For investors looking to save for retirement, building a suitable nest egg isn’t the only roadblock they face.
Many investors struggle with choosing when to claim Social Security benefits. This is because the amount of income retirees receive from Social Security depends on the age at which they elect to begin receiving benefits.
Yes, waiting until the age of 70 to start claiming Social Security benefits can help one maximize income benefits. If an investor chooses to claim their Social Security benefits early, they earn noticeably less income than they would if they waited until the 70 year mark to retire. Claiming Social Security benefits at the earliest age possible — 62 — can lower one’s benefits by around 30%.
However, not every retiree can afford to wait that long. The National Bureau of Economic Research found that about 40 percent of retirees get more than half of their income from Social Security.
This dynamic can create an impasse for investors once they reach age 62. For some, it can be difficult to justify not taking advantage of the benefits of Social Security’s structured payouts for a full eight years.
Distributing Ladder ETFs Could Bridge the Retirement Gap
Distributing ladder ETFs from Northern Trust may help investors bridge the gap to attain full Social Security benefits. For instance, take a closer look at the Northern Trust 2035 Tax-Exempt Distributing Ladder ETF (MUNB ).
As a distributing ladder ETF, MUNB constructs its portfolio to provide consistent income across a predetermined outcome period. Each rung in the fund’s laddered portfolio is separated by calendar year and filled with municipal bonds with different maturity dates.
Broadly speaking, the assets in MUNB’s laddered portfolio are distributed across its rungs in a relatively even manner. By doing so, MUNB can potentially offer a smoother and more predictable income path.
MUNB in particular could be a compelling use case for investors who are waiting until age 70 to claim their Social Security benefits. At age 62, they could put some of their retirement savings into MUNB to access potential tax-exempt income from municipal bonds. That’s in addition to the annual return of principal distributions they will receive as each ladder rung matures. The income from MUNB can help cover everyday expenses for a retiree until they can claim their full Social Security benefits at age 70.
Saving for retirement may be one of the more difficult financial goals. However, distributing ladder ETFs are available to help address savings roadblocks of all shapes and sizes. Whether an investor is looking to navigate inflation or simply amplify their long-term savings, these funds are built to help meet the moment.
For more news, information, and analysis, visit the Bond Ladders Content Hub.
Disclosures:
ETF investing involves risk and principal loss is possible. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. The net asset value of the Northern Trust ETFs will decline over time as income payments are made to shareholders. Individual bonds carry an obligation to fully return principal to investors at maturity, however ETFs have no such obligation.
Before investing, carefully consider the investment objectives, risks, charges, and expenses. This and other information is in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest.
Northern Funds Distributors, LLC, distributor. Northern Funds Distributors, LLC and FlexShares are not affiliated with Northern Trust.
All investments are subject to investment risk, including the possible loss of principal amount invested. Investments do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Not FDIC insured | May lose value | No bank guarantee
