Both funds offer investors an alternate income stream that outdoes Treasury yields. TFIV seeks to achieve a 5% yield, net of fees, while TFLT seeks to achieve the yield on the current 10-year US Treasury Note, plus 2%, with both funds expected to pay monthly distributions.
Both funds can be of benefit to retirees. In a decades-long shift from defined benefit (DB) plans, those that provide investors with predictable income streams in retirement, to defined contribution (DC) plans, individual investors have assumed much of the risk with respect to their retirements.
By utilizing an outcome-based approach, TFIV and TFLT help investors achieve targeted income levels from their retirement assets. Both funds track indexes that were developed by Wilshire Associates (Wilshire®), and allocate across 11 ETFs that represent various income-paying asset classes.
The ETFs seek their targeted income levels while simultaneously optimizing their exposures in order to mitigate risk.
Highlights of TFIV:
- 5% Income Target: In aiming for an annualized 5% yield, net of fees, TFIV seeks to offer investors a specific outcome.
- Dynamic Risk Management: TFIV’s index looks to minimize portfolio risk by optimizing allocations across 11 potential asset classes while attempting to meet its stated yield target.
- Monthly Distributions: TFIV makes distributions on a monthly basis.
Highlights of TFLT:
- Floating Income Target: In aiming to exceed the 10-Year U.S. Treasury yield by 2%, net of fees, TFLT seeks to offer investors a specific outcome.
- Dynamic Risk Management: TFLT’s index looks to minimize portfolio risk by optimizing allocations across 11 potential asset classes while attempting to meet its stated yield target.
- Monthly Distributions: TFLT makes distributions on a monthly basis.
Income Creativity Pre- and Post-Retirement
When it comes to retirement in the current market environment, one glaring challenge is obviously yields. While inflationary pressures are poised to push rates higher amid a recovering economy, individuals looking to retire must get creative with their income sources.
“Pre-retirees and retirees have been trying to squeeze out extra yield on fixed income investments for many years in the current low-interest environment. And lately the pickings have been pretty slim,” a Forbes article noted.
“However, if you broaden your goal from simply earning more interest on your savings to reliably increasing your financial security in retirement, you might discover creative ways to deploy your retirement savings,” the article added.
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