Savings

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Savings

Post by 6d1v7x3 » Wed Oct 09, 2019 11:18 pm

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

User avatar
Tyler Aspect
Posts: 1561
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: Savings

Post by Tyler Aspect » Wed Oct 09, 2019 11:31 pm

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.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

retired@50
Posts: 387
Joined: Tue Oct 01, 2019 2:36 pm

Re: Savings

Post by retired@50 » Wed Oct 09, 2019 11:52 pm

6d1v7x3 wrote:
Wed Oct 09, 2019 11:18 pm
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
Posts: 2042
Joined: Sun Feb 26, 2017 2:08 pm

Re: Savings

Post by H-Town » Thu Oct 10, 2019 12:02 am

6d1v7x3 wrote:
Wed Oct 09, 2019 11:18 pm
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
Posts: 272
Joined: Tue Mar 06, 2018 2:17 pm

Re: Savings

Post by fujiters » Thu Oct 10, 2019 12:04 am

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.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Re: Savings

Post by 6d1v7x3 » Thu Oct 10, 2019 12:06 am

retired@50 wrote:
Wed Oct 09, 2019 11:52 pm
6d1v7x3 wrote:
Wed Oct 09, 2019 11:18 pm
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.

Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Re: Savings

Post by 6d1v7x3 » Thu Oct 10, 2019 12:08 am

fujiters wrote:
Thu Oct 10, 2019 12:04 am
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
Posts: 32
Joined: Sat May 11, 2019 9:19 pm

Re: Savings

Post by chem6022 » Thu Oct 10, 2019 12:21 am

6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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.

Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Re: Savings

Post by 6d1v7x3 » Thu Oct 10, 2019 1:17 am

chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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
Posts: 1027
Joined: Tue Mar 04, 2014 1:33 am

Re: Savings

Post by anoop » Thu Oct 10, 2019 1:29 am

chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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.

Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Re: Savings

Post by 6d1v7x3 » Thu Oct 10, 2019 1:49 am

anoop wrote:
Thu Oct 10, 2019 1:29 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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
Posts: 1027
Joined: Tue Mar 04, 2014 1:33 am

Re: Savings

Post by anoop » Thu Oct 10, 2019 1:59 am

6d1v7x3 wrote:
Thu Oct 10, 2019 1:49 am
anoop wrote:
Thu Oct 10, 2019 1:29 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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.

Topic Author
6d1v7x3
Posts: 30
Joined: Tue Oct 08, 2019 4:28 pm

Re: Savings

Post by 6d1v7x3 » Thu Oct 10, 2019 2:07 am

anoop wrote:
Thu Oct 10, 2019 1:59 am
6d1v7x3 wrote:
Thu Oct 10, 2019 1:49 am
anoop wrote:
Thu Oct 10, 2019 1:29 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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
Posts: 1027
Joined: Tue Mar 04, 2014 1:33 am

Re: Savings

Post by anoop » Thu Oct 10, 2019 2:09 am

6d1v7x3 wrote:
Thu Oct 10, 2019 2:07 am
anoop wrote:
Thu Oct 10, 2019 1:59 am
6d1v7x3 wrote:
Thu Oct 10, 2019 1:49 am
anoop wrote:
Thu Oct 10, 2019 1:29 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am


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
Posts: 1027
Joined: Tue Mar 04, 2014 1:33 am

Re: Savings

Post by anoop » Thu Oct 10, 2019 2:32 am

anoop wrote:
Thu Oct 10, 2019 2:09 am
6d1v7x3 wrote:
Thu Oct 10, 2019 2:07 am
anoop wrote:
Thu Oct 10, 2019 1:59 am
6d1v7x3 wrote:
Thu Oct 10, 2019 1:49 am
anoop wrote:
Thu Oct 10, 2019 1:29 am


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
Posts: 312
Joined: Sat Oct 13, 2018 9:32 am

Re: Savings

Post by nix4me » Thu Oct 10, 2019 10:43 am

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

Grt2bOutdoors
Posts: 21353
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Savings

Post by Grt2bOutdoors » Thu Oct 10, 2019 11:41 am

nix4me wrote:
Thu Oct 10, 2019 10:43 am
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.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Gill
Posts: 5710
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Savings

Post by Gill » Thu Oct 10, 2019 11:53 am

6d1v7x3 wrote:
Thu Oct 10, 2019 12:06 am
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
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

User avatar
KlingKlang
Posts: 834
Joined: Wed Oct 16, 2013 3:26 pm

Re: Savings

Post by KlingKlang » Thu Oct 10, 2019 12:25 pm

6d1v7x3 wrote:
Thu Oct 10, 2019 1:17 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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.
Last edited by KlingKlang on Thu Oct 10, 2019 3:18 pm, edited 1 time in total.

Thegame14
Posts: 1261
Joined: Mon May 07, 2018 11:53 am

Re: Savings

Post by Thegame14 » Thu Oct 10, 2019 12:28 pm

6d1v7x3 wrote:
Thu Oct 10, 2019 1:49 am
anoop wrote:
Thu Oct 10, 2019 1:29 am
chem6022 wrote:
Thu Oct 10, 2019 12:21 am
6d1v7x3 wrote:
Thu Oct 10, 2019 12:08 am
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
Posts: 387
Joined: Tue Oct 01, 2019 2:36 pm

Re: Savings

Post by retired@50 » Thu Oct 10, 2019 12:52 pm

6d1v7x3 wrote:
Thu Oct 10, 2019 12:06 am
retired@50 wrote:
Wed Oct 09, 2019 11:52 pm
6d1v7x3 wrote:
Wed Oct 09, 2019 11:18 pm
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.

User avatar
greg24
Posts: 3678
Joined: Tue Feb 20, 2007 10:34 am

Re: Savings

Post by greg24 » Thu Oct 10, 2019 1:15 pm

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.

Post Reply