Products June 19, 2012

State Street Rolls Out Fixed Income ETFs

June 19, 2012 (PLANSPONSOR.com) -Two State Street Global Advisors Fixed Income SPDR Exchange-Traded Funds (ETFs) began trading on the NYSE Arca.
Reported by

They are the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF and the SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF.

The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF tracks the performance of the BofA Merrill Lynch US Diversified Crossover Corporate Index, which includes 3,029 securities. Each security included in the index has a BBB1 through BB3 inclusive rating, a fixed income coupon schedule, at least one year remaining to final maturity and a minimum amount of outstanding of $250 million or more of issuance. The fund’s expense ratio is 0.30%.

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The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch Emerging Markets Large Cap Senior Corporate Index, which includes 454 securities.

“Featuring potentially higher yields than most investment grade bonds and potentially less credit risk than most high yield issues, demand for crossover bonds is growing among financial advisers and investors during this extended low-yield environment,” said James Ross, senior managing director and global head of SPDR Exchange-Traded Funds at State Street Global Advisors. “With the launch of the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF, precise, cost-efficient access to this asset class is within reach for investors seeking exposure that spans both investment grade and high-yield bonds.”

The index is designed to measure the performance of U.S. dollar-denominated emerging market corporate senior and secured debt publicly issued in the U.S. domestic market and the Eurobond market. Each security included in the index is denominated in US dollars, is senior or secured debt, has at least one year remaining to final maturity, includes a fixed coupon and has $500 million or more in outstanding face value. The fund’s expense ratio is 0.50%.

“The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF provides investors with an opportunity to tap into the growth potential of emerging markets while minimizing exposure to emerging market currencies,” said Ross. “As fixed-income portfolio diversification becomes a higher priority for investors, interest in emerging market bond exposure is increasing.”

Benefits June 19, 2012

Five More Years of Work Needed to Be Retirement Ready

June 19, 2012 (PLANSPONSOR.com) – Most workers only need to work five years past age 65 to be ready to retire, a new paper contends.
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The Center for Retirement Research at Boston College (CRR) used the National Retirement Risk Index (NRRI), which measures the share of American households “at risk” of being unable to maintain their pre-retirement standard of living in retirement, to determine at what age the vast majority of Americans would be able to retire. The analysis found more than 85% of households would be prepared to retire by age 70.  

Nearly half of households are prepared for retirement at age 65, the traditional baseline assumption used in the NRRI. About one-quarter of households have to work just one to three years beyond age 65, and a portion of this increase would be offset by rising longevity over the next two decades. Only 9% have to work an additional seven years or more.  

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The paper explained that the steep improvement in retirement readiness from ages 62 through 70 and the leveling off thereafter reflect the importance of Social Security and the pattern of its benefit payments. Social Security benefits increase by about 8% per year between ages 62 and 70, due to the actuarial adjustment before the full retirement age of 66 and the delayed retirement credit between 66 and 70.  

The researchers also noted that younger households tend to be less prepared for three main reasons: they are expected to live longer, which means they will need additional assets to cover a longer retirement period; Social Security replacement rates tend to be slightly lower for younger households because they face a higher full retirement age; and fewer younger households will be covered by defined benefit pension plans.  

Today’s workers may need to work longer than their parents, but they are also healthier, better educated, generally have less physically demanding jobs, and can expect to live longer, the report pointed out. “In short, working longer is feasible for most households, and it does not mean working forever,” the researchers concluded.  

The report can be downloaded from here.

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