View Full Version : I Bonds or TIPS
With inflation rising, which is the better investment, I Bonds or TIPS?
My retirement person recommended we invest in I-bonds, she thought we had too much money in non-productive accounts (I agreed). I set up an account at the Treasury Direct website and have been starting small until I am comfortable with how it all operates. I just watched a good YouTube again on the differences between the I-bond and TIPS accounts and still like the I-bonds better for us. https://www.youtube.com/watch?v=bIq8XXo4Vfo
dado potato
10-5-22, 7:06pm
I agree with Greg44 that the YouTube video by Jennifer accurately contrasts I Bonds and TIPs.
(I am not impressed by the "legal loophole" of spouses buying I Bonds for each other, as Jennifer describes).
I treat I Bonds as a last ditch reserve. Being in my 70s, either I or my spouse could need a lot of money for Long Term Care. Or a legal judgment could be awarded in excess of our liability insurance coverage. I buy the limit every year, generally in January.
On occasion I am a buyer of short-term TIPs funds, such as VPOIX at Vanguard, but these purchases have resulted in unrealized capital losses. As a discussion point, the losses are slight compared to the losses over the same period in the SP500, VNQ, NASDAQ, or a 60/40 allocated portfolio.
In my experience, each I Bond increases in value every month. There is no income tax payable until the owner cashes in the I Bond. No fuss, no muss.
The term on an I Bond (in effect) is 1-30 years, depending on the owner's option. You choose.
For me I-bonds were the easiest to understand. I've had a couple of tips funds that never did well, although it could tun out differently in a different economy. If I were to buy tips, I'd buy the bonds at a duration I plan to hold to maturity rather than a bond fund. If I were uncertain how how each works and which as the best for my situation, I'd consult a professional adviser.
Teacher Terry
10-5-22, 11:12pm
I bought I bonds the past two years.
I just noticed the fixed rate on I Bonds issued after may 1 is .9% (plus the inflation component). The fixed rate hasn't been much above zero for years.
flowerseverywhere
5-23-23, 4:31pm
Have you checked CD rates? At our credit union 9 month and 2 year rates are over 4%.
Just something to think about.
Well, until they deal with the possibility of the Federal government defaulting...
https://www.youtube.com/watch?v=1JITC1fo2HA
It’ll be interesting to see where the inflation component goes. I bought an i bond last fall but unless inflation goes up again will probably cash it in once the penalty period has passed.
iris lilies
5-24-23, 2:14pm
Have you checked CD rates? At our credit union 9 month and 2 year rates are over 4%.
Just something to think about.
This is a good point. I should dump part of my money into some short term CDs.
There are also banks offering comparable interest rates currently. I suppose it's anyone's guess how long that will last but at least with a bank account one can move the money if it isn't earning a decent return.
Well, until they deal with the possibility of the Federal government defaulting...
https://www.youtube.com/watch?v=1JITC1fo2HA
If the government were to default, wouldn’t a lot of bank or credit union or money market options also suffer, being invested in short term government issues or rate-sensitive commercial paper?
If I were truly concerned about a default, I might start shifting assets outside the dollar.
If the government were to default, wouldn’t a lot of bank or credit union or money market options also suffer, being invested in short term government issues or rate-sensitive commercial paper?
If I were truly concerned about a default, I might start shifting assets outside the dollar.
I can imagine that gold or other precious metals would be the next level of international safe havens before shotguns. Maybe the day will come when investments in rare earths with replace gold and silver. As shaky as the US economy might seem at times, it might be the most stable among the international financial markets. Some days it feels like the entire global economy teeters on the edge of one disaster or another. Maybe one of these days the two parties playing chicken with the debt ceiling will actually have a head-on, but I'm thinking it's just more theater and will end like it always has with some sort of compromise.
And I-bonds are still a competitive investment relative to bank CDs. Their complications scare some people off but they deserve a place in a diverse portfolio. I also own a bit of silver and shotguns.
There aren’t two parties playing chicken with the debt ceiling. One of the ‘two parties’ has always approved debt ceiling increases because they understand that the debt is for expenses that have already been put into law. Even when the debt ceiling increase was for bullshit like a massive tax cut for rich people and corporation people as the Supreme Court now calls them. The other party has figured out that they can weaponize the debt ceiling for political purposes and does so every time the opposing political party is in the White House.
Both parties have become good at running the credit card up to the limit, and then sanctimoniously threatening suicide if the limit isn’t raised. One party seems to be a little better at it than the other, however.
Some political budget genius should probably take note of the Clinton administration.
Some political budget genius should probably take note of the Clinton administration.
Yep, having a Republican House and Senate made it hard for him to screw that one budget up. The only bad thing was that pretty soon the Democrats regained control and Harry Reid forced a change from the traditional budgeting process to a series of continuing resolutions which have now become the norm for both parties. Over 130 continuing resolutions since 1996 and not one traditional annual budget.
Yep, having a Republican House and Senate made it hard for him to screw that one budget up. The only bad thing was that pretty soon the Democrats regained control and Harry Reid forced a change from the traditional budgeting process to a series of continuing resolutions which have now become the norm for both parties. Over 130 continuing resolutions since 1996 and not one traditional annual budget.
Maybe that's the ideal mix, then A democrat president and the check and balance house and senate? It seems to me like there is more to the story, like maybe some tax increases on the wealthy and not having any big foreign wars or any pandemics. I actually suspect it was as much an alignment of the economic stars as the usual budget bickering, but it's hard to ignore the tax side of the balance.
Yep, having a Republican House and Senate made it hard for him to screw that one budget up. The only bad thing was that pretty soon the Democrats regained control and Harry Reid forced a change from the traditional budgeting process to a series of continuing resolutions which have now become the norm for both parties. Over 130 continuing resolutions since 1996 and not one traditional annual budget.
Bill had larceny in his heart, but his feet were honest. Didn’t stop him from claiming credit for zero deficit years when he had little choice in the matter. Sort of like Biden bragging about reducing the deficit because he didn’t have the votes to get his Build Back Better monstrosity in it’s original form.
I see one of the big cut backs is cutting funding for the IRS. I wonder what that's all about?
I see one of the big cut backs is cutting funding for the IRS. I wonder what that's all about?
I think they keep $60B of the $80B they were granted in the Inflation Acceleration Act. I wouldn't consider that "cutting funding" as much as "clawing back some of the excessive funding".
I think they keep $60B of the $80B they were granted in the Inflation Acceleration Act. I wouldn't consider that "cutting funding" as much as "clawing back some of the excessive funding".
No argument from me. I had the impression that the IRS was originally underfunded and unable to track down people illegally playing the system or abusing loopholes. Leaves me to wonder how much is excessive and how much is prudent?
No argument from me. I had the impression that the IRS was originally underfunded and unable to track down people illegally playing the system or abusing loopholes. Leaves me to wonder how much is excessive and how much is prudent?
If I'm not mistaken, the $80B was supposed to be doled out over time and the $20B in question wasn't due to be used until after 2026. Who knows what other budgetary windfalls they'll enjoy by then?
So the debt ceiling deal passed in the house quite dramatically, 314 to 177 on a bipartisan basis. Apparently the "burn it all down" wing of the republican party is livid. It will be amusing to watch Mike Lee and Rand Paul howl at the moon with their pointless histrionics as the bill works it's way through the senate before inevitably being signed into law by the man that republicans have wrongly written off as senile and incompetent. This is certainly a lesson for them that one should not believe their own BS.
Looks like Bernie Sanders is doing some howling of his own. He’s outraged that student loan borrowers will be required to start making payments on their debt again. He is one of those who feels the 14th Amendment confers the power of the purse on the chief executive, and that debt ceiling votes are “unnecessary”.
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