Thx for the information, Ray. I have a brokerage ROTH acct at USAA and will ck w/ them to see if they can handle this. Even with some losses, my wife and I are close to our targeted balances for our VG muni funds, so my wife and I will "need" to decide where to focus new money next, and your strategy is definitely on our radar as an option. I guess a "worst case scenario" would be for us to hold the TIPS in our Treasury Direct acct and pay taxes as we go. Thx again, Steve

 

Steve,

The bogelheads are dead set against holding TIPS in a taxable account and as you most likely know one cannot buy TIPS from Treasury Direct in a tax deferred account. There must be some discussion at the bogelheads.org Theory site about holding them in a taxable account; you probably should check there.

You might try a Google search on something like "TIPS in a taxable account."

Ray

 

One more comment. To find room in my IRA I withdrew funds from my Traditional Account in the IRA and transferred that money to the SDA where I used it to buy TIPS. If you have funds in the Traditional Account in an RA, GSRA or for that matter an SRA, you could do that. I think it would be preferable to placing the TIPS in a taxable account.

One thing to remember, if you hold TIPS in any account the value of the holdings changes and as Alec has alluded to in the thread on the 20-year TIPS, I have had declines in the value of the TIPS bought last week and early this week. This is the price one pays for investing in bonds; they change as interest rates change. One has to remain focused on the fact that the daily changes are of no significance IF one plans on holding the TIPS to maturity as most do and as I plan to do. And of course if you do sell prior to the bonds maturity date, you can only get their value on the day of sale in the secondary market.

Ray

Steve,

When you hold TIPS in a taxable account, you have to pay taxes on both the coupon and the inflation adjustment every year.  However, you don't receive the inflation adjustment until the TIPS matures, or you sell it.  It's called "phantom income".

Since you're using muni bonds in your taxable account, you must be in a high tax bracket, and wouldn't probably hold fully taxable bonds [i.e. nominal treasury bonds].  Since TIPS are taxed just like nominal treasury bonds, it probably doesn't make much sense for you to hold them in your taxable account.  Thus, it'd be better to fill up your tax deferred accounts with TIPS first before holding them in the taxable account.

Fidelity and Schwab are pretty cheap from which to buy TIPS, both at auction and on the secondary market.

- Alec

Ray & Alec, Thx for your comments. I do recall that TIPS-in-taxable-acct was tax disadvantaged but it's nice to be reminded, especially the details. I need to re-read Swedroe's bonds book --  been on my to-do list for weeks -- need to give that a higher priority. Thx again. Steve

Alec, Ray, et al,

Tonight I explored the Fidelity web site some. Re fees, it states:

• Low cost – just $.50/bond online, $1/bond through a representative
• Minimum concession – $19.95/maximum concession – $500/maximum concession for maturities of 1 year or less – $50

 The ".50/bond online, $1/bond through a representative" looks very nice, but what are these "concessions"?

Thx, Steve

ADDED ON EDIT: I just read this thread at Bogleheads. I am beginning to wonder, since TIPS are a long-term investment for my wife and me and towards keeping it simple, that I should just stick with the TIPS mutual funds and accts. A few months ago, I went down this same path in terms of considering whether to purchase individual corporate bonds and decided to stick with mutual funds to keep it simple. Perhaps I am guilty of thinking too much, as there is no "perfect plan."

 

Steve,

Obviously on Monday morning you should be able to phone Fidelity and get a clarification on the fees.

I had read the thread you linked to as well as others at the bogelheads sites and did not come to the conclusion you apparently have. Don't let that concern you as you have to do what you feel is right and best for you. However, here is a quote I found this early (5:00 AM EDT) morning by valuethinker - an English or Canadian financial profession working in London is very knowledgeable on TIPS across the world and who is highly respected in the bohelheads.org Theory forum; here is his statement.

"My own view is that a near 3% guaranteed return on an investment, for the entire holding period, which is government guaranteed, is about as good a bet as financial markets ever offer." Here is the Link to it.

Ray

Steve,

I checked my Fidelity account. I have an adviser managed account and the adviser made a purchase of TIPS for me this past week in the secondary market. The history shows no commission charge. I also recently made some sales of equity and for those transactions the history does show a commission. Therefore I would conclude that in an adviser managed account there is no charge for purchase of TIPS at Fidelity.

Ray

Ray,

Thx for your follow-up. I really appreciate it. I was supposed to catch up on my sleep last night but, but instead, I stayed up til about 2am reading that thread and a few others over at the BH site and scattered around the M* site -- my wife 'll rightly chastise me but she'll forgive me AGAIN (I hope).

Somewhere somehow last night, I was left with the impression that the choice between investing in individual TIPS vs a TIPS bond fund parallels the choice between investing in high-quality individual corporate bonds vs a high-quality corporate bond fund, that is, over the long-term the downside of the fund is that its NAV will bounce around (depending mostly upon investor psychology and interest rate risk) but if the shares of the fund are held for a period roughly equal to the avg duration of the holdings, the total return should be about the same as buying individual bonds. Is that your impression too, Ray, for TIPS mutual funds?

I guess maybe I'm too fatigued to make a rational decision today, but, if the odds are that over 10 or 20  years I'll get the same return from the mutual fund (or ILB acct at TC), I'm very resistant to opening another position somewhere, BUT OTOH, if there is a high probability that my wife and I will get a boost in meeting our retirement return goals, then I am not adverse to the additional complexity in our paperwork produced by another acct (I can add columns and rows of data in Excel!).

Given our current positions elsewhere that I want to keep and the new money we anticipate, I am guessing that over the next 18 months I could come up with about $60K for TIPS in a non-tax sheltered acct but only about $20K for tax sheltered accts (ROTHs) -- perhaps this would effect your advice or expected commissions.

Thx again, Ray,

Steve

PS I'm gonna make some coffee now and then watch Stephanopolous but I'll ck back later this morning. I'm home all day today.

 

I'm also struggling with my purchase allocations. I'm now thinking of 40% CREF stock, 30% ILB, and 30% Traditional in my 403b. I intend to let those 403b funds, which include a chunk of RE, alone for RMDs down the pike. My WMA advised me to hold RE at 10% of my total holdings, down from 20%. Last year he advised me to liquidate my ILBs for RE, Traditional, and CREF stock. Now we're back to ILBs...

Even changing a response on one of those six simple-minded risk assessment questions has a dramatic impact on allocation recommendations.

Henry

 

My own view is that a near 3% guaranteed return on an investment, for the entire holding period, which is government guaranteed, is about as good a bet as financial markets ever offer." Here is the Link to it.

If you trust TIAA (which I do), then why isn't TIAA Traditional's' 3% guaranteed return plus dividends just as good or better than that?

Another bonus is that there's no headache trying to figure out what Larry Swedroe or valuthinker are saying.

Sy