SUBSCRIBE
Enter your Name and Email address to get
the newsletter delivered to your inbox.
Please include name of person that directed you to my online newsletter so I can thank them personally.
1021223-00006-00
David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Client Relations Manager
Jennifer A. McCabe
Client Relations Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
May/June 2024
The Facts About Tips and I Bonds
With fixed-income investment rates seeming to be holding higher, many investors are taking a second look at bond investments with a wary eye on inflation. If you’re one of those investors, Treasury Inflation Protected Securities (TIPS) and I bonds offer inflation protection and currently attractive returns. Both are government-backed investments with interest rates that are periodically adjusted for inflation.
TIPS Basics
TIPS are popular for protecting portfolios from inflation and profiting from it because they pay interest every six months based on a fixed rate determined at the bond’s auction.* However, the interest payment amounts can vary because the rate is applied to the adjusted principal or value of the bond. The TIPS principal amount is adjusted according to the consumer price index. As a result, investors receive higher interest or coupon payments as inflation rises. Conversely, investors will receive lower interest payments if deflation occurs.You can buy TIPS with maturities of five, ten, and 30 years. They’re considered a low-risk investment because the U.S. government backs them. At maturity, TIPS return the adjusted or the original principal, whichever is greater. They’re available directly from the government through the Treasury Direct system in $100 increments with a minimum investment of $100. You can also buy TIPS from your financial professional.
ANOTHER WAY TO ADD I-BONDS TO YOUR PORTFOLIO IS TO USE UP TO $5,000 OF YOUR FEDERAL INCOME TAX REFUND TO BUY THEM DIRECTLY. ANY UNUSED PORTION WILL BE DIRECTLY DEPOSITED TO YOUR SPECIFIED FINANCIAL ACCOUNT OR PAID BY CHECK.
I Bond Basics
Series I bonds are non-marketable bonds in the U.S. Treasury savings bond program.* Their non-marketable feature means they cannot be bought or sold in the secondary market. These bonds earn two types of interest: an interest rate fixed for the bond’s life and an inflation adjusted rate each May and November based on changes in the non-seasonally adjusted consumer price index for all urban consumers (CPI-U).I bonds are considered lower risk investments because they’re backed by the full faith and credit of the U.S. government, and their redemption value cannot decline. But this safety generally comes with a lower return than corporate or municipal bonds.
Annual purchases of eletronic bonds are limited to $10,000 per Social Security number. Bonds can be held for as little as one year or as long as 30 years, but if sold after fewer than five years, the holder sacrifices the last three months’ interest.
Ask the Pros
The taxation of these instruments can be confusing, so consult your tax advisor to prevent surprises.It is important that you understand how I bonds work. For example they have the annual $15,000 investment ceiling, withdrawal restrictions and pay interest upon redemption.
Your financial professional can tell you more about these investments and whether they could play a part in your portfolio.
*Investors should read the prospectus and consider the investment objectives, risks, charges, and expenses of the fund before investing.
1066606-00002-00
CONTACT US
Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.
Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
Centuria Financial Group and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.