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TIPS (Treasury Inflation Protected Securities) and I Bonds both protect investors against unexpected inflation. Both bonds are also issued by the U.S. Government and are exempt from state and local taxes. Bu that’s about where the similarities end.
There are key differences between TIPS and I Bonds that investors should know. We look at 8 key differences, along with the pros and cons of adding each to your portfolio.
As a bonus, we look at how one of them can help you save for a child’s education.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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LEARN MORE ABOUT: Treasury Inflation Protected Securities
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Thanks for the video!!! It is very helpful. When I check the TD web, it does not specify how much I can buy ibond as a gift to someone. It only mentions I can only gift $10,000 to someone each year. Does it mean I can buy, for example $50,000 ibond to my wife as a gift this year and deliver to her $10,000 per year for the next 5 years?
well its 11 months later, inflation is crazy, and Tips are not the way to go cause they have negative returns
Yi
Oh, this didn't age well!
Hi Regarding the 3 month interest penalty if I sell i bonds within 5 years, how is the 3 month penalty calculated, since rates change every 6 months? Is it based on average monthly interest over the duration of the holding period? Or last 3 months of interest before sale?
Is there an option for the interest compound in the ibond ?
This is the second video I have watched regarding TIPS and I'm still at a complete loss of how TIPS work as a hedge against inflation. The current CPI is 8.6%, yet TIPS have an interest at 0.125% with a yield 10, 20, 30 year at 0.2, -0.2, -0.5 %. How is that anyway at all a hedge against 8.6% inflation as of June 16, 2022?????? I don't get it. I get a better interest rate from a simply savings account at my bank.
I did buy an I Bond a few days ago.
Now that we are in a bear market and the FED is raising rates to cool off inflation, how are TIPS faring now. If you known what was happening today, would you have bought TIPS when this video was released?
THEY SHOULD TEACH THIS STUFF IN HIGH SCHOOL!
sorry for all caps.
Great video. Very informative.
I've heard elsewhere that you can sell an I bond after five years without penalty and if you sell before five years you lose three months worth of interest. I raise this subject because in the video you mention that I bonds don't mature until 30 years. Does this mean that you can sell it back before 30 years without penalty. Thank you for the video and any info you can provide!
I am 55 years old with very little set aside for retirement at this point. I have always been curious about the stock market and have witnessed some people who played the game right and retired early because they used the stock market. When I ask them, most said that they invested very little to start with, but their portfolio grew. I do have a significant amount of capital that is required to start up but I have no idea what strategies and direction I need to approach to help me make decent returns.
Why 24?
There's supposedly a Gifting loopholes where a 4 person family could put $40k per person in I Bonds and if you file for a Return there's an extra $5k per Return that can be bought.
Thank you so much. Mr Rob
As a pessimist, my first thought is if you buy TIPS through a fund and the fund management company goes belly up, you don't have the government protection, do you?
Hi Rob! I’m watching this now in May of 2022 and can’t thank you enough for your fantastic explanation between these two options and helping me protect my assets!
Tax deferment on I Bonds is huge! This makes I Bonds effectively an IRA – you get tax-free compounding. I am committing to buying 10K worth of I Bonds per year and I am looking into overpaying my taxes so I get the extra 5K worth of I Bonds.
Update: May 2022 I Bonds yield 9.6% – huge!
@Rob – can I use my I Bonds to pay for my grandchildren's education without taxation?
How is the typical interest in I-bond when inflation is 2% (typically the case)
Great demonstration. I will purchase I-bond …currently pays almost 10% (May 2022). Glad to know that it I-bond won't go negative.
My Daughter will be 18 in September and she is receiving a good amount of money from her father I'm looking into what for her to do and get to secure her money until she's in her 20s they are her wishes and asked me to research for her cause she wants to have it to purchase her first house when she is a little older and now is a bad time anyway! Any suggestions for the best for her,?
You can also gift I Bonds to your spouse, but not deliver them this year. That way, a married couple could put away $40,000 in I Bonds at today‘s high rates (interest accrues from the time the Bond is purchased, even if not yet delivered to the recipient.
Rob, mirror or upload your vids to Rumble. Extend your reach, maybe make some more cash? Be great to have access to your channel there too.
Do we need to wait until November to get higher rates on ibonds, or if we buy now will the rates go up. Sounded like these are fixed
I bought the Vanguard TIPS etf back in November of 2020 and it initially went up throughout 2021. However, in December of that year it started to go down, and has since then (it is now April 2022) performed HORRIBLY. I've lost all my gains and a bunch of my initial investment. I've spoken with two other TIPS investors who say they plan to sell their holdings in TIPS, because if they perform this poorly in such an inflationary period, they are truly poor investments. In fact one of those I spoke with said his uncle has invested in TIPS for years and lost money consistently. I-Bonds are simple, straightforward instruments that pay you a stated interest rate. The only drawback is the amount you can invest is limited.
Hey Rob. Presently the I bond is paying 7.12. Many think it will go to 9 something. Just reviewed your video on the subject. Any updates?
you called this one. great video. keep it up!