How can you set yourself up to pace inflation? I Bonds, and treasury bonds in general, have always been thought of as the “retiree's investment choice.” For those that have a short time horizon on investments, bonds have made perfect sense. With a guaranteed return, there isn’t a lot to risk for someone close to retirement age who simply wants to watch their investments stabilize—not grow or decline. And in today’s high-inflation environment, more and more individuals are realizing how worthwhile bonds are, especially as their traditional assets start to nosedive.
Neither Mindy nor Scott have heavy allocations in the bond market, so to understand these interesting assets a bit more they invited Shane Shepherd, Assistant Professor at USC’s School of Business, to the show. Shane has seen a recent pique in interest from his students in a few certain subjects—inflation, rising interest rates, and bonds. It seems like even the young generation of investors want to safely store their cash during pre-recession markets. But, does Shane think that I Bonds are a smarter way to save?
If stock market slumps are starting to hit your portfolio hard, this may be the perfect episode to listen to. Shane describes exactly why so many Americans are investing in I Bonds while also explaining who should not contemplate investing in something as stable as bonds. His advice could help you keep pace with inflation or buy killer deals in the coming months!
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Episodes Mentioned on Today’s Show:
Bill Bengen:
Tom Hoenig:
Episode 119:
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Bonds vs. Stocks vs. Real Estate: Which One Wins?
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What’s the Yield Curve and How Can It Help You Recession-Proof Your Investments?
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Our Inflation Dilemma—What The Fed Won’t Tell You:
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Connect with Shane:
LinkedIn:
USC:
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Purchase Bonds through The US Treasury:
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Want to Be a Guest on the BiggerPockets Money Show? Apply Here:
Guests:
Finance Friday:
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Connect with Scott and Mindy on BiggerPockets:
Scott:
Mindy:
Episode 309
Show notes at:
00:00 Intro
01:49 Are I Bonds the Perfect Inflation Hedge?
07:58Who Should Invest in I Bonds?
10:29 Other Bond Investments
14:44 Do Bonds Belong in Your Portfolio?
21:29 What if Bond Yields Start to Fall?
26:57 Where to Invest in 2022
31:41 Diversification and Allocating Your Assets
57:03 Inflation and Getting INTO Debt
01:10:51 Connect with Shane!
01:11:27 Are Bonds Your Next Buy?...(read more)
LEARN ABOUT: Investing During Inflation REVEALED: Best Investment During Inflation HOW TO INVEST IN GOLD: Gold IRA Investing HOW TO INVEST IN SILVER: Silver IRA Investing
Are I Bonds the Perfect Way to Pace Inflation? Inflation is a recurring economic phenomenon that continuously diminishes the purchasing power of money. It's not uncommon for individuals to worry about maintaining the value of their hard-earned savings over time. Fortunately, the U.S. Treasury Department offers a solution in the form of I Bonds. These government-issued savings bonds are specifically designed to help individuals combat the erosion of purchasing power caused by inflation. So, are I Bonds the perfect way to pace inflation? To answer this question, let's explore the unique features and benefits that I Bonds offer. Firstly, unlike traditional bonds, I Bonds are inflation-protected. Their interest rates are adjusted twice a year to match changes in the Consumer Price Index (CPI), which measures the average price increase that consumers pay for various goods and services. This means that I Bonds can effectively maintain their value over time. Secondly, I Bonds have a fixed rate and an inflation rate component. The fixed rate remains the same throughout the bond's life, whereas the inflation rate adjusts according to changes in the CPI. This dual-rate structure provides an additional layer of protection against inflation. For example, if there is a sudden spike in inflation, the higher inflation rate on I Bonds will offset the decrease in purchasing power, ensuring the bondholder doesn't bear the full brunt of the inflationary effects. Furthermore, I Bonds have a unique tax advantage. The interest earned from I Bonds is exempt from state and local income taxes. In addition, if the funds from the bonds are utilized for qualified education expenses, the interest may also be tax-free at the federal level. This tax benefit can significantly enhance the overall return on investment, making I Bonds an attractive option. Another compelling feature of I Bonds is their accessibility. They can be purchased directly from the U.S. Treasury Department's website or through a financial institution authorized to sell them. The minimum investment is as low as $25, making them accessible to a wide range of individuals. This simplicity and low entry point ensure that anyone can take advantage of the benefits offered by I Bonds. While I Bonds hold many advantages, there are a few considerations that potential investors should be aware of. Firstly, there are restrictions on how much one can invest in I Bonds per calendar year. The annual limit is currently $10,000 per social security number, though an additional $5,000 can be purchased using a tax refund. Additionally, I Bonds come with a minimum one-year holding period, during which the bond cannot be redeemed. Early redemption within the first five years of purchase will result in the forfeiture of the last three months of accrued interest. In conclusion, while no investment can be considered "perfect," I Bonds do offer some significant benefits in effectively pacing inflation. Their inflation-adjusted interest rates, dual-rate structure, tax advantages, and accessibility make them an attractive option for those seeking to protect their savings against inflationary erosion. However, it's essential to consider any investment's restrictions and limitations before making a decision. I Bonds can play a valuable role in a balanced investment portfolio, ensuring that the value of one's savings remains intact in the face of inflationary pressures. https://inflationprotection.org/is-investing-in-i-bonds-the-ideal-method-to-keep-up-with-inflation/?feed_id=135815&_unique_id=6501f9bd30041 #Inflation #Retirement #GoldIRA #Wealth #Investing #biggerpockets #Bonds #bondsexplained #economiccrash #highinflation #howtobuyibonds #hyperinflation #ibindsinterestrate #ibondrate #ibonds #ibonds2022 #ibondsexplained #ibondsvsstocks #ibond #inflation #investing #realestatecrash #recession #savingbonds #savingsbonds #seriesibondsexplained #shouldIbuyIbonds #stockmarket #stockmarketcrash #Stocks #stocksvsibonds #treasurybonds #treasurydirect #USrecession #whatarebonds #whatareibonds #InvestDuringInflation #biggerpockets #Bonds #bondsexplained #economiccrash #highinflation #howtobuyibonds #hyperinflation #ibindsinterestrate #ibondrate #ibonds #ibonds2022 #ibondsexplained #ibondsvsstocks #ibond #inflation #investing #realestatecrash #recession #savingbonds #savingsbonds #seriesibondsexplained #shouldIbuyIbonds #stockmarket #stockmarketcrash #Stocks #stocksvsibonds #treasurybonds #treasurydirect #USrecession #whatarebonds #whatareibonds
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