The NUSI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html
The NDJI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NDJI/index.php
The NSPI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NSPI/index.php
The NTKI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NTKI/index.php
Call 1-800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwidefinancial.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value and return will vary, and you may have a gain or a loss when you sell your shares. Returns for periods less than one year are not annualized. Short-term performance, in particular, is not a good indication of the Fund’s future performance, and an investment should not be made based solely on returns. To obtain the most recent month-end performance, go to etf.nationwidefinancial.com or call 1-877-893-1830.
Click this link for the funds’ Standardized performance and 30-day SEC yield.
KEY RISKS: The Nationwide Nasdaq-100® Risk-Managed Income ETF, Nationwide S&P 500® Risk-Managed Income ETF, Nationwide Dow Jones® Risk-Managed Income ETF, and Nationwide Russell 2000® Risk-Managed Income ETF (collectively, the “Risk-Managed Income ETFs”) are subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Risk-Managed Income ETFs are subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting, and limited availability of information, all of which are magnified in emerging markets).
Risk-Managed Income ETFs may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Risk-Managed Income ETFs employ a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Risk-Managed Income ETFs’ investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties. The Risk-Managed Income ETFs expect to invest a portion of their assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the Index or may hold securities not included in the Index.
The Risk-Managed Income ETFs frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Risk-Managed Income ETFs and greater tax liabilities for shareholders. The Risk-Managed Income ETFs may concentrate on specific sectors or industries, subjecting them to greater volatility than that of other ETFs. The Risk-Managed Income ETFs may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Funds’ value and total return. Although the Risk-Managed Income ETFs intend to invest in a variety of securities and instruments, the Risk-Managed Income ETFs will be considered non-diversified.
Additional risks include: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the Index or may hold securities not included in the Index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
Distribution Yield – The measurement of cash flow paid by an exchange-traded fund (ETF), real estate investment trust, or another type of income-paying vehicle. Rather than calculating the yield based on an aggregate of distributions, the most recent distribution is annualized and divided by the net asset value (NAV) of the security at the time of the payment.
Nasdaq-100® Index: A rules-based, market capitalization-weighted index of the 100 largest, most actively traded U.S. companies listed on the NASDAQ stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
Nasdaq® and the Nasdaq-100® are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Nationwide Fund Advisors. The Nationwide Nasdaq-100® Risk-Managed Income ETF (“NUSI”) has not been passed on by the Corporations as to their legality or suitability. NUSI is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT.
S&P 500® Index: An unmanaged, market capitalization-weighted index of 500 stocks of leading large-cap U.S. companies in leading industries; gives a broad look at the U.S. equities market and those companies’ stock price performance.
The S&P 500® index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s®, S&P®, and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Nationwide S&P 500® Risk-Managed Income ETF (“NSPI”) is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
Russell 2000® Index: An unmanaged index that measures the performance of the small-cap segment of the U.S. equity universe.
FTSE Russell (“Russell”) is the Index Provider for the Russell 2000® Index (“Russell 2000®” or the “Index”). Russell is not affiliated with the Fund, Nationwide Fund Advisors, the Distributor nor any of their respective affiliates.
Nationwide Fund Advisors has entered into a license agreement with Russell to use the Russell 2000®.The Fund has been developed solely by Nationwide Fund Advisors. The Fund is not in any way connected to nor sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell 2000® vest in the relevant LSE Group company which owns the Index. “Russell®” is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Fund. The LSE Group makes no claim, prediction, warranty nor representation either as to the results to be obtained from the Fund or the suitability of the Index for the purpose to which it is being put by Nationwide Fund Advisors.
**Effective on July 17, 2023, NEOS Investment Management replaced Harvest Volatility Management as the subadviser to the Fund
***Effective on July 17, 2023, the Fund, which previously used a “replication” strategy to invest in a portfolio of stocks generally comprised of all the component securities of the Russell 2000® Index in the same approximate proportions as in the Russell 2000® Index, now seeks to gain exposure to the constituents of the Russell 2000® Index by principally investing in the Vanguard Russell 2000 Index Fund ETF Shares (“VTWO”), an exchange-traded fund that employs an indexing investment approach that is designed to track the performance of the Russell 2000® Index.
VTWO has not been issued, endorsed, sold, nor promoted by Nationwide Fund Advisors (NFA) and its affiliates. NFA and its affiliates make no warranties and bear no liability with respect to VTWO, including VTWO’s legality or suitability for individual investors.
Dow Jones Industrial Average®: A price-weighted index composed of 30 “blue-chip” U.S. stocks. The Index covers all industries except transportation and utilities, respectively.
The Dow Jones Industrial Average® is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Nationwide Fund Advisors. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones®, Dow Jones Industrial Average®, DJIA® and The Dow® are registered trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Fund Advisors. The Nationwide Dow Jones® Risk-Managed Income ETF (“NDJI”) is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s), nor do they have any liability for any errors, omissions or interruptions of the Dow Jones Industrial Average®.
Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable (Morningstar and U.S. Bank). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs. Representatives of the Nationwide ETF Sales Desk are registered with Nationwide Investment Services Corporation, member FINRA, Columbus, Ohio.
Nationwide, the Nationwide N and Eagle, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2023 Nationwide.
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