Karen Younge wrote:
- quote -

Karen, yes that's right, there's a portion of the I-bond rate that's
fixed and a portion that's variable - pegged to the inflation rate
(change in the Consumer Price Index). If the fixed rate rises you might
cash in/replace. From the OP's comment it sounded like he thought the
entire rate on the bond was fixed, and that he'd need to change bonds
whenever interest rates changed to get a benefit (not so).

So far the fixed rate has been dropping since I-bonds were first issued
and early ones are quite valuable as a low-risk investment. But of
course the fixed rate could rebound in the future and as you said people
would need to evaluate the rate difference vs. tax hit when
contemplating a switch. [I think it's also possible savings bonds might
someday go away, it's a costly way of raising money for the gov't.]

BWS gave a pointer to the US gov site, that's a really good one that
answers most questions about savings bonds.

I've heard of but not read Bodie's book; he's a respected name in
finance though that theory isn't exactly widely embraced. One thing I
think the I/TIPS investor might Worry about is: "what if the government
tells me inflation is 2% per year during a period that health care costs
rise 10% a year and homes rise 12% a year, and proportionally more of my
money goes into health care and housing than everything else combined?"
To me CPI isn't necessarily relevant as a gauge of inflation; if your
costs aren't distributed the way CPI assumes they are then relying on an
investment pegged to it may not make sense.

-Tad

"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:41D301A6.6040000[at]paragondynamics.com...
- quote -

Something like 97% of stable value business is in retirement accounts, which
are not affected by the SEC inquiries, since they are already covered by
other regulations. So I would not expect changes within the 403(b) plan.

http://www.stablevalue.org/help/faq_mf.asp
http://www.jordenburt.com/news-warchive-705.html

--
Mark Freeland
nBeOwXs[at]pacbell.net

Tad Borek wrote:

- quote -

Just as a side note, the Sunday paper here reported that most fund
companies will be shutting down their stable-value funds due to
increased scrutiny from regulators concerned with how the insurance
contract used by these funds affect the funds' net asset value. The
contracts can apparently mask price fluctuations. Of course, that's the
point, hence "stable-value fund". The article does not mention any
actual wrong-doing by fund companies, just that apparently the
regulatory hassle is not worth the amount of business generated.

Karen Younge <karenyounge[at]earthlink.net> writes:

- quote -

Yep. Better than the book, though, you might want to look
at the treasury's own website about this, where they have
actual and correct current numbers:

http://www.savingsbonds.gov/indiv/pr...nds_glance.htm

The combined current rate on iBonds issued today is 3.67%.
That rate will be adjusted in April, when the new CPI is
used to change the inflation-derived portion of the income.
The fixed portion on iBonds issued today is a mere 1%.

- quote -

That's theoretically possible. At present, though, the
fixed-portion is the lowest it's been since iBonds were
first issued in 1998. The fixed-portion has been as high
as 3.6% (wow - with 20-20 hindsight, what a deal! - toss
in the inflation adjustment and those 2000-issued iBonds
are a really attractive investment).

Here's the history of the fixed rates:

http://www.publicdebt.treas.gov/sav/sbirate2.htm

- quote -

As with so many things, it depends. It depends on how long
you've held the bonds (and, therefore, how much interest has
accrued), it depends on your marginal tax rate and it depends
on how much the fixed portion has increased.

That all said, even at the current composite rate of 3.67%,
if you buy them, hold for a year, cash them in and take
the three-month penalty, you'll still have earned, after
the penalty, approx. 2.8% with basically no risk, and
exempt from state and local taxes.

None of this, of course, helps out the original poster
though. These cannot be bought in one's IRA, 401k, 403b
or other retirement plan.

OTOH, one advantage of most of those is the tax-deferral
on the earnings and iBonds effectively get that *anyway*.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

Tad Borek wrote:

- quote -

I've recently read a book called "Worry Free Investing" by Zvi Bodie and
Michael
Clowes. It's about investing using I-Bonds and/or TIPS. According to the book
I-Bonds have two interest rates, a fixed rate that applies for the entire life
of the bond,
and a rate derived from the CPI, to adjust for inflation. This latter rate is
the one that
is reset periodically (twice a year).

If the book is correct, it might at least theoretically be advantageous to cash
in old bonds
in order to buy new ones with a higher fixed rate. However, since the taxes on
the interest
income are due the year you cash the bond, I'm guessing that by the time you
pay the taxes
and forfeit three months of interest on any bonds less than 5 years old, it
would take a pretty
big rise in the fixed rate to make cashing in old bonds and buying new ones a
profitable course
of action.

Karen

Brent D. Gardner, ChFC wrote:
- quote -

Thanks for the info. I called TIAA-CREF and from what they said it
sounds like their Supplemental Retirement Annuity may meet my needs. I
will have to research the fine print to make sure.

Andy


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding.

Andy wrote:
- quote -

Andy,
I-bonds (and savings bonds generally) are somewhat unique that way, they
aren't "tradeable," so they don't fluctuate in value. They just go up,
as interest posts. So if that's really what you're looking for, your
options are going to be limited, because not many investments are like that.

A money-market fund, or "stable value fund" or similar alternative
offered through your 403b, would satisfy your requirement of zero
fluctuation in value. It'll pay interest at the current short-term
rates, resetting almost constantly. The earnings potential on that is
very limited, but you said you don't want the possibility of loss, so
you'd need to live with that. (You also that you don't want to discuss
that point, so I won't).

You may be a candidate for a variable annuity, there may be some offered
through your 403b. Many come with some sort of principal protection,
which sets you whole if the fluctuation in value works against you. The
net result would be similar. But you also said you don't want to pay
fees/loads so I guess you might see some issues with that approach. If a
0.5% annual management fee on a mutual fund is a problem then VA costs
are going to look too high to you.

Couple random points...you're right that bonds lose value when interest
rates rise, those are opposite sides of the same coin. But with
short-term bonds and bond funds your potential losses are quite limited.
A short-term bond fund might be "good enough" for you (in effect a
money-market fund is a very, very, short term bond fund). Also: you
don't need to cash in I-bonds and buy new ones to benefit from the new
rate; the rates on existing bonds reset periodically as rates change.

-Tad

<idontcheckthismailbox[at]yahoo.com> wrote in message
news:1104256669.313196.234450[at]z14g2000cwz.googlegroups.com...
- quote -

TIAA-CREF has fixed accounts -- have you looked at those? Fido has them,
too, if they are making their TSA available to you.

I-bonds are not taxable at the state and local levels, so I doubt that you
can put them in a quailfied plan of any kind. Okay, I just looked, and I see
no QP/IRA ownership provisions from the Treasury Direct web site.

Fixed accounts in many competitive annuities are currently higher than I
bonds, although TIAA-CREF isn't one of the most competitive in this area (I
was suprised to see how low they are right now). No volatility, no fees, and
they are actually part of the law that created the very accounts you're
talking about.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/
http://forum.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

TB wrote:
- quote -

See, thats the thing: I don't want to be in any mutual funds. I don't
want to pay the fees/loads, and I don't want investments that
"fluctuate in value." The problem with bond mutual funds is that they
lose value if interest rates rise.
I want to put my 403(b) money in something that reliably grows in value
according to a mathematical formula, and to me I-bonds are ideal. If my
money is in I-bonds and interest rates go up I only lose 3 months
interest if I cash them in and buy new I-bonds at the new higher rate.
Andy

idontcheckthismailbox[at]yahoo.com wrote:

- quote -

Fidelity has a mutual fund that invests mostly in TIPS, can you buy that
in the 403b? TIPS are similar to I-bonds, though they fluctuate in value
(I-bonds don't). Ticker is FINPX, Fidelity Inflation Protected Bond
Fund. If inflation protection isn't what you're looking for then you
might consider a short-term bond fund or whatever similar alternative
you can get in the plan.

-Tad

I work for a non-profit, and my current employer's 403(b) plan only
allows us to invest with either Fidelity or TIAA-CREF. For various
reasons that I won't go into, I would like to get my 403(b) money out
of mutual funds and into something paying fixed interest, like I-bonds.
Is there any way to do this myself, or force my employer to offer
I-bonds as an alternative option in the 403(b) plan?

Please don't write back about asset allocation principles, etc. I just
want to know if what I want can be done.

Thanks,

Andy