Comments on: Treasury Inflation-Protected Securities for Inflation Protection http://www.myretirementblog.com/treasury-inflation-protected-securities-for-inflation-protection.html Retire happy, healthy and wise. Thu, 20 Nov 2008 13:31:32 +0000 http://wordpress.org/?v=2.6.3 By: David http://www.myretirementblog.com/treasury-inflation-protected-securities-for-inflation-protection.html#comment-64644 David Fri, 04 Apr 2008 08:47:02 +0000 http://www.myretirementblog.com/treasury-inflation-protected-securities-for-inflation-protection.html#comment-64644 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! 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 http://www.myretirementblog.com/treasury-inflation-protected-securities-for-inflation-protection.html#comment-64009 Lily Mon, 17 Mar 2008 12:04:05 +0000 http://www.myretirementblog.com/treasury-inflation-protected-securities-for-inflation-protection.html#comment-64009 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 <i>not</i> lowering the rates would impact the system. 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.

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