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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Mike M2 who wrote (187753)8/14/2002 10:59:14 AM
From: Tommaso  Read Replies (3) of 436258
 
I am in a quandary (what's a quandary, anyway?).

My wife's entire retirement annuity is in TIPS, which have been doing spectacularly well this year: up 12% so far.

The trouble is, of course, that this gain is subject to interest-rate risk and could easily be lost.

If the money is transferred to a money-market fund, it's only getting 1% and is not backed by U.S.Government inflation-protected bonds.

Also, if inflation takes off, a money-market fund will gradually track it, but probably not enough to make up for what's lost.

The TIPS would eventually be adjusted for inflation, but in the mean time their value could sink as much as 20% if the Fed raises interest rates to fight inflation.

There is no hard-money or precious-metals choice available in the TIAA-CREF family, and the money has to stay there.

There are several kinds of stock funds that the money can go into, if they ever seem low enough.

With the prospect of a declining dollar and inflation, I can't see anything better to do than just to leave the money in the TIPS where the real purchasing power (at least within the United States) would be barely maintained.

I do hate the idea of watching those nice gains melt away, but may that will just have to be considered as insurance payments.

What would you do, with those options available? (There's not a pure T-Bill option here).
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