Investing cash safely

[ssn]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

[mega317]

You'll have to define "safe" more specifically because every single option has some type of risk. The only other option for inflation protection is TIPS. For capital preservation (not having a smaller nominal number when you're ready to use the money): savings accounts, checking accounts, money market accounts, money market mutual funds, savings bonds, treasury bills/notes/bonds, CDs, mattress.

[exodusNH]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

I Bonds and TIPS are the only inflation-protected options you have. TIPS have the risk of being worth less than face value IF you need to sell before maturity.

[22twain]

We have some cash

How much? At least a ballpark figure. $10K, $100K, $500K,...?

[mikejuss]

I suggest putting the money in a high-yield savings account.

[Morik]

Money market funds (small possibility of small loss of capital)
high yield savings accounts
Those two above may not keep up with inflation...

Purchase more I-bonds--there are a few tricks. Off the top of my head:
- Register one or more trusts. Each trust will have its own $10k/year purchase limit. I'm not well versed in trust stuff, but I think you'd probably want a revocable living trust.
- Use gifts. E.g., buy $20k (you + spouse) normally, and then buy additional I-bonds right now but as gifts. E.g., buy another $20k as gifts (one from you to spouse, one from spouse to you). Then next year (or any year in the future where you don't otherwise purchase i-bonds), deliver the bonds (which counts against the purchase limit for that year). So e.g., if you had $100k right now to invest in cash, you could buy $20k regularly, and another $80k which you 'deliver' in 2024, 2025, 2026, and 2027. (Or delay delivery and keep purchasing more in those years.)
You won't be able to cash these gift bonds out until they are delivered. But the 1 year lockout on new i-bonds starts when you buy the gift, not when you deliver it. Same with the cash-out-within-5-years interest penalty--it looks at purchase date of the gift, not delivery date.

Short term inflation linked bonds. Possibility of loss of capital, but if you stick to very short term bonds, any losses should be relatively minimal.

These two may better track inflation, but note that you get taxed on the full earnings (including earnings due to inflation).

[ssn]

We have some cash

How much? At least a ballpark figure. $10K, $100K, $500K,...?

Around 100K.

[ssn]

We have some cash

How much? At least a ballpark figure. $10K, $100K, $500K,...?

Around 100K.

[ssn]

Money market funds (small possibility of small loss of capital)
high yield savings accounts
Those two above may not keep up with inflation...

Purchase more I-bonds--there are a few tricks. Off the top of my head:
- Register one or more trusts. Each trust will have its own $10k/year purchase limit. I'm not well versed in trust stuff, but I think you'd probably want a revocable living trust.
- Use gifts. E.g., buy $20k (you + spouse) normally, and then buy additional I-bonds right now but as gifts. E.g., buy another $20k as gifts (one from you to spouse, one from spouse to you). Then next year (or any year in the future where you don't otherwise purchase i-bonds), deliver the bonds (which counts against the purchase limit for that year). So e.g., if you had $100k right now to invest in cash, you could buy $20k regularly, and another $80k which you 'deliver' in 2024, 2025, 2026, and 2027. (Or delay delivery and keep purchasing more in those years.)
You won't be able to cash these gift bonds out until they are delivered. But the 1 year lockout on new i-bonds starts when you buy the gift, not when you deliver it. Same with the cash-out-within-5-years interest penalty--it looks at purchase date of the gift, not delivery date.

Short term inflation linked bonds. Possibility of loss of capital, but if you stick to very short term bonds, any losses should be relatively minimal.

These two may better track inflation, but note that you get taxed on the full earnings (including earnings due to inflation).

I did not understand the execution of 'gift ' part. Suppose we buy $20k, how can we buy additional $20k as a gift? TreasuryDirect will not even allow, right?

[brad.clarkston]

You'll have to define "safe" more specifically because every single option has some type of risk. The only other option for inflation protection is TIPS. For capital preservation (not having a smaller nominal number when you're ready to use the money): savings accounts, checking accounts, money market accounts, money market mutual funds, savings bonds, treasury bills/notes/bonds, CDs, mattress.

T-Bills and Notes are also in that class (TIPS/I-Bonds) else you would not get face value back at maturity.

For OP: I've stopped buying CD's as that's just a fixed rate middle man. I buy T-Bills in rolling ladders on the secondary market from Fidelity.
That's the closest thing to safe money as you can get - CD's and the less "risky" funds are invested in US treasuries.

[ssn]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

I Bonds and TIPS are the only inflation-protected options you have. TIPS have the risk of being worth less than face value IF you need to sell before maturity.

Right. There have been discussions about TIPS on the forum. Given their tax structure, people were not enthusiastic about TIPS, majority favored I-bonds. I will be interested in knowing @Morik's suggestion about 'gift' I-bonds.

[Peter Foley]

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

[GMCZ71]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

[coffeeblack]

Why not a short term treasury fund like VUSXX?

[evelynmanley]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

Harry Sit's articles are great:

Buy I Bonds as a Gift: What Works and What Doesn’t
https://thefinancebuff.com/buy-i-bonds-as-gift.html

Deliver I Bonds Bought as a Gift in TreasuryDirect
https://thefinancebuff.com/deliver-i-bo ... irect.html

Archives of his other articles about I-Bonds: https://thefinancebuff.com/tag/i-bonds

[ssn]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

If I understand correctly, the gift I bonds are counted towards the limit of the recipient. So, if I gift $10k to my spouse, she cannot buy $10k bonds for her in the same year. If this is true, then we are back to where I started i.e. $20k limit for the couple (barring formation of trust of course).

[GMCZ71]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

If I understand correctly, the gift I bonds are counted towards the limit of the recipient. So, if I gift $10k to my spouse, she cannot buy $10k bonds for her in the same year. If this is true, then we are back to where I started i.e. $20k limit for the couple (barring formation of trust of course).

You have already bought this year for $20k. You buy today another $20k $10k gift in your account for wife and she buys $10k in her account for you. You gift those next January 2024 to each other... You can buy for 2025 now if you wish. You earn interest from today on all gifts.

[brad.clarkston]

Why not a short term treasury fund like VUSXX?

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

[HanSolo]

We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Why not a short term treasury fund like VUSXX?

I use VUSXX in taxable (Vanguard Treasury Money Market). In my IRA, I have Vanguard Short-Term Inflation-Protected (VTAPX, available at any brokerage as VTIP). I also have SWVXX at Schwab (Value Advantage Money Fund). I think it's ok.

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

For some, the difference is in the "noise" range (possibly worth less than the time involved in managing rolling ladders).

[Flight Plan]

I see this thread was started some time ago. I just want to draw attention to a divergence of meaning here. Yes, it's me being picky.

The title, "Investing Cash Safely" is a 3-way oxymoron. No, really! Cash is short term; you don't invest it, and you most certainly don't "invest it safely". You put it into a safe vehicle until you're going to invest it. But you don't "invest it safely" and then continue to think of it as "cash". Maybe I'm off here, but yeah this bugged me a bit.

And then there's this. I've heard and read this sentiment several times here on BH since Covid, and now I can't keep quiet on it anymore. I just can't keep doing that like nothing is off-kilter.

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

I'm sorry, but I must not understand the meaning of "not noticeable" after all these years of living on this blue ball of water and rock. By this point in time, I don't understand how ANYBODY does "not notice" inflation and the loss of buying power. Really? Everything has gone up 12% to 24% since the shutdowns. Everything includes insurance, food, college, housing, energy, clothing, medicine, and more. Maybe nobody does budgets anymore? Maybe nobody compares their current budget to their year-ago budget? Maybe nobody does a comparison and goes "oh carp, where is my money going?"

I am not a pauper. I could retire today if I had to. But man oh man, even if my investments were an order of magnitude more than they are, and even if the stock market and all my investments had been industriously and obscenely thriving since the beginning of 2021, I assure you, loss of buying power on this order since 2021 would certainly not be "not noticeable" to me.

Unless I were not doing a budget or just not paying attention to the numbers in my own situation. I'm not picking on you per se, Peter, but how do so many people not see a problem with inflation here?

[dukeblue219]

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

I'm sorry, but I must not understand the meaning of "not noticeable" after all these years of living on this blue ball of water and rock. By this point in time, I don't understand how ANYBODY does "not notice" inflation and the loss of buying power. Really? Everything has gone up 12% to 24% since the shutdowns. Everything includes insurance, food, college, housing, energy, clothing, medicine, and more. Maybe nobody does budgets anymore? Maybe nobody compares their current budget to their year-ago budget? Maybe nobody does a comparison and goes "oh carp, where is my money going?"

I am not a pauper. I could retire today if I had to. But man oh man, even if my investments were an order of magnitude more than they are, and even if the stock market and all my investments had been industriously and obscenely thriving since the beginning of 2021, I assure you, loss of buying power on this order since 2021 would certainly not be "not noticeable" to me.

Unless I were not doing a budget or just not paying attention to the numbers in my own situation. I'm not picking on you per se, Peter, but how do so many people not see a problem with inflation here?

I'm not following. The post you replied to specifically mentioned keeping up with inflation to within a percent or two. Nowhere does it say inflation is not noticeable.

[Charles Joseph]

T-Bills or CDs through your Brokerage? At Fidelity and Vanguard there is no commission. If you, say, keep three months' expenses in cash, then put the rest in three month T-Bills, you wouldn't be stuck having to sell prior to maturity, perhaps at a (albeit likely small) loss.

I use Fidelity and it's super easy. Couple of clicks.

[coffeeblack]

Why not a short term treasury fund like VUSXX?

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

I think HanSolo answered the question well.

[radiowave]

FYI, Ally bank has a 4.75 no withdrawal penalty CD that may meet the OPs objective.

[dogagility]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

To keep up with inflation in "safe" investments, your choices are I-bonds and TIPS.

With 100K to invest, you could make I-bond "gift" purchases right now with the entire amount. You would pay no tax on the growth of the money until the time you redeemed the I-bonds. However, you can't sell these gifts until after they gifted to the person each year. Do you want to lock up this money for that amount of time?

If you know when you want to spend this money, then purchasing individual TIPS bonds with maturity dates matched to that spending timeline is another option. TIPS yields currently are higher than the current I-bond yields, which may make up any tax difference between I-bonds and TIPS. Assuming you can approximate the time when you will spend this money to individual TIPS maturity dates, I would put this money in TIPS.

[ssn]

I see this thread was started some time ago. I just want to draw attention to a divergence of meaning here. Yes, it's me being picky.

The title, "Investing Cash Safely" is a 3-way oxymoron. No, really! Cash is short term; you don't invest it, and you most certainly don't "invest it safely". You put it into a safe vehicle until you're going to invest it. But you don't "invest it safely" and then continue to think of it as "cash". Maybe I'm off here, but yeah this bugged me a bit.

And then there's this. I've heard and read this sentiment several times here on BH since Covid, and now I can't keep quiet on it anymore. I just can't keep doing that like nothing is off-kilter.

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

I'm sorry, but I must not understand the meaning of "not noticeable" after all these years of living on this blue ball of water and rock. By this point in time, I don't understand how ANYBODY does "not notice" inflation and the loss of buying power. Really? Everything has gone up 12% to 24% since the shutdowns. Everything includes insurance, food, college, housing, energy, clothing, medicine, and more. Maybe nobody does budgets anymore? Maybe nobody compares their current budget to their year-ago budget? Maybe nobody does a comparison and goes "oh carp, where is my money going?"

I am not a pauper. I could retire today if I had to. But man oh man, even if my investments were an order of magnitude more than they are, and even if the stock market and all my investments had been industriously and obscenely thriving since the beginning of 2021, I assure you, loss of buying power on this order since 2021 would certainly not be "not noticeable" to me.

Unless I were not doing a budget or just not paying attention to the numbers in my own situation. I'm not picking on you per se, Peter, but how do so many people not see a problem with inflation here?

I highly appreciate the insightful critique of my use of terms and the suggestions! This is why I I ask my personal finance questions here.

[ssn]

Thank you folks. These are some great inputs for me to think about.

[brad.clarkston]

Why not a short term treasury fund like VUSXX?

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

I think HanSolo answered the question well.

We will have to agree to disagree, "noise" is not a financial term and "because I'm lazy" is not a reason.

[coffeeblack]

Why not a short term treasury fund like VUSXX?

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

I think HanSolo answered the question well.

We will have to agree to disagree, "noise" is not a financial term and "because I'm lazy" is not a reason.

Ok. Take care.

[Morik]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

If I understand correctly, the gift I bonds are counted towards the limit of the recipient. So, if I gift $10k to my spouse, she cannot buy $10k bonds for her in the same year. If this is true, then we are back to where I started i.e. $20k limit for the couple (barring formation of trust of course).

The gift counts towards their limit when you deliver it, not when you buy it. It starts earning interest as soon as you buy it.

As an example, consider a couple who wanted to invest $60k/year into i-bonds for the next 10 years.
$10k each normally.
$20k in gifts to the other spouse (each)

Do this for 10 years.
Then over the following 20 years, you deliver one of the gift i=bonds to each other per year (and do not buy more i-bonds, as this will take up your purchase allowance of $10k/year).

Note that you can't sell the bond until it is delivered.

In this way you could, e.g., frontload $600k in ibonds over 10 years and then you get 10 years of $60k bonds maturing (in years 31-40).
This could be one way to bridge a gap between retirement and social security, for example.

[Arboecars]

Reasonable minds will certainly differ about the direction of the market.

For perspective, you may wish to watch the highly recommended PBS program called, PBS Frontline: Age of Easy Money (Full Documentary)about the current financial situation, to gain some perspective on the economy.

It is sober, free, informative, and non-political.

https://www.youtube.com/watch?v=EpMLAQbSYAw

[lgb]

I see this thread was started some time ago. I just want to draw attention to a divergence of meaning here. Yes, it's me being picky.

The title, "Investing Cash Safely" is a 3-way oxymoron. No, really! Cash is short term; you don't invest it, and you most certainly don't "invest it safely". You put it into a safe vehicle until you're going to invest it. But you don't "invest it safely" and then continue to think of it as "cash". Maybe I'm off here, but yeah this bugged me a bit.

And then there's this. I've heard and read this sentiment several times here on BH since Covid, and now I can't keep quiet on it anymore. I just can't keep doing that like nothing is off-kilter.

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

I'm sorry, but I must not understand the meaning of "not noticeable" after all these years of living on this blue ball of water and rock. By this point in time, I don't understand how ANYBODY does "not notice" inflation and the loss of buying power. Really? Everything has gone up 12% to 24% since the shutdowns. Everything includes insurance, food, college, housing, energy, clothing, medicine, and more. Maybe nobody does budgets anymore? Maybe nobody compares their current budget to their year-ago budget? Maybe nobody does a comparison and goes "oh carp, where is my money going?"

I am not a pauper. I could retire today if I had to. But man oh man, even if my investments were an order of magnitude more than they are, and even if the stock market and all my investments had been industriously and obscenely thriving since the beginning of 2021, I assure you, loss of buying power on this order since 2021 would certainly not be "not noticeable" to me.

Unless I were not doing a budget or just not paying attention to the numbers in my own situation. I'm not picking on you per se, Peter, but how do so many people not see a problem with inflation here?

I can answer your concerns for you. The answer is, you already know the answer as you stated what it is 'everyone else' is not doing, that you obviously are doing. There is no budget, there is no year to year comparison....so all the things 'you notice' go 'unnoticed' by those that aren't do that. Leading to the questions you are baffled by. It is the reason why 'common sense' folks like Dave Ramsey are popular to many, because he literally is stating things they're 'not doing' and don't understand or even question whether it may make some rudimentary sense.

I applaud you for your obvious efforts and end results. It is just that there are so many not anywhere close to that, that need the help from someone like you to guide them and teach them and share your experience. However - not all people are good teachers as they think it is too obvious and can't get over why others don't understand. You might be in that camp or you might be a great teacher! But you're absolutely correct!

[lgb]

I see this thread was started some time ago. I just want to draw attention to a divergence of meaning here. Yes, it's me being picky.

The title, "Investing Cash Safely" is a 3-way oxymoron. No, really! Cash is short term; you don't invest it, and you most certainly don't "invest it safely". You put it into a safe vehicle until you're going to invest it. But you don't "invest it safely" and then continue to think of it as "cash". Maybe I'm off here, but yeah this bugged me a bit.

And then there's this. I've heard and read this sentiment several times here on BH since Covid, and now I can't keep quiet on it anymore. I just can't keep doing that like nothing is off-kilter.

I buy CD's. Through my brokerage account I can choose from a number of banks and create a ladder.

Admittedly, my goal is only to keep pace with inflation. Staying within a percentage point or two over a short term (1-3 years) is close enough. What little buying power I lose will not be noticeable.

I'm sorry, but I must not understand the meaning of "not noticeable" after all these years of living on this blue ball of water and rock. By this point in time, I don't understand how ANYBODY does "not notice" inflation and the loss of buying power. Really? Everything has gone up 12% to 24% since the shutdowns. Everything includes insurance, food, college, housing, energy, clothing, medicine, and more. Maybe nobody does budgets anymore? Maybe nobody compares their current budget to their year-ago budget? Maybe nobody does a comparison and goes "oh carp, where is my money going?"

I am not a pauper. I could retire today if I had to. But man oh man, even if my investments were an order of magnitude more than they are, and even if the stock market and all my investments had been industriously and obscenely thriving since the beginning of 2021, I assure you, loss of buying power on this order since 2021 would certainly not be "not noticeable" to me.

Unless I were not doing a budget or just not paying attention to the numbers in my own situation. I'm not picking on you per se, Peter, but how do so many people not see a problem with inflation here?

I can answer your concerns for you. The answer is, you already know the answer as you stated what it is 'everyone else' is not doing, that you obviously are doing. There is no budget, there is no year to year comparison....so all the things 'you notice' go 'unnoticed' by those that aren't doing that. Leading to the questions you are baffled by. It is the reason why 'common sense' folks like Dave Ramsey are popular to many, because he literally is stating things they're 'not doing' and don't understand or even question whether it may make some rudimentary sense for them to do, and then they realize they can actually do that and it will help them if they do so. Those are things you obviously know very well and similarly have led to your success!

I applaud you for your obvious efforts and end results. It is just that there are so many not anywhere close to that, that need the help from someone like you to guide them and teach them and share your experience. They need the, 'glad you asked or showed interest, let me show you how it worked for me!' ... not the opposite that prevents them from asking the question which would be like 'how could you not know?????, were you raised in a barn???' ... the thought of course comes to mind, but it has low value. However - not all people are good teachers as they think it is too obvious and can't get over why others don't understand. You might be in that camp or you might be a great teacher if given an enabling perspective to create that change for others! But you're absolutely correct!

[RubyTuesday]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

I Bonds and TIPS are the only inflation-protected options you have. TIPS have the risk of being worth less than face value IF you need to sell before maturity.

Right. There have been discussions about TIPS on the forum. Given their tax structure, people were not enthusiastic about TIPS, majority favored I-bonds. I will be interested in knowing @Morik's suggestion about 'gift' I-bonds.

TIPS tax structure is no different than CDs, but you are earning a real return before tax as opposed to a nominal return.

[hudson]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

I'll assume that capital preservation means long term...maybe 10 years?
half individual 10 year TIPS
half 10 year individual treasuries
Will the value of these go up and down? yes unless you hold until maturity.

or
half SCHP a 6.6 year effective duration and low expense TIPS ETF
half VGIT a 5.2 year average duration and low expense treasury ETF
Can these ETFs go up and down? yes

If you don't like holdings going up and down due to interest rate changes or market forces, go with CDs.

[aghusker]

Hello,

My wife and I have 60/40 portfolio in a brokerage account. We both work. We have some cash which we would like to invest safely (meaning capital preservation and inflation protection).

Note that we buy I-bonds every year but because we can buy only $20k between the two of us, it is not adequate. We have the money in big banks and they pay close to nothing. I want to change that picture so I created few CDs at Barclays but I don't want to go overboard (i.e. exceeding FDIC limit in one bank).

I think my choices are CDs or money market funds or else?
What are my options and pros and cons of them?

I Bonds and TIPS are the only inflation-protected options you have. TIPS have the risk of being worth less than face value IF you need to sell before maturity.

Right. There have been discussions about TIPS on the forum. Given their tax structure, people were not enthusiastic about TIPS, majority favored I-bonds. I will be interested in knowing @Morik's suggestion about 'gift' I-bonds.

TIPS tax structure is no different than CDs, but you are earning a real return before tax as opposed to a nominal return.

It’s very different. CDs pay you income that is taxed. TIPS taxes your principal, without paying any income.

[rockstar]

I'd ladder TIPS. For anything less than a year, I'd buy t bills. You can get maturity dates less than 5 years on the secondary market for TIPS. You want to hold them to maturity given that rates have generally been going up to get the inflation protection before taxes. They're likely to go negative if rates continue to climb in the short term. t bills currently aren't keeping up with inflation, but if you want to sell before maturity, you'll more likely to be in the green selling t bills early than TIPS early.

I'd avoid CDs that are callable. And I wouldn't go past the $250k mark in any single bank. After taxes, you might find t bills and TIPS a better deal since you don't have to pay state taxes. They're also should be easier to sell early. Treasury market generally has more depth.

[ssn]

https://www.treasurydirect.gov/indiv/he ... /how-do-i/

To buy gift savings bonds, follow these instructions:
How do I deliver a gift savings bond?

If I understand correctly, the gift I bonds are counted towards the limit of the recipient. So, if I gift $10k to my spouse, she cannot buy $10k bonds for her in the same year. If this is true, then we are back to where I started i.e. $20k limit for the couple (barring formation of trust of course).

The gift counts towards their limit when you deliver it, not when you buy it. It starts earning interest as soon as you buy it.

As an example, consider a couple who wanted to invest $60k/year into i-bonds for the next 10 years.
$10k each normally.
$20k in gifts to the other spouse (each)

Do this for 10 years.
Then over the following 20 years, you deliver one of the gift i=bonds to each other per year (and do not buy more i-bonds, as this will take up your purchase allowance of $10k/year).

Note that you can't sell the bond until it is delivered.

In this way you could, e.g., frontload $600k in ibonds over 10 years and then you get 10 years of $60k bonds maturing (in years 31-40).
This could be one way to bridge a gap between retirement and social security, for example.

Very precise and insightful, thanks!

[UpperNwGuy]

Why not a short term treasury fund like VUSXX?

Why would I pay 0.09% ER for T-Bills? Save the ER and buy a rolling ladder yourself.

I would hate managing a rolling ladder of T-Bills. I am willing to pay the ER to have a fund do it for me.