Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
TIPS with Inflation-adjusted pensions/SS
Old 03-11-2017, 08:17 AM   #1
Thinks s/he gets paid by the post
friar1610's Avatar
 
Join Date: Jun 2002
Posts: 1,069
TIPS with Inflation-adjusted pensions/SS

Just curious what other retirees in a similar situation do.

If you have indexed-adjusted pension(s) and SS as your primary sources of income, to what degree do you feel that you need additional inflation protection via TIPS or I-Bonds? Do you consider yourself "covered" by virtue of the pensions/SS?
__________________

__________________
friar1610
friar1610 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-11-2017, 12:15 PM   #2
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 5,581
I think it would depend upon your disposition. There's one manner of thinking (see: Larry Kotlikoff) that suggests if you've already "won", there's no reason to select investments with much risk. There's other thinking that there's a systematic difference between the official inflation rate and a retiree's personal inflation rate (and it's not to the retiree's benefit). Although this latter idea probably doesn't matter too much since the effect is slow, and spending tends to taper as we age anyway.

For me, the only inflation protected thing I have is (will be) SS, and that's enough. The value of predictability for me is not that high when I compare to the potential growth of a diverse portfolio on an efficient frontier curve.
__________________

sengsational is offline   Reply With Quote
Old 03-11-2017, 01:31 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 6,543
Quote:
Originally Posted by friar1610 View Post
Just curious what other retirees in a similar situation do.

If you have indexed-adjusted pension(s) and SS as your primary sources of income, to what degree do you feel that you need additional inflation protection via TIPS or I-Bonds? Do you consider yourself "covered" by virtue of the pensions/SS?
We have more in TIPS and I-bonds than stocks. Our goal is more to avoid huge losses from either inflation or sequence of returns risk for our portfolio than it is to aim for growth in retirement. We have a house we could downsize and a hobby business we could ramp up if we needed more income in retirement, so for our circumstances and low risk tolerance we would do that rather than invest more aggressively.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is offline   Reply With Quote
Old 03-11-2017, 01:59 PM   #4
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,859
I have an index linked pension and rent and will eventually get SS from both the US and the UK so With those income streams I don't bother with TIPS in my 60/40 portfolio.


Sent from my iPhone using Early Retirement Forum
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 03-11-2017, 02:02 PM   #5
Thinks s/he gets paid by the post
friar1610's Avatar
 
Join Date: Jun 2002
Posts: 1,069
Just to clarify (and I probably should have given more detail in my initial question)...my current AA is about 47/50/3. I'm 71. My ideal equity allocation is in the 45% range with a view toward winding it down in the years to come to 35-40%. So I'm in the moderately conservative camp with no particular need to make a killing in stocks. So the question about TIPS/I-Bonds is asked from that perspective.
__________________
friar1610
friar1610 is offline   Reply With Quote
Old 03-12-2017, 05:31 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,466
the problem with anything inflation adjusted via an index is that it may not represent your personal cost of living changes at all .

a price change index , which is what the cpi is does not really represent our personal cost of living .

our personal cost of living is very dependent on location , age , discretionary income level , how many times we buy things and our ability not to buy them or sub them as well as the level of quality we buy .

higher quality goods tend to see greater price inflation but can last longer too .

so i do not count on anything inflation adjusted to represent my actual cost of living . you can be left in the dust all to easily .
mathjak107 is offline   Reply With Quote
Old 03-12-2017, 09:00 AM   #7
Thinks s/he gets paid by the post
exnavynuke's Avatar
 
Join Date: Sep 2016
Location: Acworth
Posts: 1,175
To me it's a question of goals. If your "goal" is to just have your money "last until you're gone" then going as conservative as you can while keeping up with inflation is a fine strategy. If your goal is to maximize how much you can get for your money (to either increase your lifestyle spending now or to leave more to heirs), then more risk is appropriate imo. How much risk to take on at that point is the real question.
exnavynuke is offline   Reply With Quote
Old 03-12-2017, 01:15 PM   #8
Recycles dryer sheets
 
Join Date: Jan 2017
Location: Bay Area
Posts: 193
Quote:
Originally Posted by friar1610 View Post
Just curious what other retirees in a similar situation do.

If you have indexed-adjusted pension(s) and SS as your primary sources of income, to what degree do you feel that you need additional inflation protection via TIPS or I-Bonds? Do you consider yourself "covered" by virtue of the pensions/SS?
Hi Friar1610,

I'm 56, so no SS yet, but cola'd pension income currently covers my basic expenses and a little extra. Cola's are capped, so I do need to consider longer-term inflation risk. Planning for a potential 40 year retirement period, I don't look at TIPS or I-Bonds for inflation protection. Instead, I maintain a slightly higher equity position overall in my portfolio (currently 55-60%). That means I carry some market risk, but that's a risk I feel I can afford.

BTW, I'm a "total return" investor, and I do hold some TIPS/I-Bond investments; but the decision to hold them (and how much) is determined by their impact on portfolio volatility and pricing compared to other available FI investments.

NL
Nature Lover is offline   Reply With Quote
Old 03-12-2017, 07:26 PM   #9
Thinks s/he gets paid by the post
friar1610's Avatar
 
Join Date: Jun 2002
Posts: 1,069
Quote:
Originally Posted by mathjak107 View Post
the problem with anything inflation adjusted via an index is that it may not represent your personal cost of living changes at all .

a price change index , which is what the cpi is does not really represent our personal cost of living .

our personal cost of living is very dependent on location , age , discretionary income level , how many times we buy things and our ability not to buy them or sub them as well as the level of quality we buy .

higher quality goods tend to see greater price inflation but can last longer too .

so i do not count on anything inflation adjusted to represent my actual cost of living . you can be left in the dust all to easily .


Thank you.

So what do you use to track your actual COL? A high allocation to equities? Real estate? Something else?
__________________
friar1610
friar1610 is offline   Reply With Quote
Old 03-13-2017, 04:51 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,466
i don't need to track my rate of inflation .

i use a dynamic system of withdrawals that adjusts automatically based on my spending needs .

a diversified portfolio tends to more than cover it . i use a broad assortment of passive investments .
__________________

mathjak107 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Implied inflation rate in an inflation adjusted SPIA cashflo2u2 FIRE and Money 6 04-30-2008 08:24 PM
Inflation Adjusted Results babyape FIRECalc support 1 03-15-2007 03:45 PM
How Does Inflation Adjusted Work astroboy FIRE and Money 1 10-07-2005 02:20 AM
Inflation Adjusted Home Profits Means ?? astroboy FIRE and Money 5 03-26-2005 04:42 PM
Vanguard Now Offering Inflation-Adjusted Annuities intercst FIRE and Money 24 01-10-2005 01:14 PM

» Quick Links

 
All times are GMT -6. The time now is 04:20 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×