Laura E. Kelly

Comments:

• In my case, I have money outside the TIPS ladder that will grow (hopefully) for the next 20 years (length of my ladder) and then, or before then, may use that money to buy an immediate fixed annuity for simplicity and longevity reasons. (Do they sell annuities to people in their 80s?)

  Post: Hedging your bet in retirement-dealing with inflation. What’s your strategy? R Quinn

  Link to comment from September 29, 2024

• Yes, Rob Berger's video, published when the TIPS rates were at their highest in 2023, was one of my best resources when I was buying about 3 months later.

  Post: Laying Down a Floor

  Link to comment from September 28, 2024

• Hi Dick, To answer your two questions:  The Consumer Price Index (CPI) is the inflation measure used in Treasury Inflation-Protected Securities (TIPS). In comparison, the Social Security annual Cost of Living Adjustment (COLA) is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI measures price changes for all urban consumers, while the CPI-W measures price changes for urban wage earners and clerical workers. Neither index sounds to me like they are that pertinent to retirees, but that’s what the government uses. ¯\_(ツ)_/¯ As for “Is the money locked up?”: I purchased and keep the bonds in our IRAs in our Vanguard accounts and can sell them on the secondary bond market (via VG) at any time. So it’s not like an insurance annuity where the money is locked away out of our reach. EXCEPT, as with all ladders, the plan is to hold each rung to maturity, whereupon each year a rung matures, I would get the guaranteed amount of the inflation-adjusted principal on those TIPS and interest from the other future rungs.  My TIPS ladder gives me certainty that a portion of my savings will keep pace with general inflation over time, which is what I was looking for. There is a lot more I could say, but for those curious about a TIPS ladder, read my article with more details (and good HD comments!) at https://humbledollar.com/2024/09/laying-down-a-floor/ and these helpful articles at https://www.tipsladder.com/resources/TipsLadderResources.html

  Post: Hedging your bet in retirement-dealing with inflation. What’s your strategy? R Quinn

  Link to comment from September 28, 2024

• Knowing that our savings was all we were going to have in retirement, aside from all-important Social Security, it was scary to learn how inflation would take an ax to that nest egg over 30 years. I wrote on Humble Dollar a few weeks ago in Laying Down a Floor about my plan to cope with the inflation scourge in retirement. We'll see how the plan pans out, but it's already giving me peace of mind.

  Post: Hedging your bet in retirement-dealing with inflation. What’s your strategy? R Quinn

  Link to comment from September 28, 2024

• I guess the decision about letting the bonds mature in the Roth and either reinvesting it or taking the money as needed OR liquidating the bonds right away would be up to your children. But I think that one of the pluses of this kind of "self-annuity" is that the money is there for your inheritors, as opposed to insurance annuity payments, which end when you do, right?

  Post: Laying Down a Floor

  Link to comment from September 17, 2024

• Hi achnk53. Here is a link to the Bogleheads explanations and remedies for the TIPS gap years 2033-39: https://www.google.com/search?sitesearch=bogleheads.org&q=TIPS+gap&sid=3404f1292b2340947b875f12baa7a55a This happened because the government didn't issue TIPS in certain years way back, so there weren't bonds maturing for people building TIPS ladders that spanned the above years. Following the suggestions I found on the various Bogleheads threads, I bought more TIPS bonds maturing the year before 2034 and same for the year after the gap (2040), splitting the difference to cover the "missing years." The tipsladder.com tool I mentioned told me exactly how to make the wisest purchases to cover that gap, so it was a no-brainer. The good news is that the gap is closing. Last year the government issued a 10-year TIPS bond that matures in 2033; this year the government issued a 10-year TIPS bond that matures in 2034, etc.

  Post: Laying Down a Floor

  Link to comment from September 17, 2024

• Hi CJ, See my RMD musings in a comment above. Over the past 10 years we have been through all sorts of lumpy surprises—big health emergency, new car (after a rear-ending of the old one), new roof, financial support of relatives, high NY taxes, the ever-rising cost of streaming subscriptions!—so we now have a good idea of the average annual amount to budget for. Each TIPS ladder rung is budgeted to cover ~60% of that annual number, with our two Social Security streams (eventually) covering the other ~40%. Until that point of "total coverage," we'll use our ever-rolling CDs and other cash savings to cover what the TIPS can't. We could also cut back expenses and/or pick up some work, possibly. Finally, we do have that other half of our savings, supposedly "growing in equities" for 20 years but also there in a pinch. Our plan may not cover all eventualities—decades of bad health events or even affording the steep lump-sum entry fee of a Continuing Care Retirement Community—and I'm trying to get used living with all the unknowns.

  Post: Laying Down a Floor

  Link to comment from September 15, 2024

• Thanks to Jonathan for separating out that link to the Bogleheads thread below. I looked at that thread recently and learned that the free tipsladder.com form I used back in February '24 has been greatly improved by its creator Kevin Esler. I feel very lucky to have found all that patient, expert advice throughout the 11-page thread! As for why I did this at age 63--it was external timing, not my age, necessarily. We realized our decumulation years were upon us and putting the money designated for our annual "allowance" in a government-issued, inflation-adjusted, easy-to-access account seemed like the kind of safety and simplicity we wanted. Also, the pluses of making a TIPS ladder for retirement seemed timed to the higher TIPS yields that were happening this past year, and I didn't want to miss the boat on this purchase timing. Finally, I was just tired of thinking about how we were going to access our money each year as the stock markets went up and down. All three of these things = TIPS ladder this year.

  Post: Laying Down a Floor

  Link to comment from September 15, 2024

• Hi ps f—I posted an answer about our RMDs thinking in a comment above.

  Post: Laying Down a Floor

  Link to comment from September 15, 2024

• A few commenters have asked me how I expect the TIPS to work with RMDs. Warren’s RMDs have to start when he is 73, which is 7 years from now; mine start at age 75, which is 11 years away for me. Our IRA situation is not equal—mine has more funds since I was in corporate life for a while and later rolled my 401k into my IRA.  I was able to set it up so my larger IRA contains 80% of the TIPS ladder and the rungs in my IRA will mature before the ones in Warren's IRA. So I know for sure that my IRA amount will diminish over the years with the yearly living expenses withdrawals. What I don’t know for sure is how much the other 50% (spread across both my and Warren’s IRAs) in U.S. and int’l index funds will grow (or diminish) over the 20 years. So who knows if those yearly TIPS withdrawals will cover the RMDs I’ll need to take? It’s hard for me to think about something 20 years away or even 11 years away—so many variables! So, the smartest thing I will be doing is hiring a fee-only financial/tax planner for a few hours to run the numbers on various scenarios of future RMDs, including whether doing some Roth conversions at some point makes sense or not. (Before I made my TIPS purchases, I double-checked that, if needed, TIPS can be transferred "in kind" into a Roth IRA.) My aim with hiring the planner is to make sure there aren’t some obvious things I should be doing in 2024 that will help me in 2035 and onwards. And then we hope to be on autopilot for a while! Although next spring, I have to make my Medicare choices for the first time. Luckily right now I live in NY where you can switch between Advantage and Traditional without facing underwriting, but it still seems complicated. The experiences of HD contributors being shared in the Forums and in comments to earlier HD posts have been very useful for my decision making. Thanks to all for that.

  Post: Laying Down a Floor

  Link to comment from September 15, 2024