buying more ibonds

[livingalmostlarge]

I have $40k i'm looking at put into ibonds in 2024 and 2025. Or I could put it into treasuries or CDs. What would people suggest doing?

We are not RE, and our timeline looks more like 2028-2034 depending on when DH wants to go.

Currently I have 2018-2023 $10k each for DH and I myself I bought ibonds. I have been building a ladder. I also have $30k in MM as our EF and $20k in slush funds that pay for stuff throughout the year.

I'm going to add another $30k in cash to our slush funds for spending, and more to our taxable account. But i was thinking of earmarking $40k for the next two years for ibonds?

Good or bad idea? Would that help when we decide to RE? We are 44 and 45 years old. I'm picturing maybe at 50.

 

[pb4uski]

I'm not keen on Treasury Direct and am shifting from I-Bonds to TIPs in my tIRA brokerage account.

 

[Sunset]

I'm not keen on Treasury Direct and am shifting from I-Bonds to TIPs in my tIRA brokerage account.

Can you give us a few reasons why TIP are more preferred ?

 

[tulak]

Can you give us a few reasons why TIP are more preferred ?

A few for me are a better fixed rate, there no purchase limits, and I can buy at Fidelity/Vanguard (no TD).

They also work better for laddering.

 

[pb4uski]

+1 to above... but be sure to do it in a tax-deferred account unless you don't mind phantom income.

 

[big-papa]

I go with "all of the above"

I own TIPS as an income stream in retirement not as a returns vehicle. Held in tax deferred space.

I own I-bonds for tax deferred wealth storage. I've been purchasing these since 2017 and will continue to do so for TBD more years. They will all mature later in life, but they could also be used for whatever lumpy expenses we may have in the future.

Cheers.
Big-Papa

 

[Winemaker]

pb, do you buy your TIPS at auction or on the secondary market? I find Fidelity's secondary market platform confusing, to say the least.

 

[pb4uski]

I haven't bought any TIPS as of yet, I'm fully invested in my tax-deferred and tax-free accounts at this point so I need to wait for some maturities. Will likely buy the 5 or 10 year at auction.

 

[tulak]

pb, do you buy your TIPS at auction or on the secondary market? I find Fidelity's secondary market platform confusing, to say the least.

Not pb, but I’ve bought all my TIPS after market. I bought at Vanguard and their interface is fine. I haven’t bought any at Fidelity.

There aren’t that many TIPS available and I usually filter to find the one I’m interested in. You can get a list of TIPS with various maturities at https://www.wsj.com/market-data/bonds/tips.

Since I need to start buying 2034+ for my ladder, I’m planning on buying at auction next January.

 

[jj]

https://www.treasurydirect.gov/research-center/history-of-savings-bond/comparing-tips-to-i/

This is the Treasury Direct (TD) comparison between TIPS and I Bonds.

They are quite different animals.

I'll explain our rationale for holding onto I Bonds - it seems that after being 'flavor of the month' a while ago they are now out of favor as TIPS yields have increased.

- they increase your tax-deferred space (important if you don't have much).
- they can never decrease in value, in the way that TIPS can if you sell early.
- they are redeemable after 12 months anytime until maturity at 30 years.
- they are one of only two ways of increasing tax-deferred space (along with HSA) when you have no earned income.
- they can be used for education tax-free, subject to income limits (have done this).
- they diversify your other fixed income.
- they protect against unexpected inflation (and deflation).
- they're good for a ladder of guaranteed income, out 30 years.
- fingers crossed, I have never had any problems with the TD site.
- annual limits ($10k each) are no barrier if you start early enough (can use gifting and trusts to add more.)

All that said, if you have enough tax-deferred space to hold TIPS and you're sure you won't need that money until they mature, TIPS might well be a better fit for you.

 

[Lsbcal]

Ibonds and TIPS are complementary:

Ibonds for taxable. But their real returns now are pretty poor now. I only hold iBonds from 2001.

TIPS for tax free (Roth) or deferred (IRA) accounts. TIPS are currently at levels not seen since 2007. I've been buying all the way up from 1% real returns to today's 2.5% 5year real rate. Will hold to maturity.

 

[Cayman]

Vanguard has a good interface for secondary Markey purchases of TIPS.

Tips vs iBonds - depends on your needs and investment goals and personal situation, quite a few people here would likely benefit from holding both.

Treasury Direct has this helpful comparison, for a start. https://www.treasurydirect.gov/research-center/history-of-savings-bond/comparing-tips-to-i/

TIPS Watch is a good resource: https://tipswatch.com/why-tips/

 

[Sunset]

...
This is the Treasury Direct (TD) comparison between TIPS and I Bonds.

......
.....
- they are one of only two ways of increasing tax-deferred space (along with HSA) when you have no earned income.
.

I use BRK for this as we don't have any HSA.

...
- they can be used for education tax-free, subject to income limits (have done this).
........

Are there any limits for this, can it be for grandchildren ? Does it have to be a School in the USA ?

 

[jj]

I use BRK for this as we don't have any HSA.

Are there any limits for this, can it be for grandchildren ? Does it have to be a School in the USA ?

Re BRK Us too, I was thinking here about the fixed-income side of our assets.

Harry Sit has the best, detailed explanation of using I Bonds for education tax-free. Grandparents have to jump through a few more hoops as presumably their grandchildren aren't their tax dependents. It can be done. I believe that 529 plans can be used for accredited schools overseas. You'd need to research it.

https://thefinancebuff.com/cash-out-i-bonds-tax-free-college-529-plan.html