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Roth: Do you know about I bonds as an inflation hedge? Should I retire?

Op-ed

Carol Roth answers some of your financial questions

JT Sorrell/Getty Images

From my appearances with Glenn Beck on his radio program, I receive many financial questions from listeners. I answer some on air, but as I cannot get to all of them, I thought I would use this opportunity to answer a few that might be helpful to you as well.

Note that questions may have been edited slightly for clarity.

**Important Disclaimer: This is not financial advice. It is meant to give you information to help you do additional research. You should consider your own objectives and financial position and speak with a financial adviser, if possible.**

From Stephen:

Q: What is your feeling about the purchase of I Treasury bonds at this time?

CR: Stephen, I am glad you asked about this, because I bonds aren’t as well-known as they should be! The U.S. Treasury Series I Bonds (“I bonds”) are government-issued savings bonds that combine both a fixed interest rate and an adjustable interest rate, the latter of which is calculated two times during the year based on changes in the CPI inflation rate. Interest is earned monthly and compounded semi-annually.

Electronic bonds come in any amount from $25 to $10,000, but there is a firm cap of $10,000 total per calendar year. Paper bonds have fixed denominations and are capped at $5,000 total per calendar year. The bonds have thirty-year durations, but you are only obligated to hold them for one year. However, there’s a catch: If you cash your bonds in before the five-year mark, you will lose your previous three months of interest.

To buy these electronically, you have to open an account with the Treasury via the Treasury Direct website. The IRS also has a program for paper bonds (which have that smaller purchase cap per year) that you can buy with your IRS refund. The Treasury has announced that the I Bond Composite Rate is currently 9.62%, saying, “The 9.62% composite rate for I bonds bought from May 2022 through October 2022 applies for the first six months after the issue date.” It will then be recalculated based on the next six-month computation.

If you have the ability to tie up a portion of your savings and don’t mind the paperwork of opening a new account, I bonds can be used as a partial inflation hedge, along with your other portfolio strategies.

For more information, visit the Treasury Direct website.

From John in Colorado:

Q: Is this a good year to retire? I am 69 this August and I'm already collecting Social Security money while still working. I have paid off my property and all my revolving debt. I'm now working on getting my home down to a reasonable amount, with $47,000 left to pay off. So, is this a bad time economically to retire?

CR: John, while I don’t know you or your full circumstances, there is a lot to digest here. First, congratulations on your accomplishments in tackling some of your debt!

However, you didn’t address, other than an unknown amount of equity in your home, whether you have other retirement savings. You also didn’t address how much you need to live on, whether Social Security covers those expenses, including what is left on your mortgage and ongoing property taxes, and whether your Social Security income would give you a buffer for emergencies, aging care, and the like.

This year is economically challenging because of inflation, which means that what you can buy with your money in terms of goods and services has decreased. This is an extra burden on those with fixed incomes (especially since Social Security cost-of-living adjustments aren’t likely covering the true costs of these increases). If you do have some type of invested retirement or pension plan, it may recently have taken a hit from decreased market valuations.

With jobs in plentiful supply, you may want to consider a job switch vs. retirement. You can keep yourself busy and keep yourself from extra leisure time spending — which can be a real problem — and also spend your working hours doing something that is more aligned with your interests.

Also, you may want to consider hiring a financial planner who can look at your income, financial picture, and retirement goals and give you a personalized recommendation.

I hope these additional factors to consider help you make the right decision for you, and good luck!
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