High TIPS Yields Are a Retiree’s Best Friend

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
vnatale
Executive Member
Executive Member
Posts: 9343
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

High TIPS Yields Are a Retiree’s Best Friend

Post by vnatale » Tue Oct 17, 2023 10:39 am

High TIPS Yields Are a Retiree’s Best Friend

https://www.morningstar.com/bonds/high- ... est-friend

BONDS
High TIPS Yields Are a Retiree’s Best Friend
A long-awaited investment opportunity has finally arrived.


John Rekenthaler
Oct 16, 2023



At Long Last
After ignoring Treasury Inflation-Protected Securities ever since this column began, I am now paying them substantial attention. TIPS forced my hand. After many years of languishing at unacceptable levels, their yields have soared. At long last, the investment merits serious consideration.



Wrapping Up
Receiving real income from the U.S. government is an excellent proposition if yields are acceptably high. Today, they are.

The offer is particularly appealing for retirees who need not devote their entire portfolio to their spending needs, thereby permitting them to buy stocks. If their equity holdings are sufficiently large, and the financial markets reasonably kind, such investors could end up enjoying the best of both worlds: guaranteed real income plus capital appreciation. Such a combination is very difficult to beat.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
barrett
Executive Member
Executive Member
Posts: 1977
Joined: Sat Jan 04, 2014 2:54 pm

Re: High TIPS Yields Are a Retiree’s Best Friend

Post by barrett » Mon Nov 06, 2023 3:56 am

Quick question, Vinny...

Have you actually bought any TIPS yet or are you still just researching them?
User avatar
vnatale
Executive Member
Executive Member
Posts: 9343
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: High TIPS Yields Are a Retiree’s Best Friend

Post by vnatale » Mon Nov 06, 2023 7:34 am

barrett wrote:
Mon Nov 06, 2023 3:56 am

Quick question, Vinny...

Have you actually bought any TIPS yet or are you still just researching them?


Have not yet bought any. But when I do it will be significant mega-amounts.

The urgency has somewhat been mitigated by the present levels of yield from the Vanguard Treasury Money Market Fund.

The urgency, though, will increase significantly once it appears that the Fed will start lowering rates.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
barrett
Executive Member
Executive Member
Posts: 1977
Joined: Sat Jan 04, 2014 2:54 pm

Re: High TIPS Yields Are a Retiree’s Best Friend

Post by barrett » Mon Nov 06, 2023 11:40 am

vnatale wrote:
Mon Nov 06, 2023 7:34 am
barrett wrote:
Mon Nov 06, 2023 3:56 am
Quick question, Vinny...

Have you actually bought any TIPS yet or are you still just researching them?
Have not yet bought any. But when I do it will be significant mega-amounts.

The urgency has somewhat been mitigated by the present levels of yield from the Vanguard Treasury Money Market Fund.

The urgency, though, will increase significantly once it appears that the Fed will start lowering rates.
But you were writing about setting up a 30-year ladder right? It's none of my business but I don't think the Treasury Money Market Fund yield should affect a longer term plan. But I guess an important side of investing is just feeling good about what you are doing... which seems to be where you're at. Lord knows that much of what I have done in the personal finance realm has been less than optimal!
User avatar
vnatale
Executive Member
Executive Member
Posts: 9343
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: High TIPS Yields Are a Retiree’s Best Friend

Post by vnatale » Mon Nov 06, 2023 11:49 am

barrett wrote:
Mon Nov 06, 2023 11:40 am

vnatale wrote:
Mon Nov 06, 2023 7:34 am

barrett wrote:
Mon Nov 06, 2023 3:56 am

Quick question, Vinny...

Have you actually bought any TIPS yet or are you still just researching them?


Have not yet bought any. But when I do it will be significant mega-amounts.

The urgency has somewhat been mitigated by the present levels of yield from the Vanguard Treasury Money Market Fund.

The urgency, though, will increase significantly once it appears that the Fed will start lowering rates.


But you were writing about setting up a 30-year ladder right? It's none of my business but I don't think the Treasury Money Market Fund yield should affect a longer term plan. But I guess an important side of investing is just feeling good about what you are doing... which seems to be where you're at. Lord knows that much of what I have done in the personal finance realm has been less than optimal!


It's part of a full, comprehensive plan that I want to implement all at once and not do in an inefficient, less effective piece meal fashion.

For me if the short-term rates could be counted on to remain the same for the long-term then that would well satisfy my needs. But since they will not I need to finally be able to purchase those TIPS for the long-term.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: High TIPS Yields Are a Retiree’s Best Friend

Post by mathjak107 » Sat Jan 06, 2024 4:45 am

    the boogey man to the tips idea is taxes

    also it leaves little cushion for the unexpected larger expenses in life with so little in equities , because our personal cost of living does not mimic the cpi .

    i think this would be one of the rare instances one would really want to look in to a deferred longevity annuity with inflation protection for kicking in after a certain age to kind of refill things and boost them .

    but once taxes and the costs of the annuity are factored in the swr is not going to be what it was and it may be to low to be practical for many


    90% of all the 118 30 year rolling retirements to date ended with more than you started with with a 50/50 to 60/40.

    that is a huge cushion to give up for the awe craps of life and choices you wish you had.

    so again , it’s my opinion that these ideas are for those very strongly positioned , not your typical retiree that needs their money to work for them in a good paying job . after all , we worked hard for our money all our lives , now it’s time for our money to work for us.

    i know i don’t want my money working for low wages , i much prefer it gets a good paying job to support me
    User avatar
    jhogue
    Executive Member
    Executive Member
    Posts: 754
    Joined: Wed Jun 28, 2017 10:47 am

    Re: High TIPS Yields Are a Retiree’s Best Friend

    Post by jhogue » Tue Jan 09, 2024 9:11 am

    1. I agree, the problem with TIPS is taxes.

    2. I agree, the problem with annuities is expenses.

    I bonds are tax deferred for 30 years and have an expense ratio of 0%. My current cash set up is:

    1/3 I bonds

    1/3 T-bills

    1/3 FDLXX (Fidelity Treasury Only Money Market Fund)

    It has safety, liquidity, and current yields about 5% .

    Why take any risk with your Cash?
    “Groucho Marx wrote:
    A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
    Post Reply