We bought some 10-year TIPS (Treasury Inflation Protected Securities) today, to be owned inside my 401(k) account. Although I can do most buying and selling inside that account online, bond purchases must be made using one of their trading desks. The commission isn’t bad: $50 flat fee.
< When I spoke to the trading desk yesterday about our order, he warned that everyone expected the 10-year TIPS to be auctioned at a slight premium. This turned out to be the case but not enough to discourage me from buying. We intend to hold these until maturity, as these are part of our plan to provide a guaranteed, baseline retirement income. The nominal interest rate (not including inflation adjustments) of these bonds is 1.25%.
Right now the Treasury Auction Calendar projects sales of 5-Year TIPS in October and 10-year TIPS again in November. We will probably be buying some of the 5-year TIPS although I am eager to see what the interest rate will be. We have been accumulating 401(k) money in a Stable Value Asset Account to make TIPS purchases. This fund is only yielding 1.5%-2% so getting a risk-free 1.25% over the rate of inflation with TIPS is not bad for the guaranteed part of our retirement portfolio.
The bulk of our 401(k) assets remain in a “five way” couch potato portfolio.