Savings

[6d1v7x3]

Hi guys could you tell me how to protect about $100,000 from inflation eating it up?

[Tyler Aspect]

This is an interesting question. The wrong answer would be to load up on Treasury Inflation Protected Securities (TIPs), because their returns are generally low. The right answer is to ensure that at least 40% of your investment portfolio is composed of broadly diversified stock index fund.

One easy way to compose an asset allocation is to do it according to an age based formula. If you are targeting retirement at age 55, then the retirement asset allocation is set to 50% stock / 50% bond. For every year younger than age 55, add 1% stock and subtract 1% bond.

[retired@50]

Hi guys could you tell me how to protect about $100,000 from inflation eating it up?

For how long? Do you have any plans to spend the $100,000? If so, when?

[H-Town]

Hi guys could you tell me how to protect about $100,000 from inflation eating it up?

Spend it now when inflation has zero chance to affect your money? Yeah? No?

[fujiters]

I bonds make a lot of sense right now for $10k/person/year (so if you're married, you could get $20k in I bonds for 2019, and buy another $20k in January). 0.5% real return (beats TIPS rates, currently), and interest can be tax deferred until you redeem them (up to 30 years).

You can also buy another $5k/year with your tax refund, if desired.

[6d1v7x3]

Hi guys could you tell me how to protect about $100,000 from inflation eating it up?

For how long? Do you have any plans to spend the $100,000? If so, when?

A small amount of it is used every month. Probably around a thousand. And I'd like to save it for the foreseeable future.

[6d1v7x3]

I bonds make a lot of sense right now for $10k/person/year (so if you're married, you could get $20k in I bonds for 2019, and buy another $20k in January). 0.5% real return (beats TIPS rates, currently), and interest can be tax deferred until you redeem them (up to 30 years).

You can also buy another $5k/year with your tax refund, if desired.

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

[chem6022]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

[6d1v7x3]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

And what would happen if I took money out of one of those bonds early?

[anoop]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

[6d1v7x3]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

[anoop]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

A T-bill makes sense if you're in a high tax state. If you buy a T-Bill for $100K, you can sell in chunks of $1K at any time.

If you are in a low/zero tax state, you could put $12K in savings and buy a 12-month CD for $90K, since you'll be using $12K during the year.
https://www.marcus.com/us/en/savings
The savings will get you 1.9%, the CD would get you 2.25%.
A 52 week T bill is currently yielding 1.6%.
https://www.treasury.gov/resource-cente ... data=yield

At current rates, even in a high tax state, it looks like high yield savings/CD will do better.

Or you could create a ladder with CDs:
$12K in savings
$12K in 1 year CD
$12K in 2 year CD
$12K in 3 year CD
$12K in 4 year CD
$12K in 5 year CD
$28K in 6 year CD
(At marcus, the rate for all of them appears to be the same.)

This will give you some protection of dropping interest rates (assuming interest rates continue to drop, which going by the news looks more likely than not) while giving you the exact amount you need each year.

[6d1v7x3]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

A T-bill makes sense if you're in a high tax state. If you buy a T-Bill for $100K, you can sell in chunks of $1K at any time.

If you are in a low/zero tax state, you could put $12K in savings and buy a 12-month CD for $90K, since you'll be using $12K during the year.
https://www.marcus.com/us/en/savings
The savings will get you 1.9%, the CD would get you 2.25%.
A 52 week T bill is currently yielding 1.6%.
https://www.treasury.gov/resource-cente ... data=yield

At current rates, even in a high tax state, it looks like high yield savings/CD will do better.

Or you could create a ladder with CDs:
$12K in savings
$12K in 1 year CD
$12K in 2 year CD
$12K in 3 year CD
$12K in 4 year CD
$12K in 5 year CD
$28K in 6 year CD

This will give you some protection of dropping interest rates (assuming interest rates continue to drop, which going by the news looks more likely than not) while giving you the exact amount you need each year.

Thank you so much for your reply. I'm in California. So you recommend I go with either a CD or savings account and not look into treasury bills? Do you have any specific suggestions? I'm completely lost.

[anoop]

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

A T-bill makes sense if you're in a high tax state. If you buy a T-Bill for $100K, you can sell in chunks of $1K at any time.

If you are in a low/zero tax state, you could put $12K in savings and buy a 12-month CD for $90K, since you'll be using $12K during the year.
https://www.marcus.com/us/en/savings
The savings will get you 1.9%, the CD would get you 2.25%.
A 52 week T bill is currently yielding 1.6%.
https://www.treasury.gov/resource-cente ... data=yield

At current rates, even in a high tax state, it looks like high yield savings/CD will do better.

Or you could create a ladder with CDs:
$12K in savings
$12K in 1 year CD
$12K in 2 year CD
$12K in 3 year CD
$12K in 4 year CD
$12K in 5 year CD
$28K in 6 year CD

This will give you some protection of dropping interest rates (assuming interest rates continue to drop, which going by the news looks more likely than not) while giving you the exact amount you need each year.

Thank you so much for your reply. I'm in California. So you recommend I go with either a CD or savings account and not look into treasury bills? Do you have any specific suggestions? I'm completely lost.

For your situation, I think the CD ladder at marcus.com makes the most sense, even though you're in CA. The current rate on the CD is much higher than the T-bills/notes of similar maturity.

[anoop]

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

A T-bill makes sense if you're in a high tax state. If you buy a T-Bill for $100K, you can sell in chunks of $1K at any time.

If you are in a low/zero tax state, you could put $12K in savings and buy a 12-month CD for $90K, since you'll be using $12K during the year.
https://www.marcus.com/us/en/savings
The savings will get you 1.9%, the CD would get you 2.25%.
A 52 week T bill is currently yielding 1.6%.
https://www.treasury.gov/resource-cente ... data=yield

At current rates, even in a high tax state, it looks like high yield savings/CD will do better.

Or you could create a ladder with CDs:
$12K in savings
$12K in 1 year CD
$12K in 2 year CD
$12K in 3 year CD
$12K in 4 year CD
$12K in 5 year CD
$28K in 6 year CD

This will give you some protection of dropping interest rates (assuming interest rates continue to drop, which going by the news looks more likely than not) while giving you the exact amount you need each year.

Thank you so much for your reply. I'm in California. So you recommend I go with either a CD or savings account and not look into treasury bills? Do you have any specific suggestions? I'm completely lost.

For your situation, I think the CD ladder at marcus.com makes the most sense, even though you're in CA. The current rate on the CD is much higher than the T-bills/notes of similar maturity.

Actually the rates are even better --
1 year @ 2.25
2 year @ 2.3
3 year @ 2.35
4 year @ 2.4
5 year @ 2.45
6 year @ 2.5

That's a steal compared to a 5-year T-note at 1.4%.

[nix4me]

What about something like the lifestrategy income fund at Vanguard? It’s an extremely conservative 20/80 fund.

[Grt2bOutdoors]

What about something like the lifestrategy income fund at Vanguard? It’s an extremely conservative 20/80 fund.

viewtopic.php?p=4787109#p4787109

^^^ This is the OP's original post. After you read it you'll understand why we did not suggest investing in a conservative fund, even there you can lose money. This person needs to keep as much of the savings intact.

[Gill]

A small amount of it is used every month. Probably around a thousand. And I'd like to save it for the foreseeable future.

A "small Amount". You're spending at the rate of 12% a year on your initial sum.
Gill

[KlingKlang]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

And what would happen if I took money out of one of those bonds early?

The interest accrued from the purchase to the redemption dates becomes federally taxed income. Note that the interest is always state and local tax free.

Series I US Savings Bonds must be held for at least one year after purchase before they can be redeemed. Between one and five years there is a three month interest penalty. After thirty years they must be redeemed and federal tax paid on all of the accrued interest.

Under certain circumstances they can be redeemed for educational expenses federal tax free.

[Thegame14]

I'm sorry but what is an I Bond? Can you point me to any specific bonds that I should buy right now?

A.series I bond from the U.S. Treasury, which you can read more about at treasurydirect.gov. Very flexible, but mostly an inflation-protected government bond good for periods from 1 to 30 years.

IMO a high-yield savings account or 52 week T bills would be good enough. Some gets eaten up by inflation, but that's the cost of safety.

I'm mainly concerned with being able to take the money out if necessary but still provide the highest yield. So between a CD, savings account or treasury bill which would you recommend? Are there any specific ones you can tell me? TIA

sounds like a high yield online money market is best, you can get your money in 3 business days. rates are around 2%, so you would earn $2,000 per year, you would owe taxes on the $2,000

[retired@50]

Hi guys could you tell me how to protect about $100,000 from inflation eating it up?

For how long? Do you have any plans to spend the $100,000? If so, when?

A small amount of it is used every month. Probably around a thousand. And I'd like to save it for the foreseeable future.

As you can see from reading through this thread, there are trade-offs to consider. For CDs there is the potential penalty for early withdrawal, for individual Treasury bonds, there are movements in the bond market and interest rates, which are beyond your control. To retain maximum flexibility and be "allowed" to sell anytime you want, you might consider a three pronged approach. By using an intermediate term bond mutual fund, a short term bond mutual fund, and a money market account. You could migrate money from intermediate bonds to short term bonds periodically, and move money from short term bond mutual fund to the money market account periodically. Eventually, you'd draw down the intermediate fund, then the short term fund, until all you had left was the money market account. Best of luck.

[greg24]

Vanguard Prime Money Market is currently at 1.97% and has check writing privileges. And would be a fairly easy vehicle to use for the OP who doesn't seem to be a financial expert.