Personal Investments • Are IBonds still a decent investment?

hope this is not too far of a digression, but since the question remains whether IBonds are a decent investment, it seems we need specify:
a) for whom
b) when

with that in mind, I would like to ask a very general question, followed by a somewhat more specific:

1. In general, what allocation should IBonds receive 5 years away from a 35 year retirement?

2. I guess my real question is when do IBonds make the most (and least) sense? And where might the OP's situation fit on that continuum? (It mirrors mine.) Can we generalize about how IBonds fit the following hypothetical that probably represents a good number of Bogleheads: couple, aged 59/60 and 3-5 years from retirement. One partner works part-time with no access to tax-advantaged accounts. They hold:

• large enough nest egg of tax advantaged that could lead to high RMD later in life, majority equity

• decently funded Roth accounts, say 10% of portfolio, with more conservative allocation, expected to be used as bridge to SS, unless it makes more sense to spend down either tax-advantaged or taxable to reduce future income taxes and defer taking SS longer

• tax advantaged fixed income/Bond ballast/short term reserves, say 1/3 of total: composed of what?

• taxable accounts, small relative to tax-advantage at this point, say one quarter of total portfolio, generally holding equities for tax efficiency, but annual income after expenses (including Roth) will allow purchase of IBonds or equivalent in TIPS, equities, etc.

Assuming our retirees have favorable markets, how might they maximize tax efficiency? do IBonds fit the plan? Would IBonds be a good choice for a cash anchor on the taxable side, allowing them to ride out any rough seas that might otherwise force them to sell equity and correlated bond holdings below desired point? But would short term treasuries not do that too?

Someone above mentioned a lack of tax advantaged space for bonds as a good reason for buying IBonds. What is the best strategy when a partner has no access to retirement benefits, currently using up all the space in Roth? Does it make more sense to buy IBonds then or do the after-tax returns still point to TIPS even if held in taxable? is it reasonable to start buying equities in taxable instead while slowly shifting tax-advantaged to higher bond balances to maintain AA?

Sorry if this is too much, but trying to understand the Fixed Income arena, and it does seem to come down to taxes and risk management/tolerance and therefore asset allocation, and figuring out which instruments do what best (or "well enough" I have learned ).

Statistics: Posted by mnr3 — Mon Jul 22, 2024 12:55 pm — Replies 59 — Views 6657

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