TIPS held in taxable brokerage accounts generate phantom income from inflation-adjusted principal, potentially pushing up to 85% of Social Security benefits into taxable income.
30-year TIPS currently yield 2.96% above inflation, but account placement determines how much of that real return retirees actually keep after taxes.
Holding TIPS inside a traditional IRA defers inflation-adjustment taxation until withdrawal, shielding annual principal increases from the Social Security provisional income formula.
Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years. Our free reader guide explains the flaw that separated them, and the income-first method built to avoid it.
A 71-year-old retiree did what the textbooks suggest. He built a ladder of Treasury Inflation-Protected Securities in his brokerage account to keep inflation from quietly eating away at retirement. The timing looks unusually attractive. As of August 28, Treasury's real-yield curve put 10-year TIPS at 2.42% and 30-year TIPS at 2.96%. Those are yields above inflation for an investor buying at current market prices and holding to maturity. That 2.96% is a real yield, meaning it sits on top of the inflation adjustment rather than competing with the inflation rate itself.
#real #taxable
30-year TIPS currently yield 2.96% above inflation, but account placement determines how much of that real return retirees actually keep after taxes.
Holding TIPS inside a traditional IRA defers inflation-adjustment taxation until withdrawal, shielding annual principal increases from the Social Security provisional income formula.
Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years. Our free reader guide explains the flaw that separated them, and the income-first method built to avoid it.
A 71-year-old retiree did what the textbooks suggest. He built a ladder of Treasury Inflation-Protected Securities in his brokerage account to keep inflation from quietly eating away at retirement. The timing looks unusually attractive. As of August 28, Treasury's real-yield curve put 10-year TIPS at 2.42% and 30-year TIPS at 2.96%. Those are yields above inflation for an investor buying at current market prices and holding to maturity. That 2.96% is a real yield, meaning it sits on top of the inflation adjustment rather than competing with the inflation rate itself.
#real #taxable
2 months ago
