Torn on whether I should start purchasing I bonds this year.
Brief background: 35, federal tax bracket 32-35% depending on the year, 0% state, pay NIIT. Saving approximately $135-140K/year, which will go up with time; $75-80K of this is to taxable account (remainder 401k, Roth IRA, and HSA). For a number of reasons I want an aggressive allocation, and my current plan is 100% equities until age 50-55ish, then change contributions to 100% fixed income to end up around 80:20 for retirement in 10 or so years; this would be with VBTIX in 401K and intermediate and some short-term muni funds in taxable.
I am big on diversification, but TIPS and treasuries don't seem appealing to me for tax reasons, nor am I keen to use my HSA/IRA space for those, and my 401K only has VBTIX and a money market fund for fixed income. Thus, I'm thinking I bonds may be a good option for me, partially for expansion of tax-sheltered space and partially for risk modulation (I bonds seem like the safest possible investment; I otherwise have a higher-risk portfolio). I'm also going to be looking a purchasing a home in the next few years, so like the option to liquidate them if needed. If I were to do this, I'd probably start in December of this year, as I already did my taxable investing for the month.
My main reservation is the loss of theoretical gain from this $10k/year going to I bonds instead of equities. It's hard to quantify this, but would overall give me a less aggressive allocation than I'd like, though not by a big degree; as above I do not otherwise plan on buying bonds as a long-term holding anytime soon. I'd probably also only buy I-bonds until I was ready to start buying nominal bonds/munis. In order to get a meaningful I bond accumulation, I'd have to start buying now.
tl;dr is buying I bonds early in accumulation phase actually a decent idea, or should my long-term plan be looking elsewhere for fixed income down the road?
Thanks.
Brief background: 35, federal tax bracket 32-35% depending on the year, 0% state, pay NIIT. Saving approximately $135-140K/year, which will go up with time; $75-80K of this is to taxable account (remainder 401k, Roth IRA, and HSA). For a number of reasons I want an aggressive allocation, and my current plan is 100% equities until age 50-55ish, then change contributions to 100% fixed income to end up around 80:20 for retirement in 10 or so years; this would be with VBTIX in 401K and intermediate and some short-term muni funds in taxable.
I am big on diversification, but TIPS and treasuries don't seem appealing to me for tax reasons, nor am I keen to use my HSA/IRA space for those, and my 401K only has VBTIX and a money market fund for fixed income. Thus, I'm thinking I bonds may be a good option for me, partially for expansion of tax-sheltered space and partially for risk modulation (I bonds seem like the safest possible investment; I otherwise have a higher-risk portfolio). I'm also going to be looking a purchasing a home in the next few years, so like the option to liquidate them if needed. If I were to do this, I'd probably start in December of this year, as I already did my taxable investing for the month.
My main reservation is the loss of theoretical gain from this $10k/year going to I bonds instead of equities. It's hard to quantify this, but would overall give me a less aggressive allocation than I'd like, though not by a big degree; as above I do not otherwise plan on buying bonds as a long-term holding anytime soon. I'd probably also only buy I-bonds until I was ready to start buying nominal bonds/munis. In order to get a meaningful I bond accumulation, I'd have to start buying now.
tl;dr is buying I bonds early in accumulation phase actually a decent idea, or should my long-term plan be looking elsewhere for fixed income down the road?
Thanks.
Statistics: Posted by breakfastinbed — Mon Nov 04, 2024 9:40 pm — Replies 4 — Views 319