Armed Polite Society
Main Forums => The Roundtable => Topic started by: Ben on October 24, 2021, 11:18:43 AM
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Until now, I knew nothing about Treasury Inflation Protected Securities (TIPS). I think they were mostly off my radar because I was working and was good with 10+ year waits for recovery from any market crashes.
Now that I'm retired, I can't be sure that I will outlive something like a ten year market recovery. This has been a wacky time for stocks, and frankly, I haven't found a lot of good diversification for sideline cash that wouldn't take a big hit from inflation, which, despite the "experts" who state it's only short term and temporary, I believe will be long term and significant. I've kinda been in a "take a chance on loading up on more stocks or else lose money (via inflation) in low interest T-bills and similar" mindset.
Until I started reading about TIPS. It seems to be something that would make sense in the current financial climate for people in my position, age and investment-wise. I'm going to research them further, but I think I might be throwing some cash into a Vanguard TIPS-based fund. I can live with 4% earnings in an inflation protected fund as part of my portfolio.
https://advisors.vanguard.com/insights/article/thepotentialforhigherinflationwhatcanyoudoaboutit
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But Ben, don't you have a guaranteed income stream with both the Federal basic benefits plan and Social Security?
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But Ben, don't you have a guaranteed income stream with both the Federal basic benefits plan and Social Security?
Yeah, I have the pension, TSP*, and in the next year SS. However I also have "sideline dough" that I don't, at this point in time, feel comfortable shoving into the stock market, nor the real estate market, because that's totally overinflated where I live as well. I expect a crash out of both. I'm not concerned with my income stream - I'm more concerned about bleeding investment money either through inaction, or investing it in something right now that is almost certainly going to crash and likely take a good while to recover. Which again, wasn't a concern at 40, but is a concern to me now.
*TSP is not really a guaranteed income stream for me because as of now, I have chosen not to take the annuity at the current crappy rates. So my money is invested in the various TSP funds, which fluctuate with the market. I could easily be down 30-50% there in a big market crash, even with most of my money in the L Fund.
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Yeah, I have the pension, TSP*, and in the next year SS. However I also have "sideline dough" that I don't, at this point in time, feel comfortable shoving into the stock market, nor the real estate market, because that's totally overinflated where I live as well. I expect a crash out of both. I'm not concerned with my income stream - I'm more concerned about bleeding investment money either through inaction, or investing it in something right now that is almost certainly going to crash and likely take a good while to recover. Which again, wasn't a concern at 40, but is a concern to me now.
*TSP is not really a guaranteed income stream for me because as of now, I have chosen not to take the annuity at the current crappy rates. So my money is invested in the various TSP funds, which fluctuate with the market. I could easily be down 30-50% there in a big market crash, even with most of my money in the L Fund.
While the TSP G fund has been trending down for the past 30 years or so there is still a tiny return but more importantly there is a relative safety in it, especially during times of inflation which could threaten the "normal" markets. Once I retired I put a majority of my TSP in there and just let it go. Have you compared the G Fund to TIPS to see what the pro and cons of each is? G Fund = relative safety and small return unless inflation takes off then who knows what may happen with returns. TIPS = ??
bob
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So you do have two guaranteed income streams that provide a baseline. This does give you some breathing room to experiment. I was in TIPS for a while but the rate of return was disappointing since inflation did not take off like I was betting on. CDs and savings accounts right now are paying a pittance. I wonder if your best bet right now is a decent money market fund or a high-grade bond fund.
https://www.thebalance.com/the-benefits-and-risks-of-tips-2466779
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While the TSP G fund has been trending down for the past 30 years or so there is still a tiny return but more importantly there is a relative safety in it, especially during times of inflation which could threaten the "normal" markets. Once I retired I put a majority of my TSP in there and just let it go. Have you compared the G Fund to TIPS to see what the pro and cons of each is? G Fund = relative safety and small return unless inflation takes off then who knows what may happen with returns. TIPS = ??
bob
I had money in the G for a while, but then ended up moving that, plus some of my S Fund, into the L Fund, which actually has a large percentage of G in it. L has been pretty consistently averaging ~4% since inception. G shows around 4.7% since inception, but G was around back when interest rates were 14%. L has only been around since 2005. Back in its heyday, G was bringing in near 10%, but in recent years less than 1%.
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So you do have two guaranteed income streams that provide a baseline. This does give you some breathing room to experiment. I was in TIPS for a while but the rate of return was disappointing since inflation did not take off like I was betting on. CDs and savings accounts right now are paying a pittance. I wonder if your best bet right now is a decent money market fund or a high-grade bond fund.
https://www.thebalance.com/the-benefits-and-risks-of-tips-2466779
I did move my emergency money to an AMEX high yield savings, but even that is only like 0.4% right now.
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Until now, I knew nothing about Treasury Inflation Protected Securities (TIPS). I think they were mostly off my radar because I was working and was good with 10+ year waits for recovery from any market crashes.
Depends on who measures inflation.
"Annual inflation, pegged to pigeon dung futures, continues at a mild 3% annually. All is well."
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Depends on who measures inflation.
^Bingo.
I would suggest thinking about what the emergency money is for, and buying those tangibles, as much as feasible.
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^Bingo.
I would suggest thinking about what the emergency money is for, and buying those tangibles, as much as feasible.
Well, the emergency money is for stuff like "a windstorm ripped half the roof off" or "the water well dried up". Kinda hard to stockpile those items. =)
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Do you have a financial planner? They are ones who do this for a career.
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This is a timely article:
https://www.marketwatch.com/story/whats-the-safest-place-for-retirees-to-keep-an-emergency-fund-11635184432?mod=retirement
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This is a timely article:
https://www.marketwatch.com/story/whats-the-safest-place-for-retirees-to-keep-an-emergency-fund-11635184432?mod=retirement
Good article, since that's kinda how I split my "expenses" and "big emergency" money up now. =)