Bond fund is down 4% YTD?

[ychuck46]

Agree but ..

The $10K per person annual purchase limit prevents I Bonds from having a material effect on most people's portfolio.

Not saying they shouldn't be purchased, but this isn't a solution for the current fixed income quandary.

Agree, but the OP did not say how much we were talking about. Possible it could be a solution for some, but agreed that if someone has a large portion in bonds that it would not be a short term fix.

 

[gcgang]

It’s depressing watching high inflation rapidly erode wealth.

If you need liquidity, stay in bond fund or move to stable value.

If you don’t need to access the funds for five years or more, do the Real Asset Index, if you’re not comfortable having it all in stocks.

 

[lawman]

It’s depressing watching high inflation rapidly erode wealth.

If you need liquidity, stay in bond fund or move to stable value.

If you don’t need to access the funds for five years or more, do the Real Asset Index, if you’re not comfortable having it all in stocks.

First I've heard of this..How does one invest in it? (SPRAUT)

 

[threegoofs]

Thanks for all the replies. I should have given more info on my situation (and fund choices). My pension and SS (which I just started, I receive my first deposit next week) way more than cover all of my expenses (including dining out, entertainment, health care, etc). I also have a six-figure online savings account for unexpected expenses (that I replenish each January from my 401k). My AA was 60/40, I recently shifted to 40/60 (using just two funds - an S&P 500 index fund and the bond fund referenced in this thread).

It appears I now have a couple additional choices. Here are the three:

1) BlackRock Bond Index Fund (CURRENT BOND FUND I'M IN)
Lipper Classification*- Core Bond Funds (Funds that invest primarily in highly-rated corporate and government bonds; most of these bonds are scheduled to mature in five to ten years)
Fund Objective*- The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of a particular index (its Underlying Index). The Underlying Index is the Bloomberg U.S. Aggregate Bond Index.
Total Expense Ratio: 0.033%
Returns:
YTD: -2.09%
1 Year: -2.99%
3 Years: +3.64%
5 Years: +3.06%

2) State Street Real Asset Index Fund (NEW OPTION, FIRST AVAILABLE TO ME LAST MONTH)
Fund Objective - The Fund seeks to provide a long-term targeted return in excess of the US Consumer Price Index (CPI) measure of inflation by offering broad exposure to commodities, global natural resource equities, global infrastructure equities, US commercial real estate securities and US inflation linked bonds (i.e., real assets).
Total Expense Ratio: 0.121%
Returns:
YTD: +2.18
1 Year: +23.02
3 Years: +10.96
5 Years: +7.63

3) Interest Income Fund (MIGHT HAVE ALWAYS BEEN AN OPTION, NOT SURE)
Fund Objective - The Fund seeks to provide safety of principal and a stable credited rate of interest, while generating competitive returns over time compared to other comparable investments.
Total Expense Ratio: 0.270%
Returns:
YTD: +0.10
1 Year: +1.36
3 Years: +1.94
5 Years: +1.88


Does anyone have any experience with the State Street Real Asset Index Fund (this fund is new to me, I first saw it available last month)? If I keep my AA at 40/60, I might move everything out of Blackrock and split it between SSRAIF and the Interest Income Fund. Any thoughts on this strategy? I appreciate having so many knowledgeable people here to bounce ideas off!

Wait… you’re retired and have your money in the employer’s 401k with limited fund choices?

I thought it was standard practice to roll a 401k into an IRA upon retirement so you can invest in any funds you want - probably with lower expense ratios. I dont think there is any costs involved to do this.

I’m not retired yet, so maybe I’m missing something?

 

[Dtail]

Wait… you’re retired and have your money in the employer’s 401k with limited fund choices?

I thought it was standard practice to roll a 401k into an IRA upon retirement so you can invest in any funds you want - probably with lower expense ratios. I dont think there is any costs involved to do this.

I’m not retired yet, so maybe I’m missing something?

Generically, I agree with you.
One exception would be if one has a Stable Value fund in their 401k, which can serve as part of the bond allocation and would not be offered in an IRA.

 

[daylatedollarshort]

Wait… you’re retired and have your money in the employer’s 401k with limited fund choices?

I thought it was standard practice to roll a 401k into an IRA upon retirement so you can invest in any funds you want - probably with lower expense ratios. I dont think there is any costs involved to do this.

I’m not retired yet, so maybe I’m missing something?

Most corporate 401K plans offer cheap asset protection due to ERISA laws. They may also offer a brokerage option that allows for investments outside of the plan options, like ETFs and CDs. Plus as dtail mentioned stable values are great to have in times like this - better yields than most bond funds right now and no losses.

 

[corn18]

Most corporate 401K plans offer cheap asset protection due to ERISA laws. They may also offer a brokerage option that allows for investments outside of the plan options, like ETFs and CDs. Plus as dtail mentioned stable values are great to have in times like this - better yields than most bond funds right now and no losses.

In addition, if your 401k has a good rule of 55 plan, that is the bee's knees. I retired @ 55 and left everything in my 401k because it has a good stable value fund and a great rule of 55 withdrawal plan. It also has brokerage link so I could move it all to FIDO funds if I wanted, but it will stay in the 401k SV fund. With the great rule of 55 plan, I can do Roth conversions between now and 59 1/2 without penalty, just have to pay taxes.

 

[USGrant1962]

Wait… you’re retired and have your money in the employer’s 401k with limited fund choices?

I thought it was standard practice to roll a 401k into an IRA upon retirement so you can invest in any funds you want - probably with lower expense ratios. I dont think there is any costs involved to do this.

I’m not retired yet, so maybe I’m missing something?

My 401(k) also has Blackrock and State Street index funds. These institutional indexes have lower ERs than Vanguard. While 0.03 vs 0.04 isn't really material, there is also no reason to move out of it. I kept it for Rule of 55 (though I've now passed that phase), account diversity, and theoretically better legal protection.

 

[foxfirev5]

The $10K per person annual purchase limit prevents I Bonds from having a material effect on most people's portfolio.

Not saying they shouldn't be purchased, but this isn't a solution for the current fixed income quandary.

They do if you do it long enough. A long term approach would have prevented someone from being in a serious quandary now. Prior to retirement in 2016 I constructed a CD/Treas ladder. Yields have ranged from 2026 maturities with a .9% yield to 2028's with a 3.65% payout. My Series I bonds I bought over the years are now shining. I remember a few years ago they were garbage to many. Anyway my fixed portfolio average is slightly over 3%. Remember, nobody knows nothin'.

 

[mrfeh]

They do if you do it long enough. A long term approach would have prevented someone from being in a serious quandary now. Prior to retirement in 2016 I constructed a CD/Treas ladder. Yields have ranged from 2026 maturities with a .9% yield to 2028's with a 3.65% payout. My Series I bonds I bought over the years are now shining. I remember a few years ago they were garbage to many. Anyway my fixed portfolio average is slightly over 3%. Remember, nobody knows nothin'.

Of course. And, again, I recommend buying them.

But the purchase limit prevents them from being any kind of immediate solution to the current problem for anybody with significant fixed income holdings.

 

[daylatedollarshort]

In addition, if your 401k has a good rule of 55 plan, that is the bee's knees. I retired @ 55 and left everything in my 401k because it has a good stable value fund and a great rule of 55 withdrawal plan. It also has brokerage link so I could move it all to FIDO funds if I wanted, but it will stay in the 401k SV fund. With the great rule of 55 plan, I can do Roth conversions between now and 59 1/2 without penalty, just have to pay taxes.

Yes, I forgot to add that. We rolled over several other retirement accounts to the 401K at DH's last job, which he retired from at age 55. We put enough in there to cover our expenses until he reached 59.5. and could withdraw from the other retirement accounts without penalty.

 

[foxfirev5]

Of course. And, again, I recommend buying them.

But the purchase limit prevents them from being any kind of immediate solution to the current problem for anybody with significant fixed income holdings.

And again, there are rarely immediate solutions to most problems.

 

[Chuckanut]

FWIW, I have been through several market declines in the area of 40% in my life. I don't really want to have to sell during such a badly damaged market so I can pay the rent and put food on the table.

I am thinking that over 4-6 years, I could buy enough Ibonds to cover several years of withdrawals from my total market melt down emergency fund. It would be an inflation protected emergency fund. After all, I am going to keep some funds aside for a serious emergency. Why not make it inflation protected? I could do worse, and probably have.

 

[jazz4cash]

Wait… you’re retired and have your money in the employer’s 401k with limited fund choices?

I thought it was standard practice to roll a 401k into an IRA upon retirement so you can invest in any funds you want - probably with lower expense ratios. I dont think there is any costs involved to do this.

I’m not retired yet, so maybe I’m missing something?

Yeah, a lot of people seem to believe it is standard practice to roll 401k funds into an IRA when you leave an employer but as you can see there are several reasons to maintain at least some funds in your 401k. It's best to evaluate every situation on its merits and there is no hurry to initiate a rollover. Here's a quick list of reasons already mentioned and some of my own:

• Access to Stable Value or other unique fund.
• Better creditor protection in some states.
• Access to rule of 55 for penalty free withdrawals prior to 59.5.
• Some plans permit 401k loans which is useful for smoothing income and emergency access.
• My state (MD) has a pension exclusion that applies to distributions from 401k plans but not IRA.

 

[pb4uski]

The $10K per person annual purchase limit prevents I Bonds from having a material effect on most people's portfolio.

Not saying they shouldn't be purchased, but this isn't a solution for the current fixed income quandary.

Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that.

Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

 

[Retireby45ish]

Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that.

Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

I didn’t know about the ability to gift to your spouse. So, can you also buy, say, the 2025 and 2026 allocations? And as you say they would get the current rate? It seems like if this is possible it’s a loophole in buying a bunch of these for your spouse…having the interest earning clock start now on them even if they only pick them up in a year or two or three? I’m sure I’m missing or misunderstanding something here?

I haven’t bought any of these because the 10k per person per year would be so small that it wasn’t worth the trouble. But the ability to get 7% on, say, 80k right away might be worth the effort.

Follow up: Did a bit of research via boggles and found this:

https://www.bogleheads.org/forum/viewtopic.php?t=306297

 

[oldtimer]

Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that.

Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

One negative is you are locking in the 0% fixed rate for future years.

 

[pb4uski]

One negative is you are locking in the 0% fixed rate for future years.

How do you get that? 0% real, true... but you will inflation and any ibonds that you buy before the end of April will get 7.12% annualized for the first 6 months and the May reset rate (rumored to be a minimum of 5%) for the second 6 months. After 1 year you can redeem with a 3-month early withdrawal penalty.

Everything that I buy today the 0% real rate is only really locked in for 1 year... even the 2023 tranche of ibonds in the gift box. OTOH, if the inflation adjustment continues to be better than UST and CDs then it would be foolish to not take advantage of it.

It is a slam dunk no-brainer.

What is your better option for bonds with no credit risk?

 

[Magus]

FWIW, I have been through several market declines in the area of 40% in my life. I don't really want to have to sell during such a badly damaged market so I can pay the rent and put food on the table.

I am thinking that over 4-6 years, I could buy enough Ibonds to cover several years of withdrawals from my total market melt down emergency fund. It would be an inflation protected emergency fund. After all, I am going to keep some funds aside for a serious emergency. Why not make it inflation protected? I could do worse, and probably have.

Great strategy and I agree and am working on the same thing...would like to get at least 2 years of expenses in i-bonds plus keep 6 months cash on hand.

 

[Magus]

Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that.

Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

Plus add $20k if you did some last year like a lot of us did.

 

[pb4uski]

Yes, we did $20k in late 2021, $20k in early 2022, $20k in gifts in 2022 that we'll deliver to each other in early 2023 and $5k in paper i-bonds with our 2021 tax refund... so $65k in total at that juicy 7.12% annualized rate.

I'm tempted to do another $20k of gifts for our 2024 allowance, but that is a bit far out for my liking.

 

[Linney]

Yes, we did $20k in late 2021, $20k in early 2022, $20k in gifts in 2022 that we'll deliver to each other in early 2023 and $5k in paper i-bonds with our 2021 tax refund... so $65k in total at that juicy 7.12% annualized rate.

Ditto.

I'm tempted to do another $20k of gifts for our 2024 allowance, but that is a bit far out for my liking.

Same here too.... for now. We'll have a really good idea of what the next 6 month variable rate will be in mid-April, two weeks before the official rate announcement on May 1st. So I am going to wait until late April to make the call on purchasing gift I-Bonds for delivery in 2024. I'll take a look at the new rate, how inflation is going, the situation in Europe, and make the call.

I keep hoping things will improve and I won't feel the need to make that purchase. But right now my sentiment is rather pessimistic and I've been thinking about which account I'm going to pull $20K from in order to make another purchase