Comments on: Treasury Inflation-Protected Securities for Inflation Protection

By: Charles

Charles — Thu, 19 Mar 2009 23:52:44 +0000

David,

Should have added the advantages of “re-applying”. This sets your monthly SS payment at a higher level and this payment is subject to the normal SS inflation adjustment.
Also, note that the “re-payment” does not include any interest only the SS payments you collected.

The ‘reduction percentage’ for someone born 1943-1954 is 25%. This means if full retirement would be $1000 then age 62 retirement would be $750. The ‘repayment’ thus would increase the benefit by 33% (i.e. 250 / 750). Not bad! Also, another 8% for each year past full retirement.

Read the article and then work your numbers and see if it
addresses your problem.

By: Charles

Charles — Thu, 19 Mar 2009 23:32:56 +0000

David,

I would not recommend Vanguard TIPS account for a taxable account. It would be better placed in your IRA. The taxable distribution include both the inflation-part and the regular dividend-part. Check out the Inflation Protection Investor fund (VIPSX) information for the longer history of the distribution. The Admiral fund has a shorter history and because of its lower cost the Admiral fund would have slightly higher returns that the Investor fund.

Another suggestion: Consider “re-applying for social security”. “Re-apply” means to repay the social security that you have collected to date & then applying again at your current age. For more information, go to esplanner.com and click on “learn more”, “case studies”, and then “reapply for social security”.

By: David

David — Fri, 04 Apr 2008 08:47:02 +0000

I noted with interest Lily’s response – and as a novice investor would welcome some direction. I am a 65 year old retiree and have had my traditional IRA in one year CD’s since retiring five years ago. Last year I was receiving a 5% return on a “Jumbo” CD (now $132,000), but upon maturity last month the interest rate had dropped to under 3%. I transferred my entire balance to Vanguard Investments upon maturity (currently in Vanguard Prime Money Market Fund) with the intention of investing 100k in the Vanguard TIPS Admiral shares fund (VAIPX) because of it’s low fees and inflation protection. Now I’m questioning the advisability of doing so – I would be interested in other viewpoints. I have not had to take any distributions from my IRA since retiring – S/S (since age 62), pension, and savings have been adequate to support my lifestyle, but inflation is my BIG worry for the future (I remember the 70′s) as my pension has no inflation adjustment. I am a VERY conservative investor interested only in protecting my principal with inflation protection. Any thoughts would be most appreciated!

By: Lily

Lily — Mon, 17 Mar 2008 12:04:05 +0000

TIPS might have been more timely a few months ago. Now, TIPS have negative yield because so many investors have rushed into them on inflation worries. That means investors are paying MORE for TIPS now than they’d get back in total cash flow (coupons + principal).

This doesn’t make TIPS an unwise investment. These investors are really betting that inflation will be higher than what the Fed thinks it is, as measured by the CPI. So then the question is how well do you think the Fed is predicting inflation? I wouldn’t be so quick to jump on the Fed-hating bandwagon here. It’s easy to complain about sinking yields and weak dollars, but most of the whiners don’t understand how the Federal Reserve System works, much less how not lowering the rates would impact the system.