quote:

Originally posted by old rugged cross:
As confirmed by the posts in your thread Bald. No really good options.

With interest rates on the rise I would think you could find something that would get you 3%. But I would use something local for an institution.

I really hesitate here but we're talking about IRS mandated withdrawals from 401k (in my case Federal TSP fund). Returns there have been good and fees negligible. But the withdrawals and other non-emergency accessible funds in need of a better home are well into the higher category you cite. Hence the quest.

3%? I wish. Best is still ±0.5%. If you're seeing that where you are please email me info.

Nothing safe that can beat todays inflation rate. Most are also taxable income each year to add to the pain.

quote:

Originally posted by 220-9er:
Nothing safe that can beat todays inflation rate. Most are also taxable income each year to add to the pain.

Sadly quite true, not to mention extremely frustrating.

Penfed has the best CD rates I've found

https://www.penfed.org/account...y-market-certificate

quote:

Originally posted by RogueJSK:
Continue until interest rates rise enough and inflation falls enough that it makes sense to cash out your I Bonds and stick them in something else like a better-performing future CD with a higher rate.

Not usual that Rogue misses something. In this theory, the problem is that your income is taxable. If you cash it out, you get to pay income tax on the earnings.

My primary retirement investment has been I bonds for the last 22 years. Back then you could stuff $30,000 a year in them. That worked well for us all these years. Except that in 2030 they stop earning. It means I'll take a bad tax hit, and so will my wife.

Back to the $10,000 limit, it goes to $15,000 if purchases "on line". The reason its not as good as it was is because the interest is a 2 part thing. While its good now, you get no fixed rate. Still pretty attractive if you've to the funds to put there.

quote:

Originally posted by rburg:
In this theory, the problem is that your income is taxable. If you cash it out, you get to pay income tax on the earnings.

... You'd also be paying taxes on any realized gains from just about any other source, whether that's interest from a savings account, interest from a CD, capital gains from stocks, income from investment property, etc. You always have to pay the piper. (With a few exceptions, like withdrawing gains from investments within a Roth IRA after age 59.5.)

If you can be making significantly more money elsewhere, like if inflation drops and interest rates rise to the point where something like a CD is outperforming I-Bonds again, it will often make sense to cash them out and roll the funds into the better performing option. (Keep in mind that I Bonds can drop to earning 0% if there's negative inflation during that time period... But we're a long way off from a negative inflation period with our economy right now.)

You could potentially delay cashing some of them out, such as if you want to stagger out your redemptions to lessen your immediate tax burden, for example because you're teetering on the cusp of a cutoff for a certain tax break and that additional income this year would put you over the limit. But sitting on future I Bonds earning 0% indefinitely, simply because you don't want to pay any taxes, is going to be a losing proposition.

Also, unlike many other investments, interest earnings from cashing out an I Bond are exempt from state and local income taxes. You only pay federal tax on I Bond gains.

quote:

Originally posted by rburg:
Back to the $10,000 limit, it goes to $15,000 if purchases "on line".

That is not accurate. As I detailed above, the annual limit per person on I Bonds is $10k in bonds purchased online through TreasuryDirect.

Then there's the possibility of an additional $5k in paper I Bonds that you can purchase through a federal tax refund, for a potential total annual acquisition of $15k for an individual. (This tax refund method is actually the only way to get paper I Bonds nowadays.)

You cannot simply purchase $15k in I Bonds online through Treasury Direct. Unless you're talking about buying for both yourself and your spouse, in which case the annual purchase limit would be $20k total ($10k each) online through Treasury Direct.

This message has been edited. Last edited by: RogueJSK,

Inflation is back, and nobody wants to do what it would take to stop it, not in an election year.

And with inflation back in the picture it's hard to recommend a 'safe' strategy that ensures safety of principal while guaranteeing losing ground to inflation.

What I'd recommend to the OP is doing some research on historical rates of returns, with the goal of getting comfortable with putting a portion of this into US equities.

As you will find, stocks can, and usually do, keep even with and outpace inflation over medium to long terms, and far outperform bonds for that matter.

Depending on your situation, and when you will need to draw on this cash and the number of years you need to make it last/experience inflation, the amount of equity exposure would vary.

It may be that you don't have much investing experience. But this does not have to be about stock-picking or timing.

As a straw man, putting 20% into a low expense, well diversified ETF focused on the US market (maybe S&P 500 like SPY?) could up your effective return while keeping you very liquid and letting you sleep at night. And however much you would need to put into that part of your portfolio, you don't have to put it all in at the same time - one way to do that is 'dollar-cost averaging'.

Anyway, welcome to the not-so-roaring 20s.

I'm 71 and staying in the stock market. Dogs of the Dow theory will make you money - modify to suit yourself. I look for dividend aristocrats (stocks that have raised their dividend annually for the past consecutive 25 years) and another criteria is how did they handle dividends in 2008-09. If they cut or suspended div then I'm more cautious.

https://www.fool.com/investing...ividend-aristocrats/

I like Walgreens WBA @ $43 +- paying 4.4% and Intel INTC @ 45 +- pays over 3% div on today's market and dividends are taxed favorably

quote:

Originally posted by joel9507:
It may be that you don't have much investing experience.

Absolutely none.

Neither my having to learn and invest significant time to manage such investments, or pay someone else to do it for me is attractive let alone fits my current quality of life situation.

I maxed out my TSP contributions from the start and aside from selecting the distribution of funds in my account among the very few category options, that was the extent of my involvement with stocks and bonds.

Yeah I know. But my life's demands mandated other paths.

What you seek does not exist. 100% safe, very simple, high returns.

There are some paths which will improve returns but have more than zero risk. The TIPs funds is about the safest but if you need access to $$ immediately you could be at a moment when it is down. But TIPs have good returns and very little downside compared to any other choice, and give you quick access if you should need the cash fast.

The Bogle 3-fund strategy is super easy and as diversified as possible. More short-term volatility than TIPs but over longer term is a winning strategy.

At this time, you would do well to do automated monthly purchases of either TIPs funds or the Bogle idea. This way you greatly reduce volatility compared to buying in one large chunk each year. If you time horizon is more than 2-3 years before wanting to access the money, your returns should be quite good. Longer time = lower risk.

If your priorities are safety and simplicity, you are stuck with CD and similar choices. Nothing wrong with those priorities.

Previously I had to look up TIPS and found that was a mutual fund. Now "Bogle-3"? I have no clue. Again I have never played with investments and the game plans and terminology may as well be Greek.

quote:

Originally posted by bald1:

quote:

Originally posted by 220-9er:
Nothing safe that can beat todays inflation rate. Most are also taxable income each year to add to the pain.

Sadly quite true, not to mention extremely frustrating.

So let's say you make $100.00 extra and end up having to pay taxes on it, say $10.00.

You're still ahead $90.00 so where's the pain?

quote:

Now "Bogle-3"? I have no clue

^^^^^^^^^^^
After John Bogle the guy who started the funds. What is missing here is that YOU need to be able to sleep at night and understand your investments. If you do not you are making a mistake. Savings bonds are not a bad idea. There is a slight penalty for cashing out early but they are safe.

Likely your biggest loss is the taxes you pay on the required withdrawals. Here are some ideas, but not knowing your details these are just tossed out there. You might benefit from talking with an independent financial advisor who isn't selling anything. I think Dave Ramsey's referrals on his website will be those kind of people.

Assuming you aren't expecting to need the money any time soon, or perhaps at all...

If you donate currently to charities or plan to leave $ to charity, give now via Qualified Charitable Distribution. This counts towards your minimum withdrawal from the retirement account but totally avoids taxes. Thus the charity gets more and you pay less tax.

If you have kids or grand-kids, start disbursing to them in ways that are beneficial to them. In the past 3 years we've done the following: paid for a swimming pool heater, paid for new windows in an old house, given a good used car we weren't using any more, helped with the down payment on a first home, rented a large vacation home and paid airfare for the kids.

You might match retirement savings of adult children/grandchildren, to encourage them to save.

Education savings for grandchildren (requires good guidance to get this one right).

So far we don't detect any entitlement from the kids due to our gifts. But admittedly we stay alert to the possibility.

There may be tax savings if you withdraw more but not over particular amounts. This is complicated and needs a financial advisor to calculate. You may save on future taxes.

ROTH conversion might make sense when looking out a few years.

Buy yourself something nice that you've wanted, rather than being frugal all the time and using something that is worn or out of date.

There is value to money being used now to benefit you or others. If you expect to be eventually giving it away, maybe giving some now would bring joy.

The Bogle 3-fund strategy is super simple and flexible.

Basically you buy widely diversified mutual funds. Two are stock funds, one is bonds. The stock funds would be major indexes like the S&P 500 and perhaps a similar European fund. The bond fund might be TIPs ( my choice right now) or a diversified government/corporate bond fund.

Through any brokerage you can automate it. Transfer from your retirement account into the brokerage, and they buy the 3 funds. Choose any big brand name, they all do a good job at the index funds.

The funds are very diversified, so you get the average market.

You can choose any division between the funds. Maybe 1/3rd in each. Or maybe half in bonds, 30% in the US stocks, and 20% in the European stocks.

Statistically, this strategy works well with just about any split in % because it is so widely diversified. The use of 3 funds mitigates volatility because they don't all go up or down at the same time. If your timeline is 2-3 years or longer this is as immune to bad outcomes as any investment strategy.

This is a good strategy for monies you want to grow but don't need immediately. Any living expenses or emergency fund monies should be in something like a bank account, which is safe but doesn't grow.

The S&P500 is not diversified in that it’s heavily weighted in certain sectors and stocks. For example, tech stocks make up 25% of the value and the 10 largest holdings make up 27% of the value. Link

Yep. A 3 fund portfolio would generally have a widely diversified Total US Stock Market Index Fund (not just a much less diversified S&P500 index fund), along with a Total US Bond Market Index Fund and a Total International Stock Market Index Fund.

See https://www.bogleheads.org/wik...fund_lazy_portfolios and https://www.bogleheads.org/wiki/Three-fund_portfolio

Each index has pros and cons, but many of them track with each other. The S&P500 charts look substantially the same as the Russell 2000, Schwab 1000, and NASDAQ. While I wouldn't advocate the NASDAQ for a 3-fund portfolio, any of the others would suffice for the domestic stock portion. (And the NASDAQ historically doesn't look too bad for the most part).

There are infinite ways to build indices. How they are weighted, what is included or excluded, etc. With a 3 fund type of portfolio the goal is to approximate "the market" in 3 different arenas that each over time have good track records for growth. US, foreign, and bond. Which exact indices don't matter really. Time in the market reduces risks substantially.

For most people with a timeline of say 10+ years, it is far more important to just start putting $ into something similar to any of these indices than doing nothing. Bogle provides for as much or as little individual meddling as a person desires.

quote:

Originally posted by Fly-Sig:
With a 3 fund type of portfolio the goal is to approximate "the market"

The S&P500 charts look substantially the same as the Russell 2000, Schwab 1000, and NASDAQ. While I wouldn't advocate the NASDAQ for a 3-fund portfolio, any of the others would suffice for the domestic stock portion.

The S&P 500 is not "the market", the NASDAQ is not "the market", the Russell 2000 is not "the market", etc. Those are just small subsets of the overall market.

The Entire Market is the market.

Therefore Bogle 3 Fund Portfolios will use a Total Stock Market fund like VTSMX or SWTSX as the single fund for the portfolio's domestic stock market exposure. Not just a S&P 500 index like VFINX or SWPPX.

A Bogle 3 Fund Portfolio will consist of these 3 index funds:
-One to approximate the entire US stock market (not just a subset like the S&P500)
-One to approximate the US bond market
-One to approximate the international stock market.

If you were to go with just a S&P 500 Index Fund as your US stock portion of your portfolio, you would no longer be fully diversified within US stocks, and you'd be overexposed to certain companies and certain industries as pointed out by trapper189.

quote:

Originally posted by RogueJSK:

quote:

Originally posted by Fly-Sig:
With a 3 fund type of portfolio the goal is to approximate "the market"

The S&P500 charts look substantially the same as the Russell 2000, Schwab 1000, and NASDAQ. While I wouldn't advocate the NASDAQ for a 3-fund portfolio, any of the others would suffice for the domestic stock portion.

The S&P 500 is not "the market", the NASDAQ is not "the market", the Russell 2000 is not "the market", etc. Those are just small subsets of the overall market.

The Entire Market is the market.

Therefore Bogle-style 3 Fund Portfolios will use a Total Stock Market fund like VTSMX or SWTSX as the single fund for the portfolio's US stock market exposure. Not just a S&P 500 index like VFINX or SWPPX.

To put it another way, a Bogle 3 Fund Portfolio will consist of these 3 index funds:
-One to approximate the entire US stock market (not just a subset like the S&P500)
-One to approximate the US bond market
-One to approximate the international stock market.

With variations among the percentage allocated to each, depending on your individual preferences and risk tolerance, with a common spread being something like 60% US stock index, 20% international stock index, and 20% bond index.


A Bogle 3 Fund Portfolio is not something like:
-One S&P 500 Index Fund
-One Schwab 1000 Index Fund
-One Russell 2000 Index Fund

Sure, that's a portfolio that contains 3 funds, but it's only representing a small subset of the entire US stock market, so it is not fully diversified even within US stocks, and is overexposed to certain stocks and certain industries as pointed out by trapper189. In addition, it has zero exposure to the international or bond markets so it is not diversified at all outside of US stocks.

Therefore, it is not a Bogle 3 Fund Portfolio.

To repeat what you quoted from me, all of those indices correlate very closely, and all approximate "the market", at least for stocks in the USA. The S&P500 will work fine to achieve the goal, since it tracks other market indices quite well. So will the Schwab 1000 or Russell 2000. If one wants to be purist, go with a total market fund, but the results won't be different.

Bogle provides for individual tailoring, such as choosing more or less weighting in any of the 3 areas. Furthermore, "the market" is undefinable. Bogle does not include commodities or derivatives, yet those are certainly available to investors. Bogle does not seek to approximate the entire world, just 3 markets which together reduce volatility of the portfolio. Yet one can still be a Bogle purist with very unequal weightings between the funds.

Yes, Bogle includes a US stock fund, a foreign stock fund, and a bond fund for the 3 funds. I did not say otherwise. Beyond that it is up to the individual to apply more or less thought into what they choose. And, as I pointed out, many indices closely track each other, making any of them a viable choice to approximate "the market".