With 2021 right around the corner, now is a great time for retirement investors to consider fresh income-generating strategies like the Nationwide Risk-Managed Income ETF (NUSI).
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 is a relevant consideration for retirement income hunters because the actively managed fund can help bridge the gap between retirement savings and income. Interest rates will also remain low next year.
“Interest rates are low and are expected to stay low for an extended period. The markets are volatile, making ‘stay the course’ a particularly gut-wrenching choice,” reports Kiplinger’s. “Add a pandemic to the mix. As you prepare for — or enter — retirement, you want to be able to celebrate. That means satisfying your desire for a self-sufficient lifestyle (while anticipating expenses such as unreimbursed medical or caregiver costs, or the premiums to cover these costs) even as you spoil the grandkids.”
Nationwide's NUSI: From Savings to Income
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.
Retirees should start “with a focus on income, and specifically allocating your sources of income among dividends, interest, withdrawals from your IRA and annuity payments. The annuity payments (replacing the pension that doesn’t exist for most new investors) are guaranteed for your life, are backed by highly rated insurance companies and complement your Social Security payments,” notes Kiplinger’s.
Covered call strategies such as NUSI can 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.
For more on income strategies, visit our Retirement Income Channel.