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Is purchasing I-Bonds for retirement the right choice for me?

52 years old

$46,000 saved for retirement (I-Bonds + 401K)

No assets other than my retirement savings.

$75,000/year income from stable job

401K does not require I contribute, for employer contribution ($2,200/year) so, I don't.

Conservative investor.

Currently saving $25,000/year, all in I-Bonds.

Living in California (plan on staying during retirement), I-Bonds exempt from state tax

Apr 24, 2013 by Eric from Santa Rosa, CA in  |  Flag
3 Answers  |  4 Followers
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Peter C. Karp Level 20


The decision to purchase I-Bonds in your retirement account depends on your investment strategy and outlook on inflation.

You should look to diversify your portfolio into different asset classes to help grow your assets. Putting all of your assets in I-bonds is not prudent even if you believe we will have inflation in the future. In fact now there is more evidence we are in a deflationary economic environment and not inflationary. Given where you are now in saving for retirement you need to save the maximum in your 401k ($17,500 + $5,500 catch-up for 2013) and grow the assets in your retirement account.

I suggest you revamp your investment allocation and start by reading the Karp Capital Financial Focus newsletter for direction. Our newsletter is available at http://karpcapital.com/news-archives.htm. If you would like to discuss your allocations in greater detail please call us at 415-345-8185 or email peter@karpcapital.com.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

1 Comment   |  Flag   |  May 09, 2013 from San Francisco, CA

Thanks for your advice :-)

Flag |  May 09, 2013 near Santa Rosa, CA

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1 vote
Rich Winer Level 20

Eric, I'm not an expert on I-bonds but I don't think they should be the core of your retirement portfolio. With only $46,000 saved for retirement at age 52, you have some work to do. I personally think the majority of the $25,000 you are saving for retirement should be invested in your company 401K (which will give you tax-deferred growth) and a Roth IRA. You should also check and see if there's a Roth 401K option in your company plan. If so, that's where your money should go. While your I-Bonds may be state tax free, the money in a Roth IRA can be withdrawn after age 59 1/2 Federal and state income tax-free. If you're uncomfortable investing in the stock market because you fear losing money, consider any fund of fund options in your plan, if any, or work with a financial advisor who can help you develop an appropriate allocation for your plan. At your age and with only $46,000 saved, your biggest risk is not losing money in the stock market, it's not having enough money for retirement and having to work longer than you may want to. Without more in savings, you would also be at risk of outliving your retirement savings. Job one is saving more for retirement and growing what you save.

2 Comments   |  Flag   |  Apr 24, 2013 from Woodland Hills, CA

Thanks for your advice :-)

Flag |  Apr 24, 2013 near Santa Rosa, CA
Rich Winer

My pleasure!

Flag |  Apr 24, 2013 near Woodland Hills, CA

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1 vote

Eric, conservative is good, but at age 52 investing all in I bonds is very, very conservative. I bonds are intended to supplement your retirement income, not be your retirement income. Be very cautious, and I know you are, but slowly seek retirement advice. At 52, I would like to see you have at least some growth in your portfolio. Growth involves taking some risk. I suspect you are risk averse, but by seeking retirement advice, I would hope you would find some level where you can have some growth and still sleep at night. Seek advice from professionals, but also trusted friends, neighbors, and associates.

You state you are 52, are saving 25k/yr, but only have 46k saved. So I need to presume this is a new situation where you are able to save 25k/yr.

First, I recommend you contribute to your 401(k). You get a tax advantage that I consider is a gift from the government. Consider a Roth inside your 401(k). In a traditional 401(k) you do not pay income tax now, but pay in retirement when you withdraw money; in a Roth, you pay the taxes now, but it will grow tax free for the rest of your life. And there are conservative and very conservative options inside your 401(k).

Remember, similar to I bonds, this is intended for retirement.

1 Comment   |  Flag   |  May 06, 2013 from Delray Beach, FL

Thanks for your advice :-)

Flag |  May 06, 2013 near Santa Rosa, CA

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