New kind of "Play Money" I bonds

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Highbeam said:
Vanguard's crystal ball is no better than anybody else's. There is always some expert claiming the maret will rally while another claims it will crash. Nobody knows with any certainty what the market will do which is why we can only do our best based on past statistics. I'm sure you've all heard the story that the best performing accounts are those owned by dead people.

All to say, time in the market beats timing the market.


The roth investment vehicle has nothing at all to do with risk. You can invest in almost anything with a roth and you can lose it all, including your original investment amount.
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I was trying to make the point that investing in a Roth IRA has no penalty for principal removal vs a traditional IRA. That's the no risk part. Investments within the Roth are of course at risk.
Further i was also making the point that it's historically Much better for young investors to invest in stocks vs Bonds over the long term and one of the first places to put your long term investments would be a Roth which has good tax advantages as well.
 
The Roth being a tax advantage depends a lot on where one lives. Investing while living in NY and retiring in TN makes Roth a poor choice given the difference in state income taxes.
 
stoveliker said:
The Roth being a tax advantage depends a lot on where one lives. Investing while living in NY and retiring in TN makes Roth a poor choice given the difference in state income taxes.
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With the Roth your Fed tax is 0 on all Interest and dividend payments. Owning Dividend stocks in a Roth (vs. owning dividend paying stocks in a regular brokerage account) is a substantial benefit over the long term.

Roth vs Traditional Ira has too many variables to go over here. Not everyone, especially self employed people, have a traditional ira as an option.

The whole point was that investing in bonds is a poor choice as a young long term investor. Investing in stocks and putting them in a Roth would be a much better choice.

Is their a better option, probably.
 
But you can invest more in a traditional IRA because it's before taxes. Of course $1000 in a Roth is better than $1000 in a traditional IRA. But you in fact should compare $1000 Roth to $1250 traditional (or whatever your current tax rate is) and then look at growth and taxes at the end for the traditional.
 
stoveliker said:
But you can invest more in a traditional IRA because it's before taxes. Of course $1000 in a Roth is better than $1000 in a traditional IRA. But you in fact should compare $1000 Roth to $1250 traditional (or whatever your current tax rate is) and then look at growth and taxes at the end for the traditional.
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But many people, including me, don't have a traditional ira option.
 
You compared Roth to traditional in post 26. I commented that that would only be fair if you invest equal $$ from before taxes because you can invest more in a traditional.
 
stoveliker said:
But you can invest more in a traditional IRA because it's before taxes. Of course $1000 in a Roth is better than $1000 in a traditional IRA. But you in fact should compare $1000 Roth to $1250 traditional (or whatever your current tax rate is) and then look at growth and taxes at the end for the traditional.
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But i do agree that maxing out an employer matched traditional ira is the Best way to go first, and agree with your Roth ira post tax contribution vs Pretax Traditional ira point and guesstimated withdrawal tax rate.
 
stoveliker said:
You compared Roth to traditional in post 26. I commented that that would only be fair if you invest equal $$ from before taxes because you can invest more in a traditional.
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The annual contribution limit is the same whether you choose Roth or traditional ira so really you are putting more away using Roth. I like Roths.

Oh and I’ve never bought bonds, the returns have been garbage for decades and I just don’t currently need the “stability”.
 
The majority of people don't reach the limits.

But my point on calculating return on investment is that for the Roth you have to include the money you ship to the IRS and that won't be getting a return for you. So investing in a Roth or traditional IRA to the limit means you actually paid out more dollars in the Roth route (the more going to the IRS) and those more dollars won't be getting any return over.the years.

I have the impression that this is easily forgotten. I can't explain it better.

Of course the tax paid at the end of the route over the grown sum for the traditional IRA has to be offset. But we are talking about investing here. And for a paycheck of a fixed amount, one can invest.less in a Roth because of the additional IRS expense if one does not reach the limit. And if one does, the money out of pocket for the same investment is larger for the Roth due to the taxes.

Hence my initial remark that the tax (location) matters. Not paying 6 pct state taxes now because of traditional IRA and not paying state taxes later because of a move to a state without state taxes immediately provides gains.
 
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stoveliker said:
Hence my initial remark that the tax (location) matters. Not paying 6 pct state taxes now because of traditional IRA and not paying state taxes later because of a move to a state without state taxes immediately provides gains.
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Good point. Additionally, not paying taxes at the inception when one's income is at a higher tax rate will bring additional tax benefits if the money is withdrawn later, when one is at a lower tax rate.
 
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I have never been convinced that my tax rate is lower now than it will be in retirement.
 
What the heck, I set up a Treasury Account and picked up a direct I bond. Odd are the next rate period will be paying 9%.
 
Looks like u guys made a good move. I bond rate is now 9.62%. Even if it tanks and you sell and pay the fee it will still be a good deal.
 
The party is over on I Bonds, as of May 1st the rate is 4.3%, (0.9%) of that is fixed. There are better places to put money for now.
 
I just sold my electronic I bonds, nice return for a 2 year old one but the yearly rate reset was not so good. I still have some paper I bonds and will probably sell them as soon as the "youngest" one is a year old. Hopefully inflation stays low and there is no need to buy them again.
 
peakbagger said:
I just sold my electronic I bonds, nice return for a 2 year old one but the yearly rate reset was not so good. I still have some paper I bonds and will probably sell them as soon as the "youngest" one is a year old. Hopefully inflation stays low and there is no need to buy them again.
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I'm getting 1 to 6 month t bills. 5.35% is the lowest rate I've gotten over the past year.
Last week was 5.35%
 
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