What to do with 30 yr individual TIPS ladder interest?

[guppyguy]

If you have created a TIPS ladder for retirement, lets say 30 years, what do you do with the semi-annual interest payments before retirement?

Given: held in a tax-deferred account, each rung will be consumed each year in retirement, not a TIPS ETF

Just curious what people are doing here.

[Lyrrad]

You can use the coupons from later rungs to reduce the amount of earlier rungs purchased.

[Vulcan0]

Never bought tips but it seems natural that the ladder takes into account the coupon payments. For example, if I have coupon payments of $2500 in year 5 from tips that mature in subsequent years, my ladder should be set up such that I will have tips securities valued $2500 less in year 5.

No?

[watchnerd]

Mine is only 15 years long, but I use the coupons to buy missing rungs that are gaps.

[BirdFood]

For all TIPS, I prefer minimum coupon and maximum discount, to push the maximum amount to the maturity date. But the coupons that I do ge, I spend on more TIPS.

[carminered2019]

I try to look for zero coupon TIPS but the TIPS with coupons I use coupon payment to buy individual stocks or Bitcoin.

[FoundingFather]

For all TIPS, I prefer minimum coupon and maximum discount, to push the maximum amount to the maturity date. But the coupons that I do ge, I spend on more TIPS.

This is what I do as well. Although I am still a ways out, I figure that coupon payments, though small by design, will allow me to adapt my ladder a bit through the purchase of TIPS that will either fill a gap or extend/reduce the duration of my ladder, as the future becomes a bit more clear.

Founding Father

[Kbg]

Thanks for asking this question...I have the same one.

I ended up going with VTIP as a holding place. If one wanted even shorter duration there are several good short-term treasury MFs/ETFs. I haven't decided if I'm going to let VTIP just build over time or periodically roll some VTIP collectings back into individual tips.

[guppyguy]

Thanks for asking this question...I have the same one.

I ended up going with VTIP as a holding place. If one wanted even shorter duration there are several good short-term treasury MFs/ETFs. I haven't decided if I'm going to let VTIP just build over time or periodically roll some VTIP collectings back into individual tips.

That's what I'm leaning towards. I guess it depends what duration one is targeting.

I built our TIPS ladder over the last year with rising real rates so it has been easy just to use the ladder interest to buy more rungs but at some point soon we really don't need any more new TIPS rungs, however, it doesn't make sense to park the interest in something of short duration like a money market fund or T-bills when retirement is still 9 years away.

[sphinx2020]

I try to look for zero coupon TIPS but the TIPS with coupons I use coupon payment to buy individual stocks or Bitcoin.

I didn’t know zero coupon TIPS existed.. How liquid is the market and where do you buy them?

[watchnerd]

I try to look for zero coupon TIPS but the TIPS with coupons I use coupon payment to buy individual stocks or Bitcoin.

I didn’t know zero coupon TIPS existed.. How liquid is the market and where do you buy them?

They don't exist.

0.125% is the lowest coupon

[er999]

I didn’t know zero coupon TIPS existed.. How liquid is the market and where do you buy them?

They don't exist.

0.125% is the lowest coupon

I’d say 0.125% rounds down to a zero coupon, as that’s $125 in interest on a $100k bond, basically 0. The complete tips list is on the Wall Street journal site:

https://www.wsj.com/market-data/bonds/t ... _tips_full

There’s a 0.125% for 2026, 2027, 2030, 2031, 2032, 2051, and 2052.

[watchnerd]

They don't exist.

0.125% is the lowest coupon

I’d say 0.125% rounds down to a zero coupon, as that’s $125 in interest on a $100k bond, basically 0. The complete tips list is on the Wall Street journal site:

https://www.wsj.com/market-data/bonds/t ... _tips_full

There’s a 0.125% for 2026, 2027, 2030, 2031, 2032, 2051, and 2052.

Sure.

But also, actual zero coupon TIPS don't exist, which is what the poster above was asking.

We have 'near zero coupon' TIPS.

[carminered2019]

I didn’t know zero coupon TIPS existed.. How liquid is the market and where do you buy them?

They don't exist.

0.125% is the lowest coupon

Sorry, it was US treasury bonds in my taxable not TIPS.

[watchnerd]

They don't exist.

0.125% is the lowest coupon

Sorry, it was US treasury bonds in my taxable not TIPS.

Yes, 0 coupon STRIPS exist.

[hudson]

Thanks for asking this question...I have the same one.

I ended up going with VTIP as a holding place. If one wanted even shorter duration there are several good short-term treasury MFs/ETFs. I haven't decided if I'm going to let VTIP just build over time or periodically roll some VTIP collectings back into individual tips.

Same question? me too

VTIP? It depends on the duration. My ladder is around 20 years. IF I was going with an ETF, I like SCHP, a good intermediate TIPS fund.

What will I probably do? Wing it. I'll probably buy individual TIPS or nominals depending on the current conditions. I had sell part of a 2043 (age 96) rung to do a required minimum distribution (RMD); I'll likely use incoming interest to replace what I took out...as possible. I'll have to do the math. I might need cash for my 2025 RMD.

[Kbg]

Thanks for asking this question...I have the same one.

I ended up going with VTIP as a holding place. If one wanted even shorter duration there are several good short-term treasury MFs/ETFs. I haven't decided if I'm going to let VTIP just build over time or periodically roll some VTIP collectings back into individual tips.

Same question? me too

VTIP? It depends on the duration. My ladder is around 20 years. IF I was going with an ETF, I like SCHP, a good intermediate TIPS fund.

What will I probably do? Wing it. I'll probably buy individual TIPS or nominals depending on the current conditions. I had sell part of a 2043 (age 96) rung to do a required minimum distribution (RMD); I'll likely use incoming interest to replace what I took out...as possible. I'll have to do the math. I might need cash for my 2025 RMD.

VTIP duration: 2.4 years

I have a liability matched ladder in place to cover a mortgage that is effectively "paid off" now. Odds are we would be completely fine to cover the mortgage out of other funds but the mortgage interest rate is far below current rates (we got lucky in our covid/fed interest rate suppression refi). If I pay the mortgage payments with other funds, then I'll either role the maturing TIPS into VTIP or purchase the next far end TIPS year. IDK.

[hudson]

Same question? me too

VTIP? It depends on the duration. My ladder is around 20 years. IF I was going with an ETF, I like SCHP, a good intermediate TIPS fund.

What will I probably do? Wing it. I'll probably buy individual TIPS or nominals depending on the current conditions. I had sell part of a 2043 (age 96) rung to do a required minimum distribution (RMD); I'll likely use incoming interest to replace what I took out...as possible. I'll have to do the math. I might need cash for my 2025 RMD.

VTIP duration: 2.4 years

I have a liability matched ladder in place to cover a mortgage that is effectively "paid off" now. Odds are we would be completely fine to cover the mortgage out of other funds but the mortgage interest rate is far below current rates (we got lucky in our covid/fed interest rate suppression refi). If I pay the mortgage payments with other funds, then I'll either role the maturing TIPS into VTIP or purchase the next far end TIPS year. IDK.

I'll ignore the mortgage part.
If I was given that situation, I'd roll the maturing TIPS into the next far end TIPS.
Why? Below are individual TIPS advantages and VTIP disadvantages. You already knew.
No expenses
I'm in control.
If interest rates go the wrong way, I don't care because I'm holding until maturity.

[Kbg]

I'll ignore the mortgage part.
If I was given that situation, I'd roll the maturing TIPS into the next far end TIPS.
Why? Below are individual TIPS advantages and VTIP disadvantages. You already knew.
No expenses
I'm in control.
If interest rates go the wrong way, I don't care because I'm holding until maturity.

We're blessed to be discussing these things. As they say, this is a first world problem.

I'll be the first to admit I have a split mind. For example, I like the cost savings of owning TIPS directly. I also like the convenience of an ETF in terms of precision of when and how much I can sell and just not having to worry about watching and rolling bonds. I'm willing to pay a modest fee for that. The thing that matters most for my situation is the duration between VTIP and the far end bonds that would be purchased.