Insights & Education

LifeX ETFs are a suite of Treasury bond funds designed to personalize bond investing with an emphasis on tax-efficient monthly cash flow.¹ In addition to interest income, the ETFs intend to distribute principal each month, resulting in higher cash flow than would be possible from interest alone. Each fund’s distributions are designed to continue until the end of its specified end year and to return all principal along with interest over that horizon.

A bond ladder is a series of individual bonds of varying maturities. As the bonds mature, the principal can be used for spending needs or reinvested in new bonds that mature in subsequent years. Investors may use bond ladders to generate predictable cash flow that is not impacted by interest rate moves once the ladder is purchased.

LifeX ETFs are designed to give investors the reliable cash flow and locked-in interest rates of a Treasury bond ladder in a single ticker with an added feature designed to increase stability further: LifeX ETFs are designed to return principal alongside earned interest every month, delivering more consistent cash flow than if they delivered principal back only when bonds mature, which can lead to “lumpy” cash flow.

In addition to the tax efficiency of the ETF structure, LifeX ETFs are designed to produce distributions in a tax-advantaged manner.¹  As a result, LifeX’s distributions are expected to result in a lower tax burden than if they were treated as ordinary income for tax purposes.  

Each of the ETF’s distributions is expected to consist of a mix of:

1. Interest income, which is expected to be taxable federally but tax-exempt at the state and local level.  This income will be included in standard Form 1099 reporting from your custodian.
2. Return of capital, which is not subject to tax. Your custodian will process return of capital as an adjustment to your cost basis on an annual basis.

Longevity Income ETFs are designed to generate front-loaded payouts for longer planning horizons (end years 2048-2065).²

Inflation-Protected Longevity Income ETFs offer the same front-loaded payout profile and end years as the Longevity Income ETFs, and the distributions adjust each year based on realized inflation.  

Term Income ETFs are designed to generate level payouts for shorter time horizons (end years 2035, 2040, and 2045).

LifeX ETFs are designed to provide reliable monthly distributions through the specified end year.³  

To support their distributions, the ETFs invest in U.S. government bonds and intend to distribute the resulting interest income as well as principal over time.

LifeX ETFs are designed to pay stable per-share distributions that do not fluctuate year to year based on current interest rates, so once you’ve purchased a LifeX ETF, changes in interest rates should not impact your monthly distributions.  

If interest rates increase, investors can elect to reinvest distributions at higher, prevailing distribution rates. If interest rates decrease, investors locked in their distribution rate at purchase, which can be particularly appealing to do if they expect interest rates to fall in the future.

Though changes in interest rates will not impact the monthly distribution amounts, those changes will impact the price per share of the ETF: a fall in interest rates would generally lead to a higher price per share, which would enable you to sell your existing shares for a higher value, while a rise in interest rates would generally lead to a lower price per share and a lower market value.⁴

New investors will purchase shares at the latest market value.  As a result, an annual $1 per-share distribution will represent a higher distribution rate when the market value is lower and a lower distribution rate when the market value is higher.  For example, a $1 distribution divided by a $20 market value represents a 5.00% distribution rate, while a $1 distribution divided by a $15 market value represents a 6.67% distribution rate.⁵