Many people are beginning to look at exchange traded funds (ETFs) as a retirement investment alternative to mutual funds. It is entirely possible, though not easy, to manage your own diversified basket of ETFs in your IRA or 401k. You have a variety of options here, including picking some all stock market ETFs or adding Health, Energy, Technology, and other sectors to get a diversified basket. You can browse the different ETFs that are out there at places like Instant ETF. Again, this is a more difficult approach to retirement planning, but not necessarily a bad one.
The preferred method of ETF investing is to take advantage of the long-term target ETFs offered: TDAX Independence 2010 ETF (TDD), TDAX Independence 2020 ETF (TDH), TDAX Independence 2030 ETF (TDN) and TDAX Independence 2040 ETF (TDV) and TDAX In-Target ETF (TDX). The ETFs automatically roll over your portfolio into risk positions that are inline with your current stage in life. Each offers an expense ratio of 0.65% compared with 1.3% expenses for comparable mutual funds. If you’re unsure if that is worth it see how much an extra 0.65% compounded annually can effect your portfolio – you may be surprised.
You do want to keep an eye on your ETFs and make sure that they remain solvent. ETFs are a relatively new addition to retirement planning and are somewhat untested over time. We have seen some funds be liquidated which often has tax repercussions for the long term investor. Just a few things to keep in mind before considering added exchange traded funds to your retirement planning.