The beauty of ETF-focused investing is that if you do it right, you can get returns that come extraordinarily close to meeting your benchmarks' returns, with very low costs or effort. You'll never be able to completely eliminate the risks of investing, but with a smart ETF-focused strategy, you can effectively balance and manage those risks as you strive to reach your goals.

That raises a very key question: Can you actually retire a millionaire with ETFs alone? Their ease of use and low costs would seem to make them awesome tools to help you plan for and make it through retirement. Fortunately, the short answer is "Yes, you can!"

Because of the way ETFs are structured, though, there is one thing you will have to plan around. If you expect to use ETFs as a key part of your retirement plan, you need to recognize when you'll need the money and invest it appropriately for that timeframe.

Senior leaning on a fence, looking out over water.

Image source: Getty Images

Why your timeframe matters

Typical ETFs are designed to follow a strategy. In most cases, those ETFs assume their investors plan to stay invested in that strategy effectively forever. As someone looking to retire, however, chances are that you'll be going through distinct stages when it comes to your money. Those distinct stages call for different investments.

Early in your career, you'll be looking to save new money and give your invested cash as much opportunity as it can to grow. As you get closer to retirement, if you've built a decent nest egg, you'll probably start to care about preserving at least some of what you have as much as you'll care about seeing it grow even more. And of course, once you are retired, you'll probably want to spend from your portfolio to help you cover your costs.

On top of that, it's hard to tell exactly how much you'll need at any given time decades ahead of time. That set of factors makes one-stop-shop type investments such as target date funds less useful for your retirement planning than they otherwise might seem to be on the surface.

Still, the strategy is simple enough if you think of your money in three distinct timeframes:

  • Money you don't expect you'll spend for at least the next five to seven years.
  • Money you expect to spend within one to five (or seven) years from now.
  • Money you will -- or could potentially -- need to spend within the next year.

By breaking it up into timeframes like that, it becomes fairly straightforward to pick ETFs to serve your needs as you strive to reach your millionaire retirement goal.

Money you won't need for at least five to seven years

As you're aggressively building your nest egg for your long-term future, you'll want your money invested in a way that gives it a great chance to grow. Even after you're retired, if you're hoping that retirement will last a good, long time, you'll want to keep money invested more aggressively to help you meet those longer-term goals. After all, inflation doesn't stop just because you've retired, and over the long haul, growth-oriented stock investments have been a great way to keep up with or even beat inflation.

On that front, broad-based index ETFs like the SPDR S&P 500 EFT Trust (SPY 0.06%) are a great way to invest for the long term. Over the long haul, actively managed mutual funds tend to fail to keep up with relevant indexes. That makes a broad-market, S&P 500-tracking index ETF like the SPDR S&P 500 ETF trust a great spot for money you're investing for the long-term future.

As 2022 reminded us, though, stocks don't always go up. That's a key reason why, as awesome as a stock-focused index fund can be for building wealth, it's not really appropriate for money you need to spend in the near term.

Money you expect to spend within one to five (or seven) years from now

As a general rule, if you expect that you'll need to spend your money within the next five years, it does not belong in stocks. Unfortunately, you can't guarantee you'll always have a strong stock market when you need to convert your money to higher-certainty investments like investment-grade bonds. As a result, if you find yourself with a strong market slightly before that five year window, you might want to take advantage it to start shifting some money earlier. That's where the "or seven" years comes from.

The problem with most generic bond ETFs, however, is that because they tend to target a given duration ("IE" means "intermediate term," for instance), they are subject to interest rate reinvestment risks. For instance, when interest rates rise, bond prices drop. Bond ETFs that have to sell their bonds before they reach maturity can see their values drop as a result of having to sell at a certain date.

To address that issue, Invesco has a suite of bond ETFs known as Bulletshares that can help with your nearer-term money. Bulletshares ETFs are known-maturity-date bond ETFs where the holdings mature in a specified year that differs by ETF. By buying enough of a given Bulletshares ETF to cover your expected costs in the next year, you give yourself a high likelihood of having the money you need, when you need it. Once the final holdings in those ETFs mature (around the end of their target year), the final values are distributed to investors.

The following table shows a potential set of Bulletshares investment-grade bond ETF investments for a person who expects to retire and spend $20,000 from his or her portfolio each year, starting in 2024. The targeted amount at maturity is boosted each year by 5%, to account for potential inflation along the way.

Spending Year

Invesco Bulletshares ETF

Targeted Amount at Maturity


Invesco BulletShares 2023 Corporate Bond ETF (BSCN)



Invesco BulletShares 2024 Corporate Bond ETF (BSCO 0.05%)



Invesco BulletShares 2025 Corporate Bond ETF (BSCP)



Invesco BulletShares 2026 Corporate Bond ETF (BSCQ -0.03%)



Invesco BulletShares 2027 Corporate Bond ETF (BSCR -0.08%)


Data source: author.

With modest expense ratios around 0.1%,  the Bulletshares ETFs are a straightforward and low cost way to get targeted bond dates without the hassle or company-specific risks of individual bond investing.

Money you will -- or could potentially -- need to spend within the next year

For money you expect to spend within the next year (or money you have socked away for emergencies), there's nothing wrong with holding it in cold, hard cash in an FDIC-insured checking or savings account. Indeed, for money you know you'll need or otherwise may need to have available at any time, liquidity and accessibility is more important than total return potential.

That said, if you're looking for an ETF to potentially take the place of a savings account for emergencies, you might want to consider something like the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL 0.06%). The ETF generally invests in U.S. Treasury bills that mature within the next one to three months. As a result, it generally has very low volatility and the low default risk (except when there are debt-ceiling theatrics involved) that comes with investing in near-term U.S. government bonds.

Get started now

All that said, while this strategy shows how you can retire a millionaire with ETFs alone, it doesn't change the fact that it takes time, often measured in decades, to reach a $1 million nest egg. The sooner you get started, the better your chances are of actually reaching millionaire status before you retire. So get started now, and put yourself on the best possible path toward making it a reality for yourself.