Clients Nearing Retirement? Try This New Flavor of Income ETFs

Right now, advisors are facing a massive generation of clients trying to navigate retirement. That’s challenging enough, but with inflation and the cost of living rising, assuaging those clients’ concerns and delivering for them has become much trickier. Income ETFs can help meet those clients’ goals, with new, daily covered call ETFs an appealing option.

Key Takeaways:

• Income ETFs are a popular segment right now, with covered call offerings a growing opportunity set.
• As baby boomers increasingly retire, they have to catch up — and income ETFs can help.
• ITWO, for example, has returned some 43% over the last 12 months.proshar

Many baby boomers lost out on the post-Great Financial Crisis resurgence. That put a dent in many of their retirement plans and left them in need of new options. That’s where income ETFs can help. 

ProShares is one firm that has worked hard to develop income ETFs to help advisors and their clients. While these funds can help clients across all kinds of circumstances, those trying to finance retirement may benefit the most.

So, how do ProShares’ income ETFs stand out? Many income ETFs use covered calls, capping upside for an entire month as a trade off for the income. ProShares’ income ETFs use covered call funds that cap upside daily, allowing further returns to be captured each new day. At the same time, they continue to provide income that can help retirees navigate higher costs.

Consider, for example, the ProShares Russell 2000 High Income ETF (ITWO). ITWO charges a 55-basis-point fee to track an index that holds Russell 2000 stocks. It then sells daily call options on those stocks. Together, it looks to provide high income and some pretty healthy returns. 

That has seen ITWO return 43% over the last 12 months, according to ProShares data as of March 31. What’s more, the fund has delivered a 7.5% 12-month distribution rate for its investors as of May 31. 

Together, that combination of strong performance and healthy distributions could make ITWO and its sibling ETFs appealing options. For those at or near retirement, then, it may be worth checking out the funds for that combination of benefits.

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