Tips

[rpow53]

I have a state retirement and a savings in a 457 with the same state. My 457 has around 100k in it,which I have in a stable fixed income fund that makes about 3.5 to 4.0% a yr. but has .56% fees pre yr. should I move some or all to a TIP fund with them , the fees are .55% pre yr. the TIP fund has been making about 4.5 to 5.0%. How safe are these funds. This is my short term money for the next 10 years.

 

[LOL!]

TIPS are very safe. Some folks have advocated that TIPS should be the bulk of one's fixed income. But apparently there are good times to buy TIPS and poor times to buy TIPS. Some folks consider now to be a poor time.

Bogleheads :: View topic - Questions for Larry on TIPS
Bogleheads :: View topic - Larry's rely to "Take profit in TIPS" on M*
Bogleheads :: View topic - TIPS - Are They Necessary?

 

[maddythebeagle]

Do you have a pension coming with your state employment? Why so safe with the 457 plan, then?

 

[ats5g]

Here are some more links to TIPS conversations:

TIPS fund for young accumulators instead of individual TIPS

TIPS Studies

If your future state pension has a COLA [like SS does], and it's going to account for a good portion of your retirement income, you do not have all that much inflation risk, so TIPS aren't that necesssary - versus someone with a non-cola'd pension.

As LOL said, the TIPS have the highest credit quality [and thus are very safe], however note that your stable value fund is not marked-to-market like the TIPS fund will is. So the stable value fund will just keep going up, and will never have a down quarter/year. However, the TIPS fund can do bad in some periods and well in others. To give you an idea, here's the Capital, Income, and Total Return for Vanguard's TIPS fund [VIPSX] vs. the stable value fund in my 401(k):

VIPSX

2006	-2.97%	3.39%	0.43%
2005	-2.85%	5.44%	2.59%
2004	3.48%	4.79%	8.27%
2003	4.14%	3.86%	8.00%
2002	12.06%	4.55%	16.61%
2001	3.29%	4.32%	7.61%

Stable value fund

2006	0.00%	4.32%	4.32%
2005	0.00%	4.05%	4.05%
2004	0.00%	3.93%	3.93%
2003	0.00%	4.25%	4.25%
2002	0.00%	5.19%	5.19%
2001	0.00%	5.98%	5.98%

- Alec

 

[FIRE'd@51]

I am a big fan of TIPS, but I would not be a buyer of them today. Real rates are near historic lows. TIPS are very volatile with respect to movements in real interest rates. I bought some 10-year TIPS at auction in July at a real yield of 2.75%. The real yield today is about 1.75%, and those TIPS have appreciated about 9% since July. This is stock market type volatility. I would not consider buying TIPS unless the real yield is 2.5%, or higher.

 

[rpow53]

Do you have a pension coming with your state employment? Why so safe with the 457 plan, then?

Yes I have a state pension, the 457 is for emergency and to supplement retirement if needed. We also have 250k invested in mutual funds. hopefully we will not use it and it will just grow. From the information everyone has given me it sounds like I am good to leave it in the stable fixed income fund.
Thanks for the advice Bob