PP in IRA

General Discussion on the Permanent Portfolio Strategy

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mathjak107
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Re: PP in IRA

Post by mathjak107 » Wed May 20, 2020 5:35 pm

Xan wrote:
Wed May 20, 2020 5:11 pm
"today's environment" -- I'm looking for a more, er, permanent outlook.
There is nothing in life that will remain forever through all scenarios ..not even the pp may be fine as is if we have a long term rise in rates back up ...

So we have to go with what was , what is and what stands a reasonable chance of continuing ....if that changes at some point then we re-evaluate and change with the big picture .

For now it makes no sense eating up valuable ira space with cash ....if one day interest on cash is something to be reckoned with , well then reevaluate and change it
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Re: PP in IRA

Post by Smith1776 » Thu May 21, 2020 8:22 pm

As a Canadian I find this meme highly relatable in this thread.


Image
For the money you can't afford to lose, why would you invest it in anything other than the PP? ???
Check out the Goldsmith PP: https://www.gyroscopicinvesting.com/forum/viewtopic.php?f=1&t=9613
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Re: PP in IRA

Post by jhogue » Fri May 22, 2020 10:31 am

Xan wrote:
Wed May 20, 2020 2:06 pm
I personally favor having a separate PP in each tax category. In other words, one PP for taxable, another for traditional IRA, and another for Roth IRA.

The IRA money won't/can't be touched for quite a long time. What are everyone's thoughts on dialing back the cash percentage in IRA PPs?
I started my HBPP with the idea of placing a PP in taxable, tax deferred, and tax-free (Roth) each. I have moved away from that concept over time.

I think it is essential to realize that tax efficient placement of HBPP assets is highly personalized. 401k, 457b, T-IRA, Roth IRA, inherited IRA, etc. each have different tax treatment and everyone does not have access to the same type of accounts. The age of the investor matters too.

Most of my stocks (88%) are now in Roth IRAs. Most of my T-bonds are in T-IRA (86%). Cash and gold are both split between taxable and T-IRAs, with a growing portion of Cash in tax deferred savings bonds. This seems most tax efficient for me, but I can see why other investors’ portfolios could differ with their particular circumstances.

I think we are having this discussion in part because interest rates on half of the portfolio are now close to zero, so STT and LTT placement seems increasingly irrelevant.
“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!"
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Re: PP in IRA

Post by mathjak107 » Fri May 22, 2020 12:07 pm

plus a long time myth was disproved and that is as little as a 2% dividend in a taxable account over the long term wipes out any tax savings from the special rates and then it acts as a drag on the investments return once the tax savings is wiped away ..


this is a huge factor , as old school teaching said to take advantage of special capital gain rates when you could
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Re: PP in IRA

Post by jhogue » Fri May 22, 2020 5:16 pm

mathjak107 wrote:
Fri May 22, 2020 12:07 pm
plus a long time myth was disproved and that is as little as a 2% dividend in a taxable account over the long term wipes out any tax savings from the special rates and then it acts as a drag on the investments return once the tax savings is wiped away ..


this is a huge factor , as old school teaching said to take advantage of special capital gain rates when you could
This post is unintelligible to me. Perhaps the author could resort to standard English grammar.
“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!"
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Re: PP in IRA

Post by mathjak107 » Sat May 23, 2020 2:13 am

jhogue wrote:
Fri May 22, 2020 5:16 pm
mathjak107 wrote:
Fri May 22, 2020 12:07 pm
plus a long time myth was disproved and that is as little as a 2% dividend in a taxable account over the long term wipes out any tax savings from the special rates and then it acts as a drag on the investments return once the tax savings is wiped away ..


this is a huge factor , as old school teaching said to take advantage of special capital gain rates when you could
This post is unintelligible to me. Perhaps the author could resort to standard English grammar.
it means exactly what it says .

old school thinking was to put dividend paying stocks in to a taxable account because of special capital gain rates .

that actually turned out to be the wrong thing to do .

the spinning off of as little as a 2% dividend that is taxable at all will erode any tax savings over the long term . not only that but once it is finished nipping away at the tax savings it further erorodes the return from the taxes compared to had it been in a 401k or ira at taxed at regular rates ...
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Re: PP in IRA

Post by Tyler » Sat May 23, 2020 10:23 am

Xan wrote:
Wed May 20, 2020 2:06 pm
I personally favor having a separate PP in each tax category. In other words, one PP for taxable, another for traditional IRA, and another for Roth IRA.

The IRA money won't/can't be touched for quite a long time. What are everyone's thoughts on dialing back the cash percentage in IRA PPs?
While I'm generally a "build a full portfolio in each account" kinda guy, I will say that if there's one PP asset I'd be tempted to dial back in a retirement account it would be cash. But before doing so, I would think about what it does for a portfolio and what you're losing by removing it. For example, T-bills have historically been one of the most consistent inflation hedges money can buy. Do you plan to cover that situation in another way?
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
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mathjak107
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Re: PP in IRA

Post by mathjak107 » Sat May 23, 2020 12:17 pm

“Cash is not an inflation hedge. There have been multiple 10+ year periods where Treasury bills have failed to outpace inflation. The ability of cash to hedge inflation is a function of how benevolent central bankers are in giving savers a fair rate.”

https://movement.capital/how-to-hedge-i ... bond-risk/

I guess there are arguments for and against it
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Re: PP in IRA

Post by Xan » Sun May 24, 2020 6:06 pm

Tyler wrote:
Sat May 23, 2020 10:23 am
Xan wrote:
Wed May 20, 2020 2:06 pm
I personally favor having a separate PP in each tax category. In other words, one PP for taxable, another for traditional IRA, and another for Roth IRA.

The IRA money won't/can't be touched for quite a long time. What are everyone's thoughts on dialing back the cash percentage in IRA PPs?
While I'm generally a "build a full portfolio in each account" kinda guy, I will say that if there's one PP asset I'd be tempted to dial back in a retirement account it would be cash. But before doing so, I would think about what it does for a portfolio and what you're losing by removing it. For example, T-bills have historically been one of the most consistent inflation hedges money can buy. Do you plan to cover that situation in another way?
Thanks, Tyler. That gives some good things to think about.
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Re: PP in IRA

Post by jhogue » Tue May 26, 2020 8:15 am

Tyler,

As I am retired, I have been tempted to "dial back" on cash. Especially in this kind of ultra-low rate environment cash seems like a drag on performance.

Here's the problem as I see it: Cash is the biggest damper on volatility for the actions of the other three assets. It is what smoothes out the ride. If that's the case, then decreasing cash should mean higher volatility going forward. Also, if you think of Treasurys in the PP as a barbell, cutting back on cash would tilt your barbell towards a longer average maturity if/when interest rates rise again. That seems problematic for an optimal retiree portfolio. What do you think?
“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!"
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Re: PP in IRA

Post by mathjak107 » Tue May 26, 2020 9:16 am

jhogue wrote:
Tue May 26, 2020 8:15 am
Tyler,

As I am retired, I have been tempted to "dial back" on cash. Especially in this kind of ultra-low rate environment cash seems like a drag on performance.

Here's the problem as I see it: Cash is the biggest damper on volatility for the actions of the other three assets. It is what smoothes out the ride. If that's the case, then decreasing cash should mean higher volatility going forward. Also, if you think of Treasurys in the PP as a barbell, cutting back on cash would tilt your barbell towards a longer average maturity if/when interest rates rise again. That seems problematic for an optimal retiree portfolio. What do you think?
i would not mess with the balance ... if you want a pp use the pp as designed . otherwise play the hunches in the variable portfolio ...
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Re: PP in IRA

Post by Tyler » Tue May 26, 2020 10:12 am

jhogue wrote:
Tue May 26, 2020 8:15 am
Here's the problem as I see it: Cash is the biggest damper on volatility for the actions of the other three assets. It is what smoothes out the ride. If that's the case, then decreasing cash should mean higher volatility going forward. Also, if you think of Treasurys in the PP as a barbell, cutting back on cash would tilt your barbell towards a longer average maturity if/when interest rates rise again. That seems problematic for an optimal retiree portfolio. What do you think?
I don't disagree with any of that. And don't get me wrong -- cash is one of my favorite assets.

My default recommendation for anyone with a PP is to keep the cash as-is. It's there for a reason. But I'm not totally opposed to tweaking things like cash levels in a retirement account to your personal life situation. Just take the time to think about why it's part of the portfolio before doing anything.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
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