Why I Am Not Buying I-Bonds [Are TIPS Better?]

Great content, loved it, thanks!

I don't think people are buying i-bonds in lieu of retirement contributions

If you are losing money in stocks then the risk-free rate of return of IBonds is a deal, IMHO. I'm harvesting tax losses on stocks and buying I-Bonds. I can offset $3000 of IBond interest payments each year for years to come with the harvested losses (thanks JP!) In my IRAs I am building share wealth but, alas, not NLV - maybe that will happen before I leave this Earth. I do own TIP in my IRAs but it is currently underwater. Owning TIPS directly is not a great deal because the principle can be reduced. Oh, I know they are stop-gapped at par but that's only at maturity - who does that!?

Thanks some good points other financial gurus don't talk about.

Nice work Nick. I had the same question — whether iBonds make sense for younger people who may have 20-30 years until their retirement. I think your strategy about buying stocks now makes sense as stocks are cheaper than what they were a year ago. It was cool to learn about TIPS ladders and how social security is where the bond investments lie for most people. And I appreciate the book recommendation. Thank you

Thanks for making this video. Good info that I'm not really hearing elsewhere.

9.62% iBond is a good 1 year rate for 10k.

I am 67 yr old. You I believe. You lost me 4 pages ago.

Totally agree on your points for younger people. For us in retirement ibonds are a great way to hold some cash, which we will use over the next 1-2 years. We don’t want to sell stocks in a down market., which otherwise we need to do. We already have TIPS as part of our bonds.

I wouldn't follow this guy's advice

Thanks Nick. Great explanation of the differences between TIPS and I-Bonds.

Great analysis! Where do you learn this stuff???

Sorry but I cannot see the advantage in buy Tips over 5 yr CD's or MYGAs which are paying close to 5%. Please let me know what is the allure of TIPS. If we enter a deflation era , yes I see some attraction, but the USA economy never seems to do that. I live in Japan where we have had something close to deflation, but they call it stagflation. At this time Japan is beginning to have some inflation for the first time in decades. Please advise .

why not sell puts on spy to try to get the stock market cheaper

I'm still buying stocks but have also picked up I-bonds to take advantage of the current rates. I don't plan to keep long and will likely sell when the one year is up. Sure, I'll lose 3 months gains but what I do make is still better than the current market and I can use that money for my son's college tuition. What am I missing?

For right now I bonds are great. They are a lot better that the negative 22% my IRA acount is doing.

However Tips you gotta pay fed taxes yearly I bonds you don't until you redeem them.

hi Nick, thanks for the thorough explanations here. I am questioning the tips funds however, since unlike holding to maturity with a direct buy of say a 5 yr tip, where u at least get your principal back, those funds are risky, no? they are seriously down for the yr for ex.

Agreed but no harm in having some I Bonds. DCA in a mix of assets. Index funds and things of that nature in a 401K, pick your long term favorite equity in a Roth/IRA. Looking into TIPS.

I am 76 years old and was thinking to buy a savings bond for my daughter. I am old age but I think is better to buy a bond than my account in a bank who paying nothing for my savings.

Absolute nonsense 8%+ for 1 year with virtually no risk is a great investment in this high inflation environment

I spent an hour on the GOV website trying to enlist in I Bonds. It errored out so badly, I just gave up. Never mind. I think it's a good deal at the current rate being offered. If you can get it to take your money, that thing will double in value in 10 years if you do absolutely nothing. Put your money away in a safe place like this where you can't spend it easily. Remember, "it's your money until you give it away".

Tips the value of the bond can go down so aren’t the overall value down 13% even though you get at 7% interest rate but your total value went down 13 percent for explain that

Man, what are your credentials?

Don't you lose the state and local tax exemption benefit if TIPs are held in a traditional IRA/401K? Isn't the interest being reinvisted and then the 401k withdrawals subject to all taxes?

It’s my understanding that tips are based on the change in the inflation rate, not the inflation rate itself. Correct?

I've owned I bonds since 2002. It's been a horrible investment yielding less than 3%

Even if you buy I bonds and cash prior to 5 years you forfeit 3 months. At 9.62 you'll still be getting 7.22 which isn't bad for a short term investment.
Diversity is the key.

For large emergency funds, ibonds are a decent place to sit

Terrible advice. I-bonds don't have to be long term investments. The 9.62 from last reset, and the 6.48 for the current reset equates to an annualized yield of 8% . If for example the next rate would drop to 2%, which it won't, you can hold the I-bond for 3 months, and that will be the penalty. An awesome interest rate guaranteed, buy as many as you can. I bought 7 for me and my wife.

The video missed a key consideration around interest rate / duration risk that can significantly impact the value of TIPS. Increasing inflation is often followed by policy driven interest rate increases which can dramatically reduce the market values of longer-term TIPS / TIPS funds and offset the inflation protection. A great benefit of I Bonds is they do not really carry duration / interest rate risk. In an increasing rate environment, you can always cash them out and reinvest in higher rate nominal bond without incurring market losses. For example, the 15+ year PIMCO TIPS ETF (LTPZ) is already down 33% this year due to increasing rates, despite the highest inflation in 40 years

FIPDX has been falling for the whole year, while I Bonds were paying 9.62% and now 6.48%.

How TIPS can be called “inflation protected” if they become cheaper and cheaper during such high inflation…

I wonder why my financial advisor at my credit union did not tell me about any of this.

Why I’m not buying IBonds? I bought i bonds for myself…no problem. While creating an account for my wife the primary account numbers were misplaced and my local bank rejected the account. As a result we were required to get her signature certified. We went to three branches of the same bank and all the branch managers told me “they don’t do that”. A letter to the bank (TFS) CEO got my wife’s signature certified. Now it’s been weeks waiting for Treasury Direct to respond. I’ve missed out on the highest rate and in a few more weeks we’ll miss the chance to buy IBonds before the end of 2022.

This makes zero sense. Today, you'll get 6.89% on I-bonds for the next six months. If you cash out after 15 months, you'll have 12 months of taxable gains (%6+) minus the Fed tax rate on only the gains, at no risk. You absolutely cannot guarentee the stock market movement this year or interest rate drop over one year, period. Guaranteed 12 months of 6% minus the fed gains tax of that profit CANNOT be a negative number. You cannot lose money today if you keep the bond for at least 15 months. Why on Earth are you saying its guarenteed negative real return at 15 months? Please show me the 15 month math of a $10k investment in today's I-bond (6.89%) in 2023-24 that becomes a loss.