Where to place TIPS bonds

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splat789
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Where to place TIPS bonds

Post by splat789 »

I am wondering where people who are still working and purchasing TIPS bonds are placing them in their portfolio. My understanding is that it's undesirable to purchase TIPS bonds in a taxable account due to the tax drag or a Roth IRA account due to the lower expected growth than equities, so that would leave a 401K account for most people. Is it possible to rollover your bond allocation from a pretax 401K into a traditional IRA while still employed to be able to access the ability to purchase TIPS bonds?
bombcar
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Re: Where to place TIPS bonds

Post by bombcar »

An in-service rollover is sometimes offered, but usually rarely. You'd have to check.
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retired@50
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Re: Where to place TIPS bonds

Post by retired@50 »

splat789 wrote: Mon Jun 10, 2024 10:31 am ... Is it possible to rollover your bond allocation from a pretax 401K into a traditional IRA while still employed to be able to access the ability to purchase TIPS bonds?
Depends on your plan and your age. You typically have to be 59.5 years old or older.

More details here: https://www.bogleheads.org/wiki/401(k)# ... stribution

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
RyeBourbon
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Re: Where to place TIPS bonds

Post by RyeBourbon »

To buy TIPS, I waited until I retired and was able to roll my 401k to an IRA. In the meantime, my 401k offered FIPDX, an intermediate TIPS bond fund, so I used that.
Retired June 2023. LMP (TIPS Ladder/SS Bridge) 25%/Risk Portfolio 75%, AA = 60/30/10
Topic Author
splat789
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Re: Where to place TIPS bonds

Post by splat789 »

I am not over 59.5 years of age, I live in a state with no income tax, and my 401K doesn't offer a TIPS fund. What is the best option for me to purchase TIPS?
Last edited by splat789 on Mon Jun 10, 2024 11:10 am, edited 1 time in total.
Frugal WI dude
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Re: Where to place TIPS bonds

Post by Frugal WI dude »

I rolled my 401k from prior employer to Vanguard Rollover IRA Brokerage account, and have a mix of individual TIPs bonds and equity index ETFs
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dual
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Re: Where to place TIPS bonds

Post by dual »

If you live in a state with a high income tax rate, like my California, it makes sense to hold them in the taxable account where the interest and inflation adjustment are not taxed by the state. California taxes IRA distribution as ordinary income.

One way to reduce the tips taxes reporting hassle is to buy ishares ibonds tips etf’s. See these discussions

https://tipswatch.com/2023/12/03/lets- ... ips-etfs/

https://tipswatch.com/2024/05/30/ishar ... tips-etf/
bombcar
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Re: Where to place TIPS bonds

Post by bombcar »

splat789 wrote: Mon Jun 10, 2024 10:51 am I am not over 59.5 years of age, I live in a state with no income tax, and my 401K doesn't offer a TIPS fund. What is the best option for me to purchase TIPS?
Do you want to start buying them, or buy with existing assets?

You could contribute to a traditional IRA and buy them with that. A Roth isn't a horrible place to store them, and in fact if I had taxable savings and Roth savings and had to put TIPS somewhere, they'd go in the Roth, taxable VTI is pretty efficient from a cap gains/tax standpoint.
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watchnerd
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Re: Where to place TIPS bonds

Post by watchnerd »

splat789 wrote: Mon Jun 10, 2024 10:51 am I am not over 59.5 years of age, I live in a state with no income tax, and my 401K doesn't offer a TIPS fund. What is the best option for me to purchase TIPS?
Does your 401k offer an option like Fidelity's Brokeragelink that lets you buy individual stocks and bonds?

If yes, you can buy individual TIPS.

That's what I did with my 401k through Fidelity.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Topic Author
splat789
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Re: Where to place TIPS bonds

Post by splat789 »

bombcar wrote: Mon Jun 10, 2024 11:11 am
splat789 wrote: Mon Jun 10, 2024 10:51 am I am not over 59.5 years of age, I live in a state with no income tax, and my 401K doesn't offer a TIPS fund. What is the best option for me to purchase TIPS?
Do you want to start buying them, or buy with existing assets?

You could contribute to a traditional IRA and buy them with that. A Roth isn't a horrible place to store them, and in fact if I had taxable savings and Roth savings and had to put TIPS somewhere, they'd go in the Roth, taxable VTI is pretty efficient from a cap gains/tax standpoint.
Ideally I would like to reallocate at least 50% of my existing bond allocation to TIPS, and start constructing a TIPS ladder 15 years in advance of retirement.
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splat789
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Re: Where to place TIPS bonds

Post by splat789 »

watchnerd wrote: Mon Jun 10, 2024 11:12 am
splat789 wrote: Mon Jun 10, 2024 10:51 am I am not over 59.5 years of age, I live in a state with no income tax, and my 401K doesn't offer a TIPS fund. What is the best option for me to purchase TIPS?
Does your 401k offer an option like Fidelity's Brokeragelink that lets you buy individual stocks and bonds?

If yes, you can buy individual TIPS.

That's what I did with my 401k through Fidelity.
My employer uses Fidelity to manage our 401K, but I don't believe we have access to Brokeragelink.
Pdxcess
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Re: Where to place TIPS bonds

Post by Pdxcess »

If you don’t have access to Brokeragelink, that is a limitation due to your employer’s plan, not Fidelity.
Like Watchnerd, I
1. Have an employer 401k account with Fidelity
2. That account lets me move money into a “linked” brokeragelink account (fully tax deferred, same as the “regular” 401k account
3. With money in my FIDELITY Brokeragelink account, I can buy TIPS without paying a commission.
dcabler
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Re: Where to place TIPS bonds

Post by dcabler »

splat789 wrote: Mon Jun 10, 2024 10:31 am I am wondering where people who are still working and purchasing TIPS bonds are placing them in their portfolio. My understanding is that it's undesirable to purchase TIPS bonds in a taxable account due to the tax drag or a Roth IRA account due to the lower expected growth than equities, so that would leave a 401K account for most people. Is it possible to rollover your bond allocation from a pretax 401K into a traditional IRA while still employed to be able to access the ability to purchase TIPS bonds?
As others have said, usually you have to be at least 59.5 years old to do that.
Does your 401K have a brokerage option? If it does, then you need to check out whether the plan rules allow you to purchase actual bonds such as TIPS. The last thing to find out is whether your plan would allow you to roll over assets from the brokerage option "in-kind" if you think you'll ever want to roll over your 401K to an IRA in the future. That way you won't have to liquidate the bonds and re-purchase them at a later date.

Cheers.
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