7 Core Vanguard ETFs for Retirement

If you're looking to build a broadly diversified, low cost retirement portfolio, these Vanguard ETFs should be high on your list of funds to consider.

When planning for retirement, investors often seek a mix of growth, income and capital preservation. Vanguard’s a suite of low-cost ETFs can help create a well-diversified, goal-oriented portfolio tailored to the needs of retirement savers. Whether you're looking to participate in the long-term growth of U.S. stocks, tap into global opportunities, generate steady income or hedge against inflation, there's likely a Vanguard ETF designed to play a key role. The key is understanding how these funds work together to support stability and growth throughout your retirement years.

In this guide, we’ll break down several core Vanguard ETFs and explore how each contributes to a comprehensive retirement strategy. From total market equity exposure and international diversification to reliable bond income and inflation protection, these ETFs can serve as the foundational building blocks of a resilient, cost-efficient portfolio designed to meet the challenges of retirement head-on.

Vanguard Total Stock Market ETF (VTI)

The Vanguard Total Stock Market ETF (VTI) offers expansive exposure to the entire U.S. equity market, encompassing small-, mid- and large-cap stocks across various sectors. This ETF is designed to reflect the performance of the CRSP US Total Market Index, providing a comprehensive investment vehicle for long-term growth. It is well-regarded for its low expense ratio, making it a cost-efficient choice for retirement portfolios. Investors benefit from diversification within a single fund, minimizing company-specific risk while participating in overall market potential. VTI serves as a reliable cornerstone for retirement due to its broad market coverage and consistent performance history.

• Market Coverage: VTI includes nearly 4,000 U.S. companies spanning multiple industries and capitalization segments, ensuring thorough representation of the domestic stock market landscape. This inclusiveness helps investors capture growth opportunities from small startups to established giants. It integrates sector variety, balancing cyclical and defensive industry exposure.

• Expense Ratio: With an expense ratio of just 0.03%, VTI ranks among the most economical choices for broad-market ETFs, reducing cost drag on long-term returns. Low fees are particularly beneficial in retirement accounts where compounding gains are essential. Vanguard’s emphasis on minimizing expenses aligns well with prudent retirement planning.

• Liquidity and Trading Volume: VTI is highly liquid with robust daily trading volumes, ensuring tight bid-ask spreads. This liquidity facilitates easy transactions without significant market impact, supporting efficient portfolio management. Investor confidence is strengthened by its active presence in the ETF marketplace.

• Dividend Yield: Though focused on growth, VTI distributes dividends quarterly, providing a modest income stream that can be reinvested or utilized in retirement cash flow planning. These dividends reflect the earnings power of a wide array of companies. This blend offers potential growth alongside periodic income.

• Historical Performance: VTI's track record showcases steady growth aligned with U.S. economic expansion, illustrating the power of broad market participation over time. Past performance is not guaranteed, but its comprehensive market capture tends to provide resilience through cycles. It is a pragmatic choice for foundational retirement equity exposure.

As a versatile and well-rounded equity ETF, VTI forms a vital component of a retirement portfolio. Its comprehensive U.S. market exposure ensures investors can capture widespread economic progress. Furthermore, the low costs and liquidity enhance its attractiveness for long-term investors.

Vanguard Total International Stock ETF (VXUS)

VXUS extends diversification beyond U.S. borders by including stocks from developed and emerging markets worldwide, except the United States. This global reach helps retirees gain exposure to international economic growth cycles and currency diversification. Allocating a portion of retirement funds in VXUS mitigates home-country bias and enhances risk-adjusted returns by tapping into diverse markets. Although international equities come with unique risks, VXUS’s broad scope reduces individual country volatility effects.

• Global Reach: VXUS spans over 7,000 stocks, covering companies in Europe, Asia, Latin America and other regions, ensuring true diversification beyond domestic borders. This spectrum includes prominent multinational corporations alongside smaller regional firms. Investors gain access to economies at different stages of development.

• Emerging Markets Inclusion: The ETF incorporates a meaningful allocation to emerging markets such as China, India and Brazil, which can offer higher growth potential despite elevated volatility. This exposure balances maturity and dynamism within the portfolio. It is an essential aspect of global asset allocation for retirement.

• Expense Ratio: At 0.05%, VXUS maintains a competitive expense ratio amid international equity ETFs, helping preserve capital. Lower costs are especially relevant given the typically higher inherent volatility associated with foreign stocks. Vanguard’s efficient management supports prudent investing abroad.

• Currency Diversification: Exposure to numerous foreign currencies adds another layer of diversification, helping reduce dependence on the U.S. dollar. Fluctuations in exchange rates can influence returns but also potentially offset domestic market downturns. This feature broadens the portfolio’s risk management toolkit.

• Dividend Yield: VXUS offers a moderate dividend yield distributed quarterly, reflecting the income generated by global equities. These dividends contribute to total return and can support income-focused retirement strategies. The mix of growth and income enhances portfolio versatility.

Incorporating VXUS into a retirement portfolio broadens investment horizons and mitigates domestic market risks. Its international diversification complements core U.S. holdings and enriches long-term growth prospects. A balanced allocation between VTI and VXUS supports a well-constructed, global retirement strategy.

Vanguard Total Bond Market ETF (BND)

BND provides extensive coverage of the U.S. investment-grade bond market, spanning government, corporate, and securitized debt instruments. It serves as a fundamental element in retirement portfolios focused on income and capital preservation. This ETF’s broad fixed income exposure mitigates equity volatility and provides steady interest payments. The blend of different bond types and maturities helps smooth returns and offers stability during market turbulence. BND’s low expense ratio and strong diversification appeal to investors prioritizing risk management in retirement.

• Bond Composition: BND includes U.S. Treasuries, investment-grade corporate bonds and mortgage-backed securities, creating a balanced fixed income mix. This variety contributes to risk diversification and interest rate sensitivity management. The ETF’s structure targets intermediate-term maturities to reduce duration risk.

• Income Generation: The fund distributes monthly interest payments, which can serve as a reliable source of retirement income or be reinvested for compounding growth. The steady cash flow offers predictable financial planning advantages. Bond coupon payments tend to be less volatile than equity dividends.

• Expense Ratio: BND’s expense ratio of 0.03% enhances net returns by minimizing costs, a significant factor over long durations. Cost efficiency aligns with Vanguard’s philosophy of maximizing investor value. Low fees are particularly influential in fixed income investments where yields are generally lower.

• Credit Quality: Focused on investment-grade debt, BND maintains credit quality to minimize default risk, which is crucial for retirement portfolios emphasizing principal preservation. This reduces chances of significant credit events impacting the portfolio. The fund’s rigorous index tracking ensures consistent credit risk management.

• Interest Rate Sensitivity: The ETF targets bonds with intermediate durations, roughly 6 years, balancing yield and price stability. This duration positioning helps mitigate potential volatility from rising rates without sacrificing income potential. It provides a middle ground between short- and long-term bonds.

BND stands out for its broad exposure to quality U.S. bonds, offering income and risk mitigation essential for retirement planning. Its cost-efficient structure and diversified holdings support portfolio resilience. Combining BND with equity exposure helps construct a balanced, income-oriented retirement strategy.

Vanguard Inflation-Protected Securities ETF (VTIP)

VTIP invests in short-term U.S. Treasury Inflation-Protected Securities (TIPS), offering protection against inflation while maintaining principal value. This ETF is an astute addition to retirement portfolios that seek to preserve purchasing power in a rising cost environment. VTIP’s focus on short duration reduces interest rate risk compared to longer-term TIPS funds. The inflation adjustment feature helps maintain real returns, making it a valuable tool for managing inflation uncertainty in retirement income planning.

• Inflation Protection: VTIP’s holdings are indexed to the Consumer Price Index (CPI), adjusting principal value with inflation or deflation, thereby preserving investor purchasing power. This characteristic counters the erosive effect of rising prices on fixed income returns. It offers a hedge specifically designed for inflation risk.

• Short-Term Focus: By concentrating on TIPS with maturities under five years, VTIP maintains lower interest rate sensitivity, reducing price volatility. Short duration supports capital preservation during periods of fluctuating interest rates. This positioning suits conservative income strategies in retirement.

• Expense Ratio: VTIP carries a low expense ratio of 0.03%, contributing to cost-effective inflation protection relative to other fixed income options. Keeping expenses low ensures more of the inflation-adjusted return benefits investors. Vanguard’s efficient management mitigates fee-related erosion.

• Income Distribution: The ETF distributes monthly interest payments, which vary as inflation changes adjust principal balances. These payments provide a dynamic income source adapting to economic conditions. This feature aligns with retirees' need for income streams that keep pace with inflation.

• Credit Risk: Backed by U.S. Treasury securities, VTIP carries minimal credit risk, offering a secure component to fixed income portfolios. This high quality enhances confidence for retirees seeking stable, reliable investments. Treasury backing distinguishes it from corporate-inflation-linked alternatives.

VTIP represents a pragmatic choice for inflation risk mitigation within retirement accounts. Its combination of inflation indexing, short duration and Treasury backing delivers a secure means to maintain real purchasing power. Including VTIP supports thoughtful, forward-looking retirement income strategies.

Vanguard Real Estate ETF (VNQ)

VNQ provides access to a diversified portfolio of Real Estate Investment Trusts (REITs) that invest in commercial properties, residential developments and specialized real estate sectors. As a component of a retirement portfolio, VNQ offers the benefit of income through dividends and exposure to an alternative asset class that behaves differently than stocks and bonds. Real estate investments tend to respond distinctively to economic cycles, adding diversification benefits. This ETF helps investors gain real estate market exposure without the complexity of direct property ownership.

• Dividend Yield: VNQ stands out with a historically attractive dividend yield, generated by rental income from underlying properties, often exceeding typical stock dividends. These payouts typically occur quarterly, providing a consistent income supplement. This characteristic is valuable for retirees seeking periodic income outside traditional bonds.

• Sector Diversity: The ETF covers multiple real estate sectors such as retail, office, industrial, healthcare and residential properties, reducing concentration risk. This breadth captures varying performance dynamics across different property types. Economic shifts impacting one sector may be offset by strength in another.

• Liquidity: VNQ is among the most actively traded real estate ETFs, ensuring investors can enter or exit positions with minimal price disruptions. High liquidity supports efficient portfolio rebalancing and responsive management. It also offers competitive bid-ask spreads relative to other REIT funds.

• Expense Ratio: The ETF’s expense ratio of 0.13% is reasonable for real estate-focused funds, balancing cost and specialized management. Investors benefit from professional oversight of complex property investments embedded in the index. This cost structure supports long-term holding without excessive fee burden.

• Risk Considerations: Real estate investments can be sensitive to interest rate changes and economic downturns, yet VNQ’s diversification and large-cap holdings reduce volatility compared to individual properties. The ETF’s structure helps mitigate singular market events. Retirees are advised to moderate allocations accordingly within balanced portfolios.

VNQ enriches retirement portfolios by integrating real estate exposure with income potential and diversification benefits. Its well-rounded property sector coverage amplifies risk management by diluting sector-specific risks. As a professionally managed ETF, it simplifies inclusion of real assets in long-term investment strategies.

Vanguard Dividend Appreciation ETF (VIG)

VIG focuses on U.S. companies with a history of increasing dividends year over year, highlighting firms with strong financial health and shareholder-friendly policies. This ETF appeals to retirees seeking reliable income growth combined with capital appreciation potential. Dividend growth companies generally demonstrate resilient earnings, disciplined management and attractive valuations. VIG’s quality-focused approach adds a layer of income stability within equity allocations, essential for retirement income sustainability.

• Dividend Growth Focus: VIG includes companies characterized by at least ten consecutive years of increasing dividend payments, representing a commitment to returning capital to shareholders. This consistency often correlates with strong balance sheets and profitability. It filters for financially prudent firms with durable earnings growth.

• Sector Weighting: The ETF’s portfolio tilts toward sectors known for stable dividends such as consumer staples, industrials and healthcare, balancing growth and defensiveness. This weighting helps moderate equity risk during economic fluctuations. Exposure to diverse sectors ensures broad economic participation.

• Expense Ratio: VIG offers expense efficiency with a ratio of 0.05%, delivering access to a curated dividend growth benchmark at a modest cost. Low fees enhance net returns, particularly for dividend investors relying on income compounding. Vanguard’s indexing strategy promotes transparency and cost effectiveness.

• Dividend Yield: While VIG's yield is moderate, its focus on increasing dividends suggests rising income potential, supporting income goals over time. This characteristic differentiates it from high-yield but less sustainable dividend ETFs. The strategy aligns with long-term income growth rather than immediate high yield.

• Historical Stability: Companies in VIG have historically shown lower volatility than the broader market during downturns, aiding portfolio stability. This resilience is valuable for retirees who require dependable equity income. The fund combines growth orientation with income reliability.

VIG’s emphasis on dividend growth companies enhances retirement portfolio income with a quality overlay. This approach supports income that has the potential to rise, mitigating inflation risks within equity allocations. It complements broad market funds by targeting financially disciplined dividend payers.

Vanguard Short-Term Bond ETF (BSV)

BSV invests in short-term U.S. investment-grade bonds, offering lower interest rate risk and reduced volatility compared to longer-term bond funds. This ETF is suitable for retirement portfolios seeking stable income with minimized sensitivity to rate fluctuations. By focusing on bonds with maturities typically under five years, BSV prioritizes capital preservation while providing regular income. Its role often complements broader bond holdings by reducing overall fixed income duration and smoothing portfolio risk.

• Duration Profile: BSV maintains an average duration of about 2.9 years, significantly reducing interest rate sensitivity relative to intermediate or long-term bond funds. This quality helps protect principal in rising rate environments. It ensures income stability with lower price volatility.

• Credit Quality: The ETF tracks a broad index of investment-grade U.S. government and corporate bonds, balancing yield and risk management. High credit standards minimize default risk, critical for conservative retirement investors. This credit focus supports capital preservation priorities.

• Income Distribution: BSV distributes monthly interest payments derived from its bond holdings, providing consistent income suitable for retirees’ cash flow needs. The shorter maturities facilitate reinvestment opportunities without locking in low rates long term. This flexibility aids dynamic income planning.

• Expense Ratio: With an expense ratio of 0.03%, BSV represents a low-cost solution for short-term fixed income exposure, enhancing net income generation. The minimal fees align with Vanguard’s mission to reduce investor costs. Cost efficiency is particularly important in low-yield environments.

• Portfolio Role: BSV is often utilized alongside longer duration bonds to tailor interest rate exposure and liquidity management in retirement portfolios. It acts as a stable foundation, mitigating volatility and providing cash alternatives. This ETF supports tactical fixed income allocation adjustments.

Incorporating BSV in retirement portfolios offers essential protection against interest rate hikes and volatility. Its conservative bond profile ensures dependable income and capital preservation. BSV serves as a stable core or complement to broader fixed income allocations within a balanced retirement strategy.