7 Index Funds Financial Advisors Say Retirees Should Own (And Never Sell)

When you finally retire, it's time to take a close look at your portfolio and where you stand financially. This includes deciding which investments will carry you through your golden years.

Recently, we asked financial advisors to recommend index funds that retirees should buy and hold for the long haul. Here are their suggestions.

Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock ETF (VXUS)

When you reach retirement, you might consider dialing down risk and selling all your stocks. But that can be a mistake.

"Retirees still need growth," says Carla Adams, a certified financial planner and founder of Ametrine Wealth. "With 20- to 30-year retirements now common, a portfolio that's too conservative can quietly erode purchasing power."

Adams recommends the two above Vanguard funds as a good way to remain invested in the stock market. She prefers broad, low-cost index exposure rather than focusing on specific areas of the overall market, such as overweighting growth or going all-in on mid-cap stocks.

"Particularly for those who are self-managing their assets, simplicity is key," Adams says.

Vanguard Intermediate-Term Bond ETF (BIV) and Vanguard Short-Term Bond ETF (BSV)

Each individual has their own financial wants and needs in retirement. However, Adams has a rule of thumb for asset allocation in retirement.

"A common range I see work well is somewhere around 40% to 60% equities, with the balance in bonds," she says.

She says your spending needs, other income sources, and risk tolerance will determine the right mix for you.

When choosing a bond fund, Adams recommends the above Vanguard funds.

Adams generally recommends avoiding relying too heavily on high-yield bonds, "which can behave more like equities during downturns," she says.

Vanguard Total Bond Market ETF (BND)

Jay Zigmont is a certified financial planner and the founder of Childfree Trust. He says his firm uses a simple, passive, long-term investing strategy for all of its clients.

That strategy relies heavily on three funds: VTI, VXUS, and BND, a broad-market U.S. bond fund.

"The goal is to buy the entire market, set it, and forget it," Zigmont says. "The total fees from this combination are very low."

iShares Core Dividend Growth ETF (DGRO)

This index fund is a favorite of Anthony DeLuca, a certified financial planner and senior financial advisor at Delta Capital Management.

The fund tracks large-cap domestic companies and is "good for those who seek growth and want dividends," DeLuca says.

DeLuca says he generally recommends that retirees choose low-expense funds that have a good track record and are tax-efficient.

"Once you understand your wants and needs, you can then build out the portfolio," he says.

Vanguard Long-Term Corporate Bond ETF (VCLT)

Like many other advisors, DeLuca is also a fan of Vanguard funds. He recommends VCLT as a good bond index fund option.

"Long-term bonds appreciate in a lowering interest rate environment, and the fund currently offers a great dividend," he says.

Why Vanguard funds are popular

It should be no surprise that Vanguard funds dominate this list. Financial advisors often tout Vanguard funds to clients because they come with low fees. That helps investors hold on to more of their money.

However, Vanguard isn't your only option when shopping for index funds.

"I'm a big Vanguard fan, but Fidelity, Schwab, and others also offer low-cost index fund options," Adams says.

Getting the right mix

Some advisors argue against trying to choose the "perfect" index fund. Instead, getting your asset allocation mix right is more important, according to Joon Um, a certified financial planner with Secure Tax & Accounting.

"The strategy matters more than the brand name," Um says.

Um says retirees still need a combination of broad U.S. stock index funds, some international exposure, and high-quality bond index funds.

"Stocks help fight inflation and support long retirements," he says. "Bonds help smooth volatility and support withdrawals."

Keeping things simple

Um says purchasing low-cost total market funds and broad bond index funds from firms like Vanguard, Schwab, or Fidelity is "usually more than enough."

"For people who want simplicity, balanced or target-date index funds can work too, as long as the stock level matches their comfort with risk," he says.

Reaching out for help

Even if you have been investing on your own for decades, retirement can change things considerably.

If you are unsure of how to adjust your investing and withdrawal strategy during retirement, consider reaching out to a financial advisor.

This type of professional can work with you to hone your strategy and to increase the odds that your portfolio will carry you through a long retirement.

Bottom line

Whether you are ready to start investing or have been doing so for years, you should always think about how your strategy will eventually impact your retirement.

Once you reach your golden years, odds are good that you will need to tweak your strategy. While the funds mentioned above can be good choices for many retirees, sitting down with a financial advisor can help you determine which choices make the most sense for you both today and in the future.

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