Total bond versus I bond for retirement account

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Topic Author
Brianjp18
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Total bond versus I bond for retirement account

Post by Brianjp18 »

I currently have 20k in Ibonds for the bond portion of my retirement portfolio at 80/20 (I’m 35). My only tax efficient account is a Roth, where I hold all my equity (VTSAX/VTIAX). I don’t have a work 401k cause I’m PRN staff.

My question is, am I cutting myself short by choosing I bonds (3.5%) rather than putting my bond allocation into the total bond fund (VBTLX)?

One consideration is if I were to convert to total bond fund rather than Ibonds, I would have to either have it in a taxable account (I’m in 12% fed income tax; no state tax) or replace equity in Roth with total bond. I was under the impression I should fill my Roth with funds that have the most potential growth, hence all equity.

Any assistance apprecIated.
BrokerageZelda
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Re: Total bond versus I bond for retirement account

Post by BrokerageZelda »

Brianjp18 wrote: Tue Jun 22, 2021 10:36 am I currently have 20k in Ibonds for the bond portion of my retirement portfolio at 80/20 (I’m 35). My only tax efficient account is a Roth, where I hold all my equity (VTSAX/VTIAX). I don’t have a work 401k cause I’m PRN staff.

My question is, am I cutting myself short by choosing I bonds (3.5%) rather than putting my bond allocation into the total bond fund (VBTLX)?

One consideration is if I were to convert to total bond fund rather than Ibonds, I would have to either have it in a taxable account (I’m in 12% fed income tax; no state tax) or replace equity in Roth with total bond. I was under the impression I should fill my Roth with funds that have the most potential growth, hence all equity.

Any assistance apprecIated.
When you say "cutting myself short", it sounds to me like you're describing missing out on something. What is the thing you are worried about missing out on by not switching?

Right now I Bonds have a higher nominal rate than total bond (although that can always change), and they also have built-in tax deferral (like a non-deductible traditional IRA), which doesn't seem to help you much right now (but over the next 30 years that can change as well).
dbr
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Re: Total bond versus I bond for retirement account

Post by dbr »

I bonds are inflation indexed and the interest is tax deferred for 30 years. Further these are Treasury bonds and have "no" default risk. They are not marketable and therefore do not have duration risk. There is risk in the sense that the available interest rate varies. Right now it is terrible, but not more terrible than anything else.

That could be a description of the perfect bond. You can hold I bonds in a taxable account and they are their own tax deferred account, meaning tax on earnings is deferred but not tax deferred on the principal you earned to have the money to buy them. A Roth also does not defer the tax on principal but is tax exempt on the earnings, so I bonds are in a middle ground.

The one drawback to I bonds is that you don't have optionality of redeeming a low interest I bond and replacing it with a high interest I bond. You do have optionality of redeeming I bonds and investing in something else. The reason is that the purchase limits preclude any significant repurchases in the future.

I think buying I bonds now is a debate between the no-brainer option to build an I bond portfolio and the bad luck that real interest paid is very low together with lack of optionality.
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

BrokerageZelda wrote: Tue Jun 22, 2021 10:59 am
Brianjp18 wrote: Tue Jun 22, 2021 10:36 am I currently have 20k in Ibonds for the bond portion of my retirement portfolio at 80/20 (I’m 35). My only tax efficient account is a Roth, where I hold all my equity (VTSAX/VTIAX). I don’t have a work 401k cause I’m PRN staff.

My question is, am I cutting myself short by choosing I bonds (3.5%) rather than putting my bond allocation into the total bond fund (VBTLX)?

One consideration is if I were to convert to total bond fund rather than Ibonds, I would have to either have it in a taxable account (I’m in 12% fed income tax; no state tax) or replace equity in Roth with total bond. I was under the impression I should fill my Roth with funds that have the most potential growth, hence all equity.

Any assistance apprecIated.
When you say "cutting myself short", it sounds to me like you're describing missing out on something. What is the thing you are worried about missing out on by not switching?

Right now I Bonds have a higher nominal rate than total bond (although that can always change), and they also have built-in tax deferral (like a non-deductible traditional IRA), which doesn't seem to help you much right now (but over the next 30 years that can change as well).
Cutting myself short referring to getting less return on the long run by having my bond allocation in I bonds rather than total bond fund.

I know I’m not supposed to look at past returns, but it seems that despite some years of low returns, total bond fund does have some good years that seem on average would do better than I bonds.
dbr
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Re: Total bond versus I bond for retirement account

Post by dbr »

Total bond is riskier than I bonds and therefore should have higher expected return.

In a portfolio it is probably more effective to adjust for overall risk and return by adjusting allocation between stocks and bonds than by trying to compare small differences among bond funds.

Again, no inflation risk, no duration risk, no default risk, tax deferred earnings are a good payback for possible lower real rate of return.
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

dbr wrote: Tue Jun 22, 2021 11:20 am I bonds are inflation indexed and the interest is tax deferred for 30 years. Further these are Treasury bonds and have "no" default risk. They are not marketable and therefore do not have duration risk. There is risk in the sense that the available interest rate varies. Right now it is terrible, but not more terrible than anything else.

That could be a description of the perfect bond. You can hold I bonds in a taxable account and they are their own tax deferred account, meaning tax on earnings is deferred but not tax deferred on the principal you earned to have the money to buy them. A Roth also does not defer the tax on principal but is tax exempt on the earnings, so I bonds are in a middle ground.

The one drawback to I bonds is that you don't have optionality of redeeming a low interest I bond and replacing it with a high interest I bond. You do have optionality of redeeming I bonds and investing in something else. The reason is that the purchase limits preclude any significant repurchases in the future.

I think buying I bonds now is a debate between the no-brainer option to build an I bond portfolio and the bad luck that real interest paid is very low together with lack of optionality.
I certainly like the safety of I bonds, and it seems you are implying there are not many options in the bond category that are doing better than I bonds, including VBTLX? If that is true, would it be foolish to continue to hold I bonds and when VBTLX starts to do better cash out I bonds and move money into VBTLX.

I just can’t seem to get it out of my head that VBTLX is the best bet for the long run. I’m probably influenced by noticing this is the core component of all Vanguard TDFs.
Broken Man 1999
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Re: Total bond versus I bond for retirement account

Post by Broken Man 1999 »

dbr wrote: Tue Jun 22, 2021 12:56 pm Total bond is riskier than I bonds and therefore should have higher expected return.

In a portfolio it is probably more effective to adjust for overall risk and return by adjusting allocation between stocks and bonds than by trying to compare small differences among bond funds.

Again, no inflation risk, no duration risk, no default risk, tax deferred earnings are a good payback for possible lower real rate of return.
OP, these are all good reasons, plus I-bonds do not use up your IRA space(s).

Broken Man 1999
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SnowBog
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Re: Total bond versus I bond for retirement account

Post by SnowBog »

Personally, I love I Bonds - buy as much of them as I can.

But I'm not sure they can (or should) remain your "only" bond... At some point, assuming that you want to maintain your AA, thanks to the wonder of compound interest (and that you add more to stocks than bonds annually), eventually you are not going to buy able to buy enough I Bonds to maintain your AA.

Additionally, I Bonds are not well suited for rebalancing between stocks and bonds (to maintain AA). You can obviously sell I Bonds (after 1 year), but you can't buy them back (other than annual purchase limit).

So I'd recommend not thinking about I Bonds vs. total bond... Instead I'd recommend realizing that - at some point - its more likely I Bonds and total bond.

As to the "when", given you already have I Bonds - the logical answer is when you need more bonds and can't buy any more I Bonds. Maybe that's later this year, maybe that's in 5 years...

As to the "where", definitely do not buy bonds in your Roth! If you don't have a tax - deferred space, buying them in taxable is fine. And at 12%/0% tax rate, I'd skip municipal bonds, as those will pay far less at your tax brackets (muni bonds may make sense when you are in the top tax brackets and a high tax state - nether of which currently applies to you).
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

dbr wrote: Tue Jun 22, 2021 12:56 pm
Again, no inflation risk, no duration risk, no default risk, tax deferred earnings are a good payback for possible lower real rate of return.
One quick beginner investor question. I understand bond funds pay out mainly with interest “dividends” that are taxed as income. If you reinvest that interest back into the bond fund, what is that advantage of putting bond funds in tax deferred compared to taxable. My understanding is the money would grow the same and you would pay the same amount of tax, but the only difference is you are paying along the way or paying at the end when you sell, is that correct?
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

SnowBog wrote: Tue Jun 22, 2021 1:18 pm Personally, I love I Bonds - buy as much of them as I can.

But I'm not sure they can (or should) remain your "only" bond... At some point, assuming that you want to maintain your AA, thanks to the wonder of compound interest (and that you add more to stocks than bonds annually), eventually you are not going to buy able to buy enough I Bonds to maintain your AA.

Additionally, I Bonds are not well suited for rebalancing between stocks and bonds (to maintain AA). You can obviously sell I Bonds (after 1 year), but you can't buy them back (other than annual purchase limit).

So I'd recommend not thinking about I Bonds vs. total bond... Instead I'd recommend realizing that - at some point - its more likely I Bonds and total bond.

As to the "when", given you already have I Bonds - the logical answer is when you need more bonds and can't buy any more I Bonds. Maybe that's later this year, maybe that's in 5 years...

As to the "where", definitely do not buy bonds in your Roth! If you don't have a tax - deferred space, buying them in taxable is fine. And at 12%/0% tax rate, I'd skip municipal bonds, as those will pay far less at your tax brackets (muni bonds may make sense when you are in the top tax brackets and a high tax state - nether of which currently applies to you).
Very insightful, thank you. It makes sense that I bonds alone won’t be able to keep up with stocks to maintain my AA in the future. Maybe a good strategy with interest rates being low and unknown inflation, is to buy I bonds now until I reach the point where I’ll have to buy another category of bond to maintain AA, at which point start buying VBTLX.

If other bond funds start to look promising I could always invest there prior to maxing out I bonds in regards to AA. Also, good point about difficulty with rebalancing.

It seems like I’ve received pretty consistent advice. Keep all stocks in Roth, I bonds for now cause there isn’t much better out there in the bond category.
dbr
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Re: Total bond versus I bond for retirement account

Post by dbr »

Brianjp18 wrote: Tue Jun 22, 2021 1:20 pm
dbr wrote: Tue Jun 22, 2021 12:56 pm
Again, no inflation risk, no duration risk, no default risk, tax deferred earnings are a good payback for possible lower real rate of return.
One quick beginner investor question. I understand bond funds pay out mainly with interest “dividends” that are taxed as income. If you reinvest that interest back into the bond fund, what is that advantage of putting bond funds in tax deferred compared to taxable. My understanding is the money would grow the same and you would pay the same amount of tax, but the only difference is you are paying along the way or paying at the end when you sell, is that correct?
Yes, but the tax rate that applies could be very different and therefore you do not pay the same amount of tax. In general a lot of the advantage of a 401k plan is employer match and the advantage of a Roth is tax free growth. The advantages of an IRA are more qualified in the long run. People with large taxable pensions, SS, large RMDs, etc. do not really escape all that much taxation. But the devil is in the details.
exodusNH
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Re: Total bond versus I bond for retirement account

Post by exodusNH »

Brianjp18 wrote: Tue Jun 22, 2021 1:20 pm
dbr wrote: Tue Jun 22, 2021 12:56 pm
Again, no inflation risk, no duration risk, no default risk, tax deferred earnings are a good payback for possible lower real rate of return.
One quick beginner investor question. I understand bond funds pay out mainly with interest “dividends” that are taxed as income. If you reinvest that interest back into the bond fund, what is that advantage of putting bond funds in tax deferred compared to taxable. My understanding is the money would grow the same and you would pay the same amount of tax, but the only difference is you are paying along the way or paying at the end when you sell, is that correct?
The hope is that in retirement, when you are no longer drawing an income that you'll be in a lower tax bracket and thus pay less.

Bonds are about tempering volatility and safely storing your money. Bonds aren't designed to offer substantial growth. The last number of years has been a bit unusual with decent bond returns.

At some point, $10K of ibonds will not do enough to keep your AA intact. At that point, you could look at a bond fund to make up the difference.

At 35, if you can stomach the volatility (and resist the urge to sell in a market crash), you have a higher chance of higher returns by keeping an aggressive AA. You may not need much more than $10K of bonds per year right now.

Depending on how you're paid, you might consider setting up a solo 401(k).
SnowBog
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Re: Total bond versus I bond for retirement account

Post by SnowBog »

Brianjp18 wrote: Tue Jun 22, 2021 1:32 pm Maybe a good strategy with interest rates being low and unknown inflation, is to buy I bonds now until I reach the point where I’ll have to buy another category of bond to maintain AA, at which point start buying VBTLX.

If other bond funds start to look promising I could always invest there prior to maxing out I bonds in regards to AA. Also, good point about difficulty with rebalancing.
Food for thought... It may make sense for you to continue buying I Bonds - forever (or for a long time).

While I Bonds are technically a "taxable" investment, they act like a tax-deferred investment - in that you do not need to pay taxes on interest until the bonds are sold (or reach their 30 maturity). And since you don't have tax-deferred space anywhere else, this may remain advantageous to you over time.

That said, I'm not sure you need to maximize I Bonds. Buying a mix is I Bonds and total bonds is perfectly acceptable.
exodusNH
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Re: Total bond versus I bond for retirement account

Post by exodusNH »

Brianjp18 wrote: Tue Jun 22, 2021 10:36 am One consideration is if I were to convert to total bond fund rather than Ibonds, I would have to either have it in a taxable account (I’m in 12% fed income tax; no state tax) or replace equity in Roth with total bond. I was under the impression I should fill my Roth with funds that have the most potential growth, hence all equity.

Any assistance apprecIated.
While that's true, with bond funds yielding what they are, there's not a lot of trouble keeping them in taxable. If you'd keep a savings account paying 2%, you shouldn't have an issue holding a bond fund paying 2%. (And until you have a substantial portfolio, we're not talking a lot of money, anyway. $100K in bonds would yield you $2K.)

https://www.bogleheads.org/wiki/Tax-eff ... _placement
Northern Flicker
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Re: Total bond versus I bond for retirement account

Post by Northern Flicker »

If you get paid 1099 income as an independent contractor, you can set up a SEP-IRA (virtually as easy as setting up a Roth account) or a solo 401K (more effort than a SEP-IRA) as mentioned above.

You are giving up the foreign tax credit by not holding VTIAX in a taxable account, but extending your tax-qualified space by holding i-bonds (in taxable space). i-bonds also are state-tax-free if you live in a state that taxes income.

I think holding either i-bonds or VTIAX (or both) in your taxable space is efficient. If state income tax is low or zero, I might prioritize VTIAX.
SnowBog
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Re: Total bond versus I bond for retirement account

Post by SnowBog »

I strongly suggest against this line of thought... You want to focus on the long term, and try to tune out the noise and the short term variations. If you try "chasing" after short term returns, you are almost guaranteed to underperform.
Brianjp18 wrote: Tue Jun 22, 2021 12:53 pm Cutting myself short referring to getting less return on the long run by having my bond allocation in I bonds rather than total bond fund.
Brianjp18 wrote: Tue Jun 22, 2021 1:32 pm If other bond funds start to look promising I could always invest there prior to maxing out I bonds in regards to AA.
If you have a diversified portfolio, it's almost a guarantee that one part will be out performing another part at some point. And if you start switching things around to switch to what you think is the "now better" option, you'll likely lose every time (especially as most of your investments are in a taxable account - which adds taxes as a cost on your trades).

So you want to think about "why" you want something, and then pick things that meet that need and will stand the test of time.

Presumably, you are buying bonds as you want to lower your overall risk and understand the benefits that bonds bring to this.

While I Bonds aren't the best for rebalancing (as I noted in my other post), they are exceptional at reducing other risks. They will not lose value:
  • if the markets implode
  • if interest rates explode
  • if corporations fold
Compare that with total bond, where it's less clear what will happen:
  • if the markets implode - they likely decrease slower slower than stocks, and maybe even increase if people "flee to safety", but many (including myself) were surprised in March 2020 when this wasn't occurring as expected
  • if interest rates explode - presumably they'll decrease in value, but might be offset (some) if stocks are negatively impacted and people want a less volitale asset
  • if corporations fold - presumably they'll decrease as the bonds aren't repaid, but given the large diversification of bonds held the impact is likely minor (unless it's a systemic issue causing thousands of corporations to fold)
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

[/quote]

Yes, but the tax rate that applies could be very different and therefore you do not pay the same amount of tax. In general a lot of the advantage of a 401k plan is employer match and the advantage of a Roth is tax free growth. The advantages of an IRA are more qualified in the long run. People with large taxable pensions, SS, large RMDs, etc. do not really escape all that much taxation. But the devil is in the details.
[/quote]

Ok, that’s what I thought but just wanted to clarify. Thanks 👍
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

[/quote]

At some point, $10K of ibonds will not do enough to keep your AA intact. At that point, you could look at a bond fund to make up the difference.

At 35, if you can stomach the volatility (and resist the urge to sell in a market crash), you have a higher chance of higher returns by keeping an aggressive AA. You may not need much more than $10K of bonds per year right now.

Depending on how you're paid, you might consider setting up a solo 401(k).
[/quote]

I had 80k (Not invested) in several IRAs that I converted over to one Roth and invested all of that in equity. I then had 20k I wanted to invest that was not originally planned for retirement fund. After I bought 20k in I bonds between me and my wife I then decided to dedicate the I bonds to retirement, making my AA 80/20 by default. My plan is to get back to 90/10 cause I do think at my age being aggressive is a good idea and I feel like I will stomach volatility just fine. So once my portfolio hits 200k I’ll be back at 90/10 at which point I’ll need to decide my move on acquiring more bonds.
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

Northern Flicker wrote: Tue Jun 22, 2021 1:59 pm If you get paid 1099 income as an independent contractor, you can set up a SEP-IRA (virtually as easy as setting up a Roth account) or a solo 401K (more effort than a SEP-IRA) as mentioned above.

You are giving up the foreign tax credit by not holding VTIAX in a taxable account, but extending your tax-qualified space by holding i-bonds (in taxable space). i-bonds also are state-tax-free if you live in a state that taxes income.

I think holding either i-bonds or VTIAX (or both) in your taxable space is efficient. If state income tax is low or zero, I might prioritize VTIAX.
I get paid W2 so I think my options are minimal for setting up a tax-advantaged account of some sort.

I need to read up on foreign tax credit. That is a concept I’m not familiar with.
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

SnowBog wrote: Tue Jun 22, 2021 2:21 pm If you have a diversified portfolio, it's almost a guarantee that one part will be out performing another part at some point. And if you start switching things around to switch to what you think is the "now better" option, you'll likely lose every time (especially as most of your investments are in a taxable account - which adds taxes as a cost on your trades).

So you want to think about "why" you want something, and then pick things that meet that need and will stand the test of time.

Presumably, you are buying bonds as you want to lower your overall risk and understand the benefits that bonds bring to this.

While I Bonds aren't the best for rebalancing (as I noted in my other post), they are exceptional at reducing other risks. They will not lose value:
  • if the markets implode
  • if interest rates explode
  • if corporations fold
Compare that with total bond, where it's less clear what will happen:
  • if the markets implode - they likely decrease slower slower than stocks, and maybe even increase if people "flee to safety", but many (including myself) were surprised in March 2020 when this wasn't occurring as expected
  • if interest rates explode - presumably they'll decrease in value, but might be offset (some) if stocks are negatively impacted and people want a less volitale asset
  • if corporations fold - presumably they'll decrease as the bonds aren't repaid, but given the large diversification of bonds held the impact is likely minor (unless it's a systemic issue causing thousands of corporations to fold)
Thanks for the advice and clearly highlighting the key points on I bonds versus total bond fund. You are right, I need to make a plan for the long term and commit. I’m writing a IPS currently, and that’s why I’m collecting advice from people like you to consolidate my thoughts and put it all in writing.
Bama12
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Re: Total bond versus I bond for retirement account

Post by Bama12 »

I wouldn't have any bonds at 35, I Bonds or Total Bonds.
Northern Flicker
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Re: Total bond versus I bond for retirement account

Post by Northern Flicker »

Brianjp18 wrote: In general a lot of the advantage of a 401k plan is employer match and the advantage of a Roth is tax free growth.
This is not correct. If your tax rate in retirement is the same as your tax rate while working, there is no difference. Suppose your return between now and retirement is R (expressed as a percentage). Suppose your tax rate is T (expressed as a percentage). Then if you earn P dollars and contribute to a traditional IRA, you pay no tax going in, so you have P*(1+R/100) dollars at retirement. They will be taxed at withdrawal at rate T, so that the after-tax value of the account is P*(1+R/100)*(1-T/100).

If you instead contribute the earnings to a Roth account, you first pay tax on it, so you contribute P*(1-T/100) to the Roth account. It will then grow to P*(1-T/100)*(1+R/100) when you retire, which can be withdrawn tax-free. So you have the same after-tax value. However, many retirees find that their tax rate in retirement is lower than during their working years. For them the traditional IRA results in more after-tax value than the Roth account.

The Roth contribution is superior to a taxable contribution because you pay the tax when making the contribution either way.

A maximum Roth IRA contribution typically is superior to a traditional IRA contribution because the max Roth IRA contribution is equivalent to a traditional IRA contribution that is larger than the max contribution by the above arithmetic, and you cannot do both.

But you can do both a Roth IRA contributuon and SEP-IRA (or solo 401K) contribution if your income is eligible (i.e. it is not W2 income).
Topic Author
Brianjp18
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Re: Total bond versus I bond for retirement account

Post by Brianjp18 »

Northern Flicker wrote: Tue Jun 22, 2021 11:29 pm
This is not correct. If your tax rate in retirement is the same as your tax rate while working, there is no difference. Suppose your return between now and retirement is R (expressed as a percentage). Suppose your tax rate is T (expressed as a percentage). Then if you earn P dollars and contribute to a traditional IRA, you pay no tax going in, so you have P*(1+R/100) dollars at retirement. They will be taxed at withdrawal at rate T, so that the after-tax value of the account is P*(1+R/100)*(1-T/100).

If you instead contribute the earnings to a Roth account, you first pay tax on it, so you contribute P*(1-T/100) to the Roth account. It will then grow to P*(1-T/100)*(1+R/100) when you retire, which can be withdrawn tax-free. So you have the same after-tax value. However, many retirees find that their tax rate in retirement is lower than during their working years. For them the traditional IRA results in more after-tax value than the Roth account.

The Roth contribution is superior to a taxable contribution because you pay the tax when making the contribution either way.

A maximum Roth IRA contribution typically is superior to a traditional IRA contribution because the max Roth IRA contribution is equivalent to a traditional IRA contribution that is larger than the max contribution by the above arithmetic, and you cannot do both.

But you can do both a Roth IRA contributuon and SEP-IRA (or solo 401K) contribution if your income is eligible (i.e. it is not W2 income).
That math makes sense, thanks for the follow up 👍
muel87
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Re: Total bond versus I bond for retirement account

Post by muel87 »

Brianjp18 wrote: Tue Jun 22, 2021 10:36 am I was under the impression I should fill my Roth with funds that have the most potential growth, hence all equity.
It makes no difference if you tax-adjust your asset allocation. By filling your Roth funds w/ all equity, all you are doing is skewing your asset allocation and taking on more risk than you think you are. A roth account is worth more than a taxable account after taxes, so this has to be accounted for.
secondopinion
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Re: Total bond versus I bond for retirement account

Post by secondopinion »

Bama12 wrote: Tue Jun 22, 2021 6:39 pm I wouldn't have any bonds at 35, I Bonds or Total Bonds.
I gladly bought some long-term TIPS back in October; it is a high standard to expect stocks to beat 1.75%+ real yield for over a 20+ year period. Are you thinking that there is zero point in investing in such a prospect?

Also, do you have any cash? That is a bond as well in some regards.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
muel87
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Re: Total bond versus I bond for retirement account

Post by muel87 »

secondopinion wrote: Wed Feb 08, 2023 1:15 pm I gladly bought some long-term TIPS back in October; it is a high standard to expect stocks to beat 1.75%+ real yield for over a 20+ year period. Are you thinking that there is zero point in investing in such a prospect?
What makes you think this is a high standard over 20 years?
secondopinion
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Re: Total bond versus I bond for retirement account

Post by secondopinion »

muel87 wrote: Wed Feb 08, 2023 1:34 pm
secondopinion wrote: Wed Feb 08, 2023 1:15 pm I gladly bought some long-term TIPS back in October; it is a high standard to expect stocks to beat 1.75%+ real yield for over a 20+ year period. Are you thinking that there is zero point in investing in such a prospect?
What makes you think this is a high standard over 20 years?
It is not a high standard for stocks to beat it (it is likely that they will); it is a high standard to expect stocks to beat it (as to justify not hold any long-term TIPS).

There is a difference between investing in the likely case versus investing everything in the likely case.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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