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Thread: I Bonds or TIPS

  1. #1
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    I Bonds or TIPS

    With inflation rising, which is the better investment, I Bonds or TIPS?

  2. #2
    Senior Member Greg44's Avatar
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    My retirement person recommended we invest in I-bonds, she thought we had too much money in non-productive accounts (I agreed). I set up an account at the Treasury Direct website and have been starting small until I am comfortable with how it all operates. I just watched a good YouTube again on the differences between the I-bond and TIPS accounts and still like the I-bonds better for us. https://www.youtube.com/watch?v=bIq8XXo4Vfo

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    I agree with Greg44 that the YouTube video by Jennifer accurately contrasts I Bonds and TIPs.

    (I am not impressed by the "legal loophole" of spouses buying I Bonds for each other, as Jennifer describes).

    I treat I Bonds as a last ditch reserve. Being in my 70s, either I or my spouse could need a lot of money for Long Term Care. Or a legal judgment could be awarded in excess of our liability insurance coverage. I buy the limit every year, generally in January.

    On occasion I am a buyer of short-term TIPs funds, such as VPOIX at Vanguard, but these purchases have resulted in unrealized capital losses. As a discussion point, the losses are slight compared to the losses over the same period in the SP500, VNQ, NASDAQ, or a 60/40 allocated portfolio.

    In my experience, each I Bond increases in value every month. There is no income tax payable until the owner cashes in the I Bond. No fuss, no muss.

    The term on an I Bond (in effect) is 1-30 years, depending on the owner's option. You choose.

  4. #4
    Senior Member Rogar's Avatar
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    For me I-bonds were the easiest to understand. I've had a couple of tips funds that never did well, although it could tun out differently in a different economy. If I were to buy tips, I'd buy the bonds at a duration I plan to hold to maturity rather than a bond fund. If I were uncertain how how each works and which as the best for my situation, I'd consult a professional adviser.

  5. #5
    Senior Member Teacher Terry's Avatar
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    I bought I bonds the past two years.

  6. #6
    Senior Member Rogar's Avatar
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    I just noticed the fixed rate on I Bonds issued after may 1 is .9% (plus the inflation component). The fixed rate hasn't been much above zero for years.

  7. #7
    Senior Member flowerseverywhere's Avatar
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    Have you checked CD rates? At our credit union 9 month and 2 year rates are over 4%.

    Just something to think about.

  8. #8
    Senior Member bae's Avatar
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    Well, until they deal with the possibility of the Federal government defaulting...


  9. #9
    Senior Member jp1's Avatar
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    It’ll be interesting to see where the inflation component goes. I bought an i bond last fall but unless inflation goes up again will probably cash it in once the penalty period has passed.

  10. #10
    Senior Member iris lilies's Avatar
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    Quote Originally Posted by flowerseverywhere View Post
    Have you checked CD rates? At our credit union 9 month and 2 year rates are over 4%.

    Just something to think about.
    This is a good point. I should dump part of my money into some short term CDs.

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