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I recently listened to a podcast discussing “longevity income” ETFs from an outfit called LifeX. It appears that the money is invested in treasuries, and the fund returns both interest and a portion of capital each month, with the expectation of exhausting the fund by a target date. It seems to be intended as an alternative to a TIPS or bond ladder, but costs 50 basis points initially and carries no guarantee.
I’d appreciate others’ views on this.
50 Bips and No Guaranty = NO! Buy an immediate annuity. 0 Bips and Guaranty! YES.
I taught insurance and investments for 15 years, and wrote textbooks on the same topics, after a 35 career in finance. Carriers DO NOT produce products for our benefit. ALL Financial products are produced for the benefit of the producer.
If you want “TIPS Like” results…buy TIPS.
If you prefer predetermined, guaranteed income streams, buy Annuities.
Remember the most important of all financial lessons…TANSTAAFL!
From their prospectus as a top investment priority. So you’re paying for them to give you a distribution that they don’t guarantee. A fair expense ratio would be a lot closer to 10-15 basis pts
(Google sheets has a function that lets you do something similar for free with a very liquid bond etf)
My father was thrilled with products like this. After he died I showed my mother that most of the 12% return they were getting was return of capital. Then quickly moved her to a Boglehead portfolio.
Like Dan I’m also unfamiliar with these LifeX etf’s. Looking at the chart on their website, I struggled to understand how they could pay such a high payout (about 8% at the current share price of $12.37 for LFAE) investing only in treasuries. I randomly picked the 2048 “fixed” etf symbol LFAE. Reading the prospectus for it, 2 things stood out to me. First, the prospectus says “the Fund’s per-share distribution rate will be reduced in April of 2028 (the “Recalibration Year”) to a level estimated to be sustainable for the Fund’s full term through 2048.” Well, I guess that answers part of my question. Second, the prospectus also says “There can be no assurance that the Fund will achieve its investment objective.” I’m no investment expert, but those 2 statements from the prospectus cooled my interest enough I didn’t really want to keep reading. If anyone looks further and I’ve misunderstood or misread something, please let me know. But for now, I read enough.
I thought it sounded like the LifeX people would do better than the investors. They claim they are saving you the difficulty of setting up a TIPS or bond ladder, and arranging monthly checks, yourself.
I’m not familiar Kathy, but it sounds like an un-insured immediate annuity. Would it crash and burn if interest rates rose after you made the investment?
That’s the kind of thing I was wondering about.