Bogleheads.org

The author speculates that the coming fixed rate may not be as high as originally anticipated due to recent banking events. I bought a decent chunk of ibonds over the last couple of years between me, spouse, RLT and sole prop business and gift box. With variable rates and inflation trending down, and cash rates going up I probably won’t be adding to the positions, but what I may do is sell some of the zero percent fixed rates I’ve accumulated over the years and buy some at the higher fix rate. I’ll probably wait until later in the year to do that in case fixed rates rises, and also to cash out any purchases within 5 years to lose only 3 months at the new combined May lower rate. I assume you didn't hit the $10K limit this year from either ...

Hire a good accountant to do your taxes. Why stress every year?

I don't think the fixed rate is going up. TIPS real yields are much lower than they were a few months ago. We'll see! I have no room for more purchases until next year, anyway, so I'll be watching from the sidelines.

DaveTH wrote: ↑Sat Mar 18, 2023 3:40 pm Do you really want to lock your money into a 6-yr CD @ 4.5% when you can get a 1-yr CD paying over 5%? Long duration CDs in this inverted yield environment doesn't really make sense to me.

Someone pointed out that historically, when the yield curve "un-inverts", it's not that long rates go higher - it's that short rates drop significantly. The 4.5% yield for six years might turn out to be a good deal. Five years is about as far I like to go.

that seems like the data on how things went... the question is going forward do you think the environment for bonds will be the same as it was from 1999 to now? LT Treasury Crushed IBonds and all the other fixed income choices.... do you think that will repeat over the next 20 years? Last 20 years have been awesome for bond funds as rates have come down... and down... and down... IBonds are good at a very specific thing... inflation protection, can't lose nominal money, and federal tax deferred, state tax exempt. The only drawback is the limited amount you can deploy each year Not sure what you have fear of missing out on... Mike Let's just suppose there were no limits to buying I bonds. If it were possible, would allocating 100% of fixed ...

I meant when the iBond inflation rate went up high (to 9.62%) It's calculated by measuring the change in CPI six months apart. At that time, inflation had gone up a lot , thus the high rate. Last time, the six-month change was a little less, so the variable rate went down. Next month, it's likely that the six-month change will be under 4%. That is just how it works. If you want something that reflects nominal rates, you can buy a CD or a Treasury. I think most people familiar with I Bonds knew that the 9% rate was unusual, and many people decided to take advantage of it for the short term, knowing that the rate would drop later on. It wasn't a problem when the I Bond was paying 9% and Treasuries were at 4%, was it? Did you think the govern...

Taking profits on what? I don't think there are a lot of short-term traders here.

As of 9:30 central this morning, Fidelity brokered CDs, call protected available as follows: 18 months 5.35% 2 years 5.25% 3 years 5.0% 4 years 4.95% 5 years 4.90% Obviously all subject to change and various issuers that may or may not be within your preference. At the moment, a good 80 basis points total yield above treasuries (shorter terms). Hope that helps. Thanks. I have Fidelity, so I'm taking a look, and I stand corrected. Right now, the highest call-protected rates I see on new-issue CDs match what you said. I added the bank for details. Morgan Stanley seems to be pretty aggressive in the CD market. 5 yr 4.8% (Amex) 4 yr 4.95% (Morgan Stanley) 3 yr 5% (Morgan Stanley) 2 yr 5.25% (Morgan Stanley) 18 mo 5.35% (Schwab)

dcabler wrote: ↑Fri Mar 17, 2023 6:51 am I recall your thread from a very long time ago regarding #4 and the discussions you had with people at TD. But have you (or anybody else) revisited that? Does anybody actually KNOW of a case where this actually happened? Even in your original thread back in the day, this seemed awfully unlikely to me.

We had this very discussion last summer. Nobody knew of any actual instances of this. People seemed more concerned about (a) getting locked out, or (b) family members inappropriately accessing the site.

viewtopic.php?t=383394

You can still get 5% for a year, but after that, the rates drop off sharply. A 3-year is more like 4.3%-4.5%. If there's a 5.5% out there, I don't see it.

Where do you see non-callable 5.5% CDs?

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds. With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this. My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too ...

arsenal_fan wrote: ↑Fri Mar 17, 2023 1:40 am If the overall rate were lower than say the ~5% T-Bills are offering but you had higher fixed rate component 0.7-0.8%, would you redeem a 0% fixed rate allocation and buy the 10k, or put another 10k in it??

Check out this discussion.

https://bogleheads.org/forum/viewtopic. ... 0#p7169270

Maybe you'd be better off with a card that pays less than 5%, but does so on all purchases?

Kaymaza wrote: ↑Thu Mar 16, 2023 11:51 am Hey everyone just wanted to resurrect this threat as Vanguard now has 3 month brokered CDs yielding 5.05%. I wanted to tie up some of my emergency funds into this. Any concerns about that?

https://investor.vanguard.com/investment-products/cds

For $10,000, the difference between that three-month CD and a MM fund like VUSXX is $12, and your money won't be tied up at all.

swansong wrote: ↑Wed Mar 15, 2023 11:41 am I am a newbie with treasuries, but have bought many the last six months. When I look at cost basis, I now have a profit on them. Is this amount real? Is it added to my total at maturity or only if I sell early? I read through the wiki stuff but I guess I still don't grasp. I know I bought them at a discount to face value and will get face at maturity. These other gains are they only actualized if I sell before maturity?

Let's say you bought a $1000 bond for $950. Today, the price is $970. If you sell, you have $970. You don't get the face value. If you hold to maturity, these temporary price gains vanish, and you get your $1000.

I didn't think AVGE was supposed to track VT. Down 6% in one week... but it can also go up quickly.

Rates could also fall because there's a big demand for bonds ("flight to safety"), which pushes prices up and yields down.

Wow, yields have really plummeted. Last month, I bought a bunch of Treasuries maturing next spring at 4.9% or so. Those are now yielding under 4.3%. Even the five percenters for later this summer are down to 4.6%.

burritoLover wrote: ↑Wed Mar 15, 2023 10:15 am

Tom_T wrote: ↑Wed Mar 15, 2023 9:11 am AVGE now down 10 percent off its ATH of February 3. I guess the exposure to smaller international banks is hurting it.

At 2% international SCV, nah.

Then maybe the large international banks!

AVGE now down 10 percent off its ATH of February 3. I guess the exposure to smaller international banks is hurting it.

I am looking at the Schwab CD. You guys are not worried about the fears going around about Schwab right now? I went in actually looking for a big bank CD but there aren't any left and everyone seems to be talking about Schwab possibly being the next one to go down so I am hesitant to jump the gun here. Any thoughts? CDs are FDIC insured. I just looked and the Discover CDs were still listed. If you are interested, keep checking back. Good idea, I will keep checking back. New ones seem to come up but they are from the secondary market so there are minimum buy ins. Also I know they are FDIC insured but I am guessing that only covers the principal? If the bank goes belly up will the FDIC give me my 5% as well? The insurance includes any intere...

Tooth wrote: ↑Wed Mar 15, 2023 6:25 am https://www.reuters.com/business/financ ... 023-03-15/

Banking stocks taking a beating. I wonder how far the indexes are going to go down.

A lot.

anon_investor wrote: ↑Tue Mar 14, 2023 8:18 pm

Tom_T wrote: ↑Tue Mar 14, 2023 6:49 am

vonigud wrote: ↑Mon Mar 13, 2023 8:23 pm 6-month T-bills now yield around 5%, I see no reasons to skip this opportunity.
To buy do something like "Fixed Income" "Bonds" "New issues" "Treasury"
Auctions for them are announced every Thursday, held every Monday, place order between those two days

More like 4.8% at the moment, after all the "fun" of the last two trading days. Today's CPI report could spur a rebound in yields once everyone forgets about the banking crisis.

Bummer yields dropped again today. I had planned to buy some at Thursdays auction but may wait until next week leaving my cash in FDLXX.

Looks like today is going to be good for bond prices, bad for bond yields.

I wonder if we are going to see a fairly rapid loss of interest in iBonds among investors newer to them that got in when they had a composite rate of 9.62% now that the new composite rate is looking more like something in the 3.5-4% range starting in May of 2023. "Fairly small"? Maybe more like "complete." I didn't bother buying any in 2023. The current rate isn't enough higher than Money Markets to bother with, IMO. I bought $10k in 2021 and 2022, I'm good. If the i bond rates go lower than my 2.25% auto loan, then I'll wait 3 months, cash in and pay off my car. I have a lot from late 2021-early 2022 (spouse, gifts, etc.), but I was not planning on holding them long-term. If the next variable rate collapses, I'll proba...

It sure beats getting sub-1%, right?

Tipswatch with a quick morning update...

February is the fifth month of a six-month string that will determine the I Bond’s new inflation-adjusted variable rate. Through the five months, inflation has run at 1.36%, which would translate to a variable rate of 2.72%. One month remains, so it looks like the new variable rate should fall into a range of about 3.2% to 3.5%, down substantially from the current 6.48%. The I Bond’s fixed rate will also be reset May 1, but the outlook for that reset is high uncertain, given the volatility of real yields over the last week.

You're not missing anything. You've planted your flag at 5%, and now you just have to see if it's worth it. You could lose to inflation, or to higher nominal yields. Or, maybe it will be OK.

If there's anything I know from this site, it's that everyone will agree you should try to time the market based on your personal knowledge of the Fed's upcoming actions. I detect a note of sarcasm. Not really helpful.. I know 'timing' is a curse word around here. However it seems just plain dumb to ignore the environment into which youre investing. Some things are unknowable, however there are facts and conditions which can influence how you invest. Its not always necessary or even advisable to adhere to an ironclad view of the economy, devoid of real market influencers. Can you predict without failure future stock movements or interest rates? Of course not.. That doesnt mean you shouldnt use certain known recent environmental facts to yo...

watchnerd wrote: ↑Tue Mar 14, 2023 8:49 am The probabilities of what the Fed will or won't do are already priced in.

But that just means that some people will be right and others will be wrong, and the price can change accordingly. So anything the OP does is basically a bet on one side or the other.

vonigud wrote: ↑Mon Mar 13, 2023 8:23 pm 6-month T-bills now yield around 5%, I see no reasons to skip this opportunity.
To buy do something like "Fixed Income" "Bonds" "New issues" "Treasury"
Auctions for them are announced every Thursday, held every Monday, place order between those two days

More like 4.8% at the moment, after all the "fun" of the last two trading days. Today's CPI report could spur a rebound in yields once everyone forgets about the banking crisis.

BuffMaltese wrote: ↑Mon Mar 13, 2023 6:37 pm Seems to be underperforming that last week or so. Has a bit a financials tilt, which could be the culprit.

What were you expecting?

For anyone who grabbed or considered Treasuries at 5% -- that window seems to be closed, at least for the moment. Yea what the heck happened? Look at the bond market Friday and today. Flight to quality? Anticipating of Fed slowing down increases? Combination of both? Whatever, the prices have soared. This could swing tomorrow with a hot CPI print. I’m waiting to buy for now. Yea wondering if I should sell my 1 year that's at 4.44 .... then rebuy in a week or two in park in TTTXX... When did the fed signal they were slowing down? Thought they stated they wanted to not... The Fed has not signaled anything. This is all market speculation, i.e. "Surely Powell has to hold off on rate increases during this banking turmoil." The market ...

GoodOmens wrote: ↑Mon Mar 13, 2023 9:18 am

Tom_T wrote: ↑Mon Mar 13, 2023 8:08 am For anyone who grabbed or considered Treasuries at 5% -- that window seems to be closed, at least for the moment.

Yea what the heck happened?

Look at the bond market Friday and today. Flight to quality? Anticipating of Fed slowing down increases? Combination of both? Whatever, the prices have soared.

For anyone who grabbed or considered Treasuries at 5% -- that window seems to be closed, at least for the moment.

Bonds have been making quite the comeback this past Friday and again today. Maybe your fund is doing better?

Why would a company choose to place deposits in excess of the FDIC limits at any small/medium bank? Everyone knows that the government will fully backstop the very large banks, so why take the risk anywhere else? Are they chasing some small yield on their operating funds? You generally get better service if you’re a big fish in a small pond. It’s not too different from how people feel about banking with credit unions vs megabanks. If every company in the country did this, there’d only be 3-4 commercial banks. Maybe this event will force the issue. Canada seems to operate well with a small number of large banks. I’m sure there are downsides, but at least the funds are safe and accessible. Canada has fewer people than California.

"If he waits, his SS balance grows tax-deferred by the rate of inflation."

Does this mean his SS benefit? Every year he delays, it grows by approx. 7% plus COLA.

Stormfloatter wrote: ↑Fri Mar 10, 2023 7:18 pm I hope today’s news gave more context about me worrying about liquidity.

Not really. The banking system isn't collapsing.

PlayingLife wrote: ↑Sat Mar 11, 2023 8:18 am Hi all,

I'm under the impression we can deduct our New Jersey mortgage interest paid in 2022. When using the H&R block software we went with standard deduction under the federal return. I just went through the motions to file our state return and claimed the deduction for taxes paid. However, I don't see anywhere within the state return section referring to mortgage interest paid in 2022.

Does anyone have any ideas?

Straight from the NJ tax page:

New Jersey law provides several gross income tax deductions that can be taken on the New Jersey Income Tax return. New Jersey does not allow federal deductions, such as mortgage interest, employee business expenses, and IRA and Keogh Plan contributions.

I live in NJ, by the way.

Given today's big move in bonds, BND price is actually a little bit up for 2023. It's been a while since it was "hammered."

Since you left the job, you do have the option of moving your 401K to an IRA at Fidelity,Vanguard, etc., where you'll have all the choices you want.

nisiprius wrote this excellent post in 2021 about a similar thought experiment:

viewtopic.php?t=360575

I like the chart they used to show life expectancy for a 65-year-old broken down in different ways.

Started looking at it, and I like it.

uaeebs86 wrote: ↑Wed Mar 08, 2023 10:07 am Anyone know when OpenSS will have newer SS mortality tables?

2019 is pre-Covid so chances are an update will have lower life expectancies, especially given how hard Covid hit the senior population.

I don't see how this would affect you. Life expectancy is kind of a "looking backward" situation. Because a lot of people died of COVID, the average went down. If your health is unchanged, then there's no reason to think that your life expectancy should be any different. People are far less likely to die of COVID now because there are treatments, which didn't exist when the pandemic began. And of course the infection rate is far lower. That's how I see it, anyway. It's not something that concerns me for SS planning purposes.

bawaso wrote: ↑Tue Mar 07, 2023 9:33 pm
However, I do think that we're headed for some pain in the next 3-6 mos. and have been holding off on investing it.

Then why isn't the market much lower? Here is a different way to look at it: if all economic conditions were rosy, the Dow would be over 40,000. The current price already reflects uncertainty.

Granted, there is a lot of assumption and speculation in the market. Consider yesterday when markets dropped because the Fed said a 50bps rate hike may be necessary (the market had been anticipating a slowdown in hikes.) But that just backs up my statement that the market always reflects fear, uncertainty, and doubt.

So bottom line, dad should start taking social security immediately per opensocialsecurity and mom should wait until 70? And the new benefit amounts should be reliable now now that future income has been factored in? If they stopped working, and have 0 as their last year income, then the calculator will assume 0 going forward, and the estimate should be more accurate. opensocialsecurity assumes they both live to their life expectancy. If that assumption proves not to be the case, then their suggestion won't have been the optimal one. No way of knowing in advance. Luckily it doesn't mater too much. Delaying one year or not isn't going to make a big difference. If you want to make an informed guess then consider their combined life expectanc...

From playing around with https://opensocialsecurity.com/, I was surprised to find that the possible trust fund depletion issue (mentioned numerous times on this thread) is currently irrelevant Social Security strategy for current 62 year-olds. I could not find a scenario where a 23% reduction in 2034 made any strategy difference. (Not sure this will continue to be the case as younger people arrive at at 62.) Hmm... that is not the results I am getting. I tried modeling a 62-year-old with a birth date of 1/1/1961, PIA 1000, single male. With no cut, it says to claim at 67 and 11 months. With a cut, it says 65 and 3 months. (There are actually two places you have to indicate a cut. The first is in the list of advanced options. The second is ...

anthonypals wrote: ↑Mon Mar 06, 2023 3:09 pm

Tom_T wrote: ↑Fri Feb 03, 2023 11:32 am

tarheel91 wrote: ↑Fri Feb 03, 2023 11:26 am They are offering 5% now, I'll take that. I'll think about renewal when the time comes.

But it's not 5%. It's 4.58% for 11 months.

Thanks for pointing that out, its only 4.58% not 5. I am thinking about using Ally's 4 percent no penalty 11 month CD instead. Do you know if their rate is truly 4 percent, or is it lower too?

All CD rates are quoted as annual rates. Your actual interest will be 11/12ths of 4 percent.