How ETFs can jumpstart retirement investing

Investing for retirement can seem daunting, with seemingly endless possibilities, With so many economic headwinds, it can be nerve wracking to choose the right place to start. According to a survey from BlackRock, a staggering 57 million Americans lack access to a 401(k) or employer-sponsored retirement plan and 40% of those surveyed feel they are off-track for retirement goals. Rachel Aguirre, BlackRock US Head of iShares Product, joins Yahoo Finance to discuss the results of the survey and give insight into why ETFs should be on the top of Americans list to start investing for retirement.

Aguirre gives advice on investing: "It is just absolutely necessary that people begin to invest in the market and we know that that has been challenging in the recent history just because of the volatility that we have been experiencing in the market. But, here's the thing, one of the things we like to say is that time in the market is so much more important than trying to time the market. It's nearly impossible to time the market, but if you are a long-term investor, you have to be in the market."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JARED BLIKRE: A new Blackrock read on retirement survey found that 40% of independent savers feel off target for retirement with 45% of independent savers saying that professional management would help them feel more on track. Now, to help assuage that lack of confidence, Blackrock launched a suite of target date ETFs to give new avenues where investors might look at investing specifically for retirement. And so are ETFs a good way to save for investment and are they a good investment for those heading into retirement?

As part of our ETF report brought to you by Invesco QQQ, let's bring in Blackrock US head of iShares Product Rachel Aguirre to discuss more. Rachel, thank you for joining us here today. We'll get to the-- and you can talk about the ETFs here. I'm interested in the survey and the results that led you to create this new basket of ETFs.

RACHEL AGUIRRE: Yeah, absolutely. Thank you so much for having me here today. And I want to start by giving you a number, 57 million. There are today, 57 million Americans that don't have access to either a 401k or some type of work plan investing.

And you know, as you mentioned, we recently surveyed this group of independent savers and what we found was pretty remarkable. 40%, in fact, say that they feel like they're off track for retirement. And it's not surprising when you look into why. 47% of this same group say that they're leaning on cash to build their retirement nest egg, so they're missing out on some really critical investment opportunities that are required to achieve their financial goals. So we really believe this is one of the most pressing retirement challenges that need to be addressed.

And while, you know, clearly there is not a silver bullet here, we do believe that there's an opportunity for us to step in and really help with this. And that is where the iShares Lifepath Target Date ETFs were born. We invented the Target Date Fund 30 years ago now. And so what we wanted to do was take that same IP and deliver it to your everyday investor in the convenience of an ETF. That's what this is all about.

MADISON MILLS: Well, Rachel, it's funny, I saw you slightly shaking your head when you mentioned that so many people are keeping cash as their nest egg and hoping for that to work out in retirement. Because we know because we work in this industry that that's not the right path forward. I'm curious though in your survey results, did you see anything else about the biggest mistakes people make when it comes to planning for retirement? We hear a lot about people who even do have 401ks not realizing that they have to invest the money that they have in there. Did anything like that surprise you or come up for you?

RACHEL AGUIRRE: Absolutely. So cash is really the greatest enemy when it comes to achieving long-term financial goals. It is just absolutely necessary that people begin to invest in the market. And we know that that has been challenging in the recent history just because of the volatility that we've been experiencing in the market.

But here's the thing, one of the things we like to say is that time in the market is so much more important than trying to time the market. It's nearly impossible to time the market. But if you are a long-term investor, you have to be in the market.

JARED BLIKRE: I'd like to talk about the difference between ETFs and mutual funds in general. You talked about your leadership in bringing target funds to the market 30 years ago. You know, ETFs offer intraday liquidity and there's other comparisons we can make there. There's also the fee structure. I'm looking at some of your fees, they range from 8 basis points to 11, which is low, but how does this-- how does this compare with the mutual fund industry offerings of target funds that has been the norm for so many decades?

RACHEL AGUIRRE: Sure, absolutely. And for us, it's all about choice and it's all about meeting investors where they are. As you say, we've certainly offered target date style investing in mutual funds for many, many years and will continue to do so.

But what we have found is that increasingly, and end investors in particular, are beginning to choose ETFs as their vehicle of choice. And it's not surprising as more and more investors experience all of the things that we love about ETFs, their convenience, their simplicity, their low cost and value, and of course, their tax efficiency. So in particular, if you are an investor who has money invested in a taxable account, this is really something to take a closer look at because of the tax efficiency that can be achieved in an ETF structure.

MADISON MILLS: Rachel, I'm curious, as we start to wrap up here, what factors should go into a person's decision about that target date because I myself have my own target date retirement fund. And I have a little bit more time, so a lot of it is stock heavy. And of course, then we had the best 60-40 portfolio month in November that we've had in decades, so I was really bummed to look at my 401k after that news. What factors should consumers like me be considering when they're picking that target date and what that does to the mix of what's in their retirement funds?

RACHEL AGUIRRE: Sure. So here's the incredible thing about the iShares Lifepath Target Date ETFs, they are so incredibly simple and they move with you through your retirement investing journey. It's as easy as choosing the fund that most closely aligns to your target retirement date and make regular contributions. The rest is done for you.

You can think about the retirement investing life cycle in three phases-- grow, protect, spend. So when you're early in your career, it's all about growing your assets. So we begin with nearly 99% of our portfolio in a broad and diverse set of equities.

Then as you enter your mid-career, as you begin to get closer to retirement, it needs to shift to protecting your assets. So there we begin to add high-quality fixed income and inflation protection into the portfolio. And then finally, when you reach retirement, it's all about spending. You begin to draw on those assets. And so here you want your most conservative mix and we shift down to about 40% in equities at this point.

So you still do have access to growth, but you can spend from there. And so the beauty of these ETFs is that it does all of that. It moves with you and evolves with you as you move along your retirement journey, so it really couldn't be easier.

MADISON MILLS: All right, Rachel. Well, we really appreciate you joining on us. Our thanks to Blackrock US head of iShares Product, Rachel Aguirre, joining us on ETFs and retirement there.