Anyone else waiting for the 20 Year to hit 5.0%?

[53anddone]

I will be 82 20 years from now.

If the 20 Year hits 5% (and I think it might) its going to look tempting for a chunk of my taxable account.

 

[jim584672]

I saw the 30 year at 4.8% the other day.

 

[Closet_Gamer]

I’m 53. Keeping an eye on the 10 years. North of 5% and I will get some. I’m also hoping we get some spread between treasuries and high grade, non-callable corporate debt. Whenever I look I don’t see the reward in buying corporate debt with its increased risk.

 

[Healthy Lifestyle]

I’m 53. Keeping an eye on the 10 years. North of 5% and I will get some. I’m also hoping we get some spread between treasuries and high grade, non-callable corporate debt. Whenever I look I don’t see the reward in buying corporate debt with its increased risk.

I am 68 and would buy the 10 year Treasury ~5%. 20 year maybe but sounds like long time for me. Also watching the corporate spread for higher ytm.

 

[aja8888]

I'm waiting on the 5 year to hit 5%.

 

[Koolau]

My I-Bonds from the early 00's are paying 5% (plus) now and likely will for their life time. That's why I'm hanging onto them. YMMV

 

[DrRoy]

The yield is at a resistance level right now. If you wait for 5%, you may never get it. Better to buy some here.

 

[copyright1997reloaded]

I would be more interested in a TIPS real return of 2.5%. The 9 year (2034) are at 2.22% (real, i.e plus inflation), the15 year (2040) at 2.39%. If we get a run up (in real yield) on these, I would consider this a better investment than 10 year nominals at 5%. Do I expect inflation to be higher than 2.5% over the next 10 years? Yep.

 

[Surewhitey]

We've picked up some 7&10yr's recently at 4.25-4.5%. Probably left a little on the table, but this was some CD monies that needed rolling over...

 

[Healthy Lifestyle]

As I am learning to be more tax efficient in retirement, do you place your CDs and TIPS in IRAs and/or Brokerage account?

 

[copyright1997reloaded]

As I am learning to be more tax efficient in retirement, do you place your CDs and TIPS in IRAs and/or Brokerage account?

Given:
Interest on CD's/TIP's is ordinary income in regular accounts while LT cap gains have lower rates, and
All gains in traditional IRA/401k/etc. is ordinary income, and
All gains in Roths are tax free
Then:
1. Prioritize individual equities in regular accounts to capture LTCG AND control when gain/loss is taken
2. Prioritize interest bearing in tIRA or Roth
3. Winners (e.g. the NVDA's of the world) might be nice to have in ROTHs (but no ability to harvest losers)

ETA: My tIRA has almost all of my bond/T-Bill/CD holdings. I have some inflation-adjusted in my Roth (and also some equities). The exception is a layer of cash required for emergency funds, ongoing funding, etc. in my regular (brokerage/bank) accounts.

 

[Exchme]

As I am learning to be more tax efficient in retirement, do you place your CDs and TIPS in IRAs and/or Brokerage account?

Other than an "emergency fund" in a money market, all our fixed income is in my tIRA. Someday when that gets full of fixed income, we will then put fixed income in Roth or just hold less fixed income.

Tax drag in taxable is your enemy, minimize it.

 

[Out-to-Lunch]

As I am learning to be more tax efficient in retirement, do you place your CDs and TIPS in IRAs and/or Brokerage account?

In addition to what copyright said, note that individual TIPS give you "phantom income" that is taxable. If they are in a brokerage account, you will owe taxes on the increase in their value, but you didn't get any actual money in your hands to pay the taxes with.

 

[OldShooter]

I will be 82 20 years from now.

If the 20 Year hits 5% (and I think it might) its going to look tempting for a chunk of my taxable account.

And what will inflation be over that period? Low inflation is what you're proposing to bet on. Our solution is TIPS. We don't have to bet.

 

[copyright1997reloaded]

In addition to what copyright said, note that individual TIPS give you "phantom income" that is taxable. If they are in a brokerage account, you will owe taxes on the increase in their value, but you didn't get any actual money in your hands to pay the taxes with.

Thanks for adding. I've made it a point to NEVER buy TIPS in a taxable account.

 

[jazz4cash]

I am 68 and would buy the 10 year Treasury ~5%. 20 year maybe but sounds like long time for me. Also watching the corporate spread for higher ytm.

Same for me. Freedom56 migrated the fixed income thread to Reddit and he is suggesting we should expect 5-6% on 5-10 year treasuries. I am considering a significant de-risking and treasuries >5% would be very tempting. I expect highly rated corporates would be forced to offer higher coupons also.

 

[OldShooter]

In addition to what copyright said, note that individual TIPS give you "phantom income" that is taxable. If they are in a brokerage account, you will owe taxes on the increase in their value, but you didn't get any actual money in your hands to pay the taxes with.

This gets brought up frequently and is accurate, but I think it is kind of like fearing a monster under the bed.

By holding TIPS in a tIRA (which we do) or Roth, tax on the inflation adjustment income is deferred but it is not eliminated. So the issues IMO are primarily whether there is enough cash available to pay the taxes and whether it is preferable to smooth out the tax payments rather than pay a bigger bill (at potentially a higher tax rate) later. RMD timing and strategy is a factor here, too.

I don't have a position pro or con on when people should pay their inflation taxes, but I don't see it as the horrible thing it is sometimes portrayed as.

 

[Sunset]

But isn't it a hassle to track the amount each year a person has to pay tax on for each TIP, and to then do all the subtractions when cashed so don't get double taxed ?

or do they send a tax form each year with all the numbers and do the subtraction so only pay tax on the last year when cashing ?

 

[Out-to-Lunch]

This gets brought up frequently and is accurate, but I think it is kind of like fearing a monster under the bed.

By holding TIPS in a tIRA (which we do) or Roth, tax on the inflation adjustment income is deferred but it is not eliminated. So the issues IMO are primarily whether there is enough cash available to pay the taxes and whether it is preferable to smooth out the tax payments rather than pay a bigger bill (at potentially a higher tax rate) later. RMD timing and strategy is a factor here, too.

I don't have a position pro or con on when people should pay their inflation taxes, but I don't see it as the horrible thing it is sometimes portrayed as.

Certainly these points are reasonable.

I would view the phantom taxes as a problem in the case where one has established a TIPS ladder with the expectation of generating a yearly income stream to cover expenses. Then you have a shortfall in the early years (due to paying taxes on the growth of later years), and need cash from somewhere else to cover it. Yes, as you say, if one has other funds available, this is not a big problem.

 

[Healthy Lifestyle]

You all are so helpful with smart thoughts and comments. Thank you!!

I am sitting with a large rollover IRA, ~15% Roth, and fixed income which is starting to produce more interest and dividends then my income needs, so I am now trying to adjust my assets around Bonds, CDs, and TIPS.

 

[Montecfo]

I'm not waiting, I'm laddering.

But when rates pick up a bit I get more focused.

But the 20 year is more for speculation in my view. Too long to hold.

 

[Phroig]

A very small portion of my fixed income allocation is in bonds/bond funds, but I'm increasing duration. I recently sold an individual bond (at a loss) to buy a CEF, and exchanged some of my Fidelity Total Bond for Fidelity Long-Term Treasury Index.

 

[jim584672]

30 year 4.96%, will the 20 year follow? Update: I just checked the 20 year is 5.026%!

 

[Rianne]

Not sure if anyone still follows Freedom56 who moved to Reddit. I still read his posts and the outlook is yes, the 20 year will hit 5% and beyond in 2025. He suggests holding dry powder in high interest savings.

 

[Chuckanut]

In addition to what copyright said, note that individual TIPS give you "phantom income" that is taxable. If they are in a brokerage account, you will owe taxes on the increase in their value, but you didn't get any actual money in your hands to pay the taxes with.

I have Tips in the area of 5-10 years. For me that is a good balance of risk/reward. I also have a few 5 year CDs I that barely creeped into the 5% area a while back. Of course, today they are no longer 5 year CDs.

So far I see no significant energy at the Federal level aimed at reducing deficit which are the primary driver of inflation. Recent events at the Federal level reinforce the do-nothing attitude towards deficit spending of our current elected leaders, IMO.