There are retirement opportunities and pitfalls alike to be mindful of this year. The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is ready to help investors with the both.
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.
NUSI can also help retirees and investors nearing retirement that suffered setbacks last year at the hands of the coronavirus pandemic.
“The pandemic has worsened the outlook, according to the National Retirement Risk Index, or NRRI, produced by the Center for Retirement Research at Boston College,” writes Morningstar analyst Mark Miller. “The NRRI measures the share of working-age households at risk of being unable to maintain their pre-retirement standard of living by comparing projected replacement rates with target rates.”
How NUSI Can Get You Back On Track
NUSI’s unique methodology makes it a compelling choice for investors looking to buffer against low yields and equity market drawdowns, which can crimp retirement savings.
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 ETF also acts as a strong Social Security supplement, a crucial consideration given the program’s weak finances.
“Social Security’s long-term solvency already was eroding before the pandemic, and it has accelerated a bit because of the economic downturn and accompanying slump in payroll tax receipts. Social Security’s actuary now projects that the combined retirement and disability trust funds will be drained in 2034, one year earlier than the projection made before the pandemic,” notes Miller. “At that point, Social Security would have sufficient income from current tax payments to meet roughly 80% of promised benefits.”
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Investors have long capitalized on covered call options strategies for income generation, or protective put options strategies to protect against and limit losses.
For more on income strategies, visit our Retirement ETF Channel.