Using Real Money

In 2024, gold went up over 20% in U.S Federal Reserve Notes (what we call the U.S. Dollar). The proper way to view it is that the U.S. Federal Reserve Notes lost significant value that year. Even though the government said that inflation was only about 3%, it didn’t even come close to what we experienced in the loss of buying power for things like gold and silver. It is clear that if everyone had saved their money in gold, they would all be much wealthier now, and this was only one year. Almost every year, inflation takes a large percentage of the value of our savings.

Gold and silver coins were intended to be the money of the United States. It is still possible to use gold and silver as money in modern life. This means that there is still a way to stop inflation. In this article I explain the problem and propose one good solution. I’m going to explain how you can get your own gold and silver account with the UPMA and why it makes sense. I’ll also show you how you can use gold and silver to buy things today.

It’s important to understand that what I’m describing isn’t just a way to invest in gold and silver. It’s a way to start saving and using it for everyday purchases and to make investments using gold and silver as money. This is what I believe will help to bring healing back to our broken monetary system.

There are many important reasons for getting out of the paper currency system:

The paper dollar loses value by government policy which destroys savings
Giving a group of people the ability to print money at will, encourages corruption
The Constitution of the United States says we are supposed to be using gold and silver
Using gold and silver as money makes it much harder to deny access to your money
Using physical gold and silver is more private because no one else has to know about your transactions.
You could be earning inflation protected interest by leasing out a gold balance to a business.

Only about 50 years ago, most banks used to store and lend money as gold and silver. The government quit backing paper dollars with gold in any way by not allowing anyone to exchange them for a specific amount of gold.

The reality is, we don’t need anyone’s permission to start doing what we know is right. We can start using gold and silver with each other now. This puts our own finances back on a gold standard. You could open a gold and silver account today. I’d like to show you one good way to do that here.

The United Precious Metals Association (UPMA) provides a way that you can cost-effectively store your money in gold and silver coins. It is an online service that gives you three kinds of accounts: a U.S Silver Dollar account, a U.S. Gold Dollar account and a Goldback account, which are real gold bills you can use as cash. The service allows you to pay for things directly to other account holders too. This means that you can do digital transactions in gold and sliver online which removes the inconvenience of delivering physical metal.

By opening a gold and silver account at the UPMA, you protect your money from inflation, inappropriate taxation and from the control of the corrupt banking system. Another great feature is that you can even earn interest on your gold and silver if you choose to do that with a portion of your savings.

These accounts are serviced by a gold and silver depository called Alpine Gold Exchange and are:

Easy to use online,
100% insured,
Available to both individuals and business entities.
There is no cost to sign up,
No commitment to making or investments required,
No minimum balance required.

Open a Free Account

The existing corrupt financial system steals money secretly through inflation. By making money easier to borrow, governments revalue their currency by increasing the amount that is loaned into existence. This video explains more about inflation and how UPMA accounts help protect us:

The UPMA is not just a another place to store your investments in gold. It’s a completely different concept. It’s organized as a non-profit organization. It’s an association of members that has the feel of a credit union that exists for its members.

Understanding the “Zero Spread”

Did you know that most gold dealers don’t post the same prices for buying and selling? What you usually see is the price you will have to pay, not the price they would pay you (which is much lower!) The UPMA is very different. When you choose to hold your money in an account at the UPMA, they don’t sell the gold to you at one price and then only take the gold back at a lower price. This practice is called the buy/sell spread. UPMA members always get the posted rates for both buying and selling, unless you sell more that $10,000 in a month.

To be very clear, when you choose to take physical possession of your coins and then attempt to physically deliver them back, there is a market-based spread, but if you exchange back and forth from paper dollars, the posted price works both ways. The zero spread is limited.

If you exchange more than $10,000 paper dollars in a single month, you will be charged a market based spread for that. The UPMA isn’t a “trading platform”. It’s actually a financial institution for regular people who just want to use gold and silver as money. Since most people don’t spend more than $10,000 a month unless they are trying to trade, it makes sense. If you are a trader, you may want to become a coin store or something like that. The UPMA is intended to help us actually use gold and sliver.

As far as I know all gold dealers charge a spread. This is something that makes the UPMA very unique.

Considering Storage Options

I personally believe it is important to keep some of the actual metal at home. If we use it in place of cash, then you need to have some actual metal to use to pay for things. One of the problems, though, is that having a lot of cash at home, starts to become a risk. Wouldn’t it be nice to also have a place to store larger amounts that is protected from flood, fire and is both audited and insured?

The UPMA holds your money physically in gold or silver in its high-security professional storage facility. They take physical records and maintain those outside of a computer as well. Splitting your metal holdings between what you have at home and what you store in a professional facility really makes sense when you think about it.

Open a Free Account

What Using U.S. Coins Means for Taxes

The UPMA holds your gold and silver in U.S. silver and gold coins with an option to store in Goldbacks as well. This means that you are buying and selling using money not barter. It also means that you shouldn’t have to pay taxes just for spending your gold or silver money to buy things.

Unfortunately, the federal government’s enforcement doesn’t match the law. Much will have to be done by our states to hold both state and federal officials to the law and remove those who don’t.

Because of the illegal activity by government agencies and states, I still recommend that you keep track of your purchases and sales of U.S. gold and silver coins for tax purposes, unless you have a sheriff and a state that will defend you against government theft.

Pawning (Loaning Gold to Yourself)

When you use U.S. gold and silver coins to make purchases, you should not be required to pay capital gains taxes. Taxing authorities appear to be requiring that conversions from gold to paper dollars be reported on tax forms. If they decide not to recognize the transaction as a legal tender but instead as barter, the move from metal to paper might trigger the government to wrongfully assert that you must pay capital gains tax.

For this reason, the UPMA is also offering a pawn service option. It’s like loaning your gold to yourself. It does have a cost, because you must pay a pawn broker to manage the loan until you “pay yourself back” what you borrow from your account. But since you borrowed to get cash, there was no capital gain. Even though this shouldn’t be a tax consideration, it is another service provided to UPMA members to make sure that there isn’t any wrongful government interference.

Open a Free Account

So there is a safe way to store large amounts of gold.

It’s important to understand the costs too. Since gold and silver are real things, they must be stored by someone and that does have a cost. This is one way that Alpine Gold gets paid.

Storage Fees

The storage fees are .05% every month paid for in gold and silver. So, 1 ounce of gold costs .05 ounces a month. If gold was valued at $3000 per ounce, that would be $1.50 per month.

This is an important consideration, but I might add that it isn’t uncommon for the value of gold to go up more than 10% in a single year these days. Often it has been much higher than that. Paying $1.50 per month is $18 a year which is only 0.6%. The benefits clearly out-weigh the cost.

If you have invested your savings before, you know that there isn’t any investment that doesn’t have a fee (even if it is well hidden). These fees are low and clearly stated.

If you choose to hold only Goldbacks, there currently is no storage fee. More about Goldbacks later.

But there’s another very important thing you could do to avoid paying storage fees.

Getting Inflation Protected Interest

You could get paid for leasing out some of your gold. When you do that, you are not charged storage fees, and you get paid 2% in gold.

Leasing your coins is very much like having a one year “certificate of deposit” at a bank only you retain custody. It allows you to lend your money for a fixed period of time. The thing that really makes a difference is that the interest is also in gold or silver coin. This means that your investment is naturally protected from inflation. Even the interest is. That’s something that is nearly impossible to find in our paper money economy.

Leased gold is used to fund businesses. Usually, these businesses are the kind that have to keep an inventory of gold or silver in order to operate. Some of them actually mine which gives them gold or silver as a product of their business. When these businesses borrow in gold, it makes it easier for them to manage and tends to make the risk cheaper to insure.

One type of business that uses these leases to fund business is the manufacturer the makes the “Goldback”.

Golden Cash

That brings me to one of the newest local money alternatives that is also provided by the UPMA. A Goldback is a real gold monetary unit. It’s in the shape of a bill. Each one contains 1/1000 of an ounce of gold. The UPMA allows you to purchase these as well and store them in an account or have them delivered to you whenever you wish to withdrawal them.

Individuals and businesses can easily accept Goldbacks as payment. There’s even a calculator that keeps track of the average daily price. It helps you calculate the paper dollar exchange rate.

You don’t need to sign up for the UPMA or do anything to start accepting Goldbacks. They are private and a great replacement for paper cash.

Several states have decided to offer their citizens the ability to use precious metal-delimited instruments, also called specie, as legal tender in the state. This give the people of those states the ability to use gold and silver as money when they buy things there.

Open a Free Account

One of the difficulties with buying and selling with metal is that silver is heavy and gold is so valuable that you have to have very tiny coins in order to use it for every-day buying and selling.

The Goldback is a high-tech alternative to coined money. They are bills that use a modern process to put gold inside a plastic coating in very specific quantities. It’s a revolutionary new way to have and use cash.

There’s even a cartoon that teaches kinds the benefits of using real money. I found this Tuttle Twins episode to be helpful for big kids too. Now even a kid can own gold!

Legit and Fraud Protected

They are produced with technology that creates articulate designs and fraud protection making them very hard to fake. You can learn more about a third-party verification of the Goldback’s quality here.

The UPMA allows you to hold Goldbacks in your UPMA account without paying for vaulting fees at all. You can withdrawal Goldbacks from your account and have them sent to you at any time.

Open a Free Account

Getting Gold into Your Own Hands

The UPMA is holding your gold and silver but if you want, they will ship it out to you. Not only that, there are now gold ATMs cropping up around the United States. Check this out:

There are also an increasing number of businesses that are willing to exchange their goods and services for Goldbacks. There are even state government officials getting involved.

Some Notable Opinions

One of the most revealing and popular books about the fiat money system: “The Creature from Jekyll Island: A Second Look at the Federal Reserve”, was written many years ago by G. Edward Griffin. As a self-proclaimed critic of things like this, here’s what he has to say:

In this article and video, Alpine Gold and Mr. Griffin discuss the UPMA, addressing concerns and benefits.

Something More Important than Money

Having an honest money system is important, but what is more important than anything is being prepared for what happens after this life is over. It wouldn’t do any good for me to show you a way to preserve the value of your money and just let you die and and discover that God had expectations that you have failed to live up to.

This is the most important thing that I have to share because it deals with true wealth that happens after this life is over.

Please download my free PDF of the gospel of John and read it carefully. That will pay me more than anything.

If you are interested in getting a UPMA account, using my referral link to sign up will help me. This gives me a very small portion of your vaulting fees (up to a limit) which rewards me for telling you about the UPMA.

Sign Up Here

To join the UPMA you can use my link to sign up and it will help me. The sign up process is surprisingly easy! Just tap or click on UPMA below

I Bonds and TIPS Not Recommended

Posted on May 2, 2023 by Troy

I am not recommending the people purchase I Bonds and TIPS anymore. As I continued to study the reason behind inflation and the depth of the corruption of the people who benefit from it, I realized that investing in that system is not a good idea.

My original idea was to hold the government accountable by making them pay me when they print money, but I realized that this is a foolish idea because they also create dollars out of thin air and have no reason to be transparent or honest with me about how things are managed.

I have come to believe that the best way to protect yourself from inflation is to not be a part of the paper currency system at all. That includes not investing in bonds that are delimited in those currencies. That means that I can’t logically justify purchasing and holding I Bonds or TIPS.

Here’s some video clips from a video that helped me see the money world differently.

I am currently using and promoting the purchase of gold and silver to get out of the system that creates inflation and steals our money. I am a member of the United Precious Metals Association (UPMA) that provides solutions that help make it much easer to use gold and silver as money. Here’s one of their videos:

Here’s a good place to get gold and silver

How to Calculate a TIPS Inflation Adjustment

Posted on May 2, 2018 by Troy

Treasury Inflation Protected Securities (TIPS) have the properties of a bond. Since bonds are just a kind of loan, we can expect to get our money back when the loan period is over. What makes TIPS especially attractive, however, is that the principal value is adjusted for inflation over time. This eliminates a bond’s worst enemy. This valuable feature does have a drawback, though. There’s more complexity in determining what the value of a TIPS bond is. Not only are there two ways to consider the value as I discuss in the article: Two Ways to Look at TIPS, the value of the principal is constantly changing.

If you’re a saver like me, you are probably interested in the current value of the principal of your TIPS. In order to determine that, we need to adjust the bond’s face value by all of the inflation that has been experienced up to now.

Adjusted Principal

The adjusted principal of a TIPS is the amount of money that you would receive if the bond were due today. You can’t get that money today, but it is the what it would be worth if it were due. For those of us with a strategy to hold the bond until maturity, this is a meaningful number. It gives us a view into how much inflation we have been protected from so far. It is also the number that indicates how much interest you will get on the next coupon. If our coupon (interest) rate is 1%, that 1% is not calculated on the face value of the bond, but on the adjusted principal. That means that your interest is going up with inflation too.

Three Step Overview

It’s actually pretty easy to calculate your TIPS current value. The basic procedure is this:

Get the CUSIP of your TIPS
Go to TreasuryDirect and look up today’s inflation “index ratio” for your specific TIPS.
Multiply the index ratio by the face value of your TIPS.

That’s really all you have to do. If you hold several different TIPS with different CUSIP numbers, you will need to repeat this process for all of your CUSIP’s.

TIPS CUSIP’s

Every bond that is tracked by the public market has a special identifier called a CUSIP. There are thousands and thousands of these but they each identify a single bond issue. When you purchase a TIPS at your brokerage or online you will see your CUSIP for the bond on you “trade confirmation.” For this example we are going to use the current 10 year TIPS CUSIP and that is: 9128283R9. This bond was originally issued on 1/18/2018.

Finding your TIPS Index Ratio

The index ratio for a TIPS is a number that you multiply with the face value of your TIPS in order to determine it’s current real value. TreasuryDirect keeps track of all of these numbers for every TIPS that is currently available on the market. Every day there is a new index ratio for every bond. You can look up the index ratios for your TIPS by going to this page on TreasuryDirect:

TIPS/CPI Data Page

When you open this page, you will see all of the CUSIP’s listed for every TIPS that hasn’t matured yet. Then, you click on your CUSIP number. When I click on the number 9128283R9, I get a list dates along with some other numbers in a table. For the sake of my example, lets say that it is April 28th. To get the Index Ratio, I would go down the list to 4/28/2018 and then go over to the Index Ratio column and see the number: 1.00897. You will need to get this number for every TIPS that hold.

Calculating the Adjusted TIPS Value

The last step is easy. For each one of your TIPS that you now have an Index Ratio for, you just take the total face value and multiply it by the Index Ratio. That is your adjusted principal value.

For my example, let’s say that I have two TIPS bonds with the CUSIP 9128283R9 with an original face value of $1000. My total face value for both is $2000. Then multiply that by the Index Ratio I looked up: $2000 x 1.00897. The resulting current value is: $2,017.94. This tells me that my money is currently being protected from $17.94 of inflation.

If I had quite a few different TIPS with many different CUSIP’s, this might take a little while to do. You can make it go a bit faster by getting my free TIPS Tracker Spreadsheet. I hope to make this process much faster when the new software is released.

So, that’s how you do it. It’s pretty neat to see your money go up in value, especially on days when the stock market is down. I urge you to give it a try and experience it for yourself.

Where to Buy TIPS

Posted on April 18, 2018 by Troy

Where you choose to buy your Treasury Inflation Protected Securities (TIPS) is very important. As I mentioned in the article: Inflation Protection and Taxes, failing to put your TIPS into a tax advantaged account causes them to shed their inflation protection. That’s because taxes are assessed as if inflation doesn’t matter.

You can buy Treasury Inflation Protected Securities directly from the United States Treasury at TreasuryDirect.gov. There are detailed instructions on setting up your TreasuryDirect account in my article: How To Buy an I Bond. TreasuryDirect accounts are not Roth accounts, though. That means that you will not be protected from inflation losses due to taxation.

Finding an Online Brokerage Company

Instead of using TreasuryDirect to buy TIPS, I highly recommend that you open a Roth IRA account at an online brokerage company. I have done a little research for you to make sure that there are some options, but I would not be surprised if there are many more good options. I came up with four and they are almost the same in what they have to offer as far as TIPS go.

E Trade

Roth IRA accounts with no minimum balance
Can hold TIPS in the account
No trading fees for TIPS
Can buy at auction or on secondary market
Minimum trade is $1,000

Charles Schwab

Roth IRA accounts with no minimum balance
Can hold TIPS in the account
No trading fees for TIPS
Can buy at auction or on secondary market
Minimum trade is $1,000

Fidelity Investments

Roth IRA accounts with no minimum balance
Can hold TIPS in the account
No trading fees for TIPS
Can buy at auction or on secondary market
Minimum trade is $1,000

Things to Consider

Where you choose to hold your Roth IRA depends on your own needs and preferences. It may be easiest to open one with a brokerage that you already use for your traditional IRA or 401k. There are other things to compare as well, such as the fees that will be charged should you choose to leave them, so it’s good to do your homework.

Financial Advisors

If you have an advisor you trust, it might be easy to do it all through them. Just tell them that you would like to hold your long term savings in TIPS using a Roth IRA and they should be able to take care of it for you. As you can see, trading in TIPS doesn’t usually cost very much so it shouldn’t cost very much to just have your existing financial advisor do it for you.

If you have an advisor that is unwilling to put you into a Roth IRA or TIPS, I would consider looking for help elsewhere. TIPS are one of the most secure investments available. Remember that advisors are supposed to be working for you and they should be looking out for your best interests.

The Fine Print Takes Time

One of the things that really surprised me was the legal paperwork that an account holder is required to understand and agree to before opening an online account. This creates a time cost that can easily be overlooked. It dwarfs the time it takes to enter your information and set up your account. The fact that it is in small print and put right at the final button before you open the count should probably be illegal in and of itself, but that’s what we have to deal with right now.

When you click on that little tiny link, it exposes you to as much as 100 pages of legal paperwork that you are required to “read and understand.” This part of the process took me about a week of reading after I got home from work.

This really hurts, but because I wanted to be honest before God and I could clearly see that I was likely to save thousands of dollars as a result, I eventually got through it. I didn’t read the documents for all four of these brokerages. I can only speak for Fidelity. I did start on Charles Schwab and TD Ameritrade documents. All of them were pretty difficult. Schwab’s seemed a bit simpler in language but if I recall, it was about 100 pages printed.

When you read the fine print, you may want to have these links on hand to help you understand what you are reading. These documents require that you understand jargon in three difficult professions: Tax, Securities and Legal. Here are some helpful links:

Investopedia – This helps with trading jargon
The Free Dictionary – Defining legal terms
The IRS IRA Info – The tax info

You may even want to “share the pain” with your brokerage representatives. That’s what I did. If I got discouraged, I just called them up and told them that I have been going through their legal documents for a few days and I don’t understand “xyz”.

Funding the Account

There are several ways that you can fund an account. One of the easiest ways would be to roll an existing 401k account into your Roth IRA. Before you do that, talk to your tax advisor. In general I think this is a good idea, but your specific situation is important to consider. Taxes will be required in the year that you do the rollover. It may be beneficial to do a rollover each year for a few years instead. Rollovers don’t have a penalty of 10% when you do them before age 59 and a half, but you do have to make sure to specify it as a “Rollover.” My understanding is that you can only do a certain number of rollovers per year. Again check with your tax advisor.

You can usually fund an account by linking your checking account to your brokerage account. This is similar to what you might do when you pay a bill online.

You can also just send a paper check by mail to your brokerage. They should have a deposit slip that you can get with your account number on it after you set up your account.

The road is quite narrow to protecting your savings from inflation here in the United States. Even though it’s not easy, it’s worth it to get your brokerage Roth IRA account open and ready to make it possible.

Inflation Protection and Taxes

Posted on April 11, 2018 by Troy

Tax Paper It’s important to understand that inflation protection is removed when taxes are applied. Current tax rules disregard inflation, and as a result it’s easy to demonstrate that inflation can cause all of our interest on a TIPS and some of our principle to be lost through taxation alone.

When we consider our inflation adjusted returns, we can easily see that the real tax rate climbs to astronomical levels. This simple example shows how easy it is for taxes to use up all of our real returns.

A Revealing Example

Let’s consider the effects of taxes on our inflation adjusted gains. These adjusted gains are what finance professionals call our “real” gains.

Let’s use the actual TIPS that is being offered as I write this and our current inflation rate. Our current inflation rate is actually 2.2% but we will use 2% make it easier and more conservative. If you buy a $1000, Ten year TIPS with a 0.5% interest rate and experience inflation that averages about 2% during that time, the overall real gain would be 5% over 10 years and the overall inflation adjustment if it stayed the same during that period would be 20%.

After 10 years, your principle would be adjusted to $1,200 and you would have been paid about $60 in interest. The problem is that you are not taxed on the just the $60. The tax rules require that you be taxed on the $60 real gain + the $200 of principle adjustment. If you are paying taxes at a low 15% rate, the rules say that you must pay 15% of $260 or $39. Since you really only earned $60 in real value, you will have paid 65% in taxes.

That’s a very high tax rate for sure, but look what would happen if we had an unusual amount of inflation. This is something we need to consider because our intention is to protect ourselves from both average and unusual changes in inflation.

Let’s change the average inflation to 5%. After 10 years, your adjusted principle would now be $1500 and your 0.5% interest would be $75. Your tax on $575 at 15% would now be $86.25. Since you only really earned $75, taxes will have taken all of your real gain and forced you to take a loss of $11.25 on top of that. That comes out to be a real interest rate of -0.1125% and a real tax rate of 115%.

In a taxable account, the greater the inflation, the less the protection. I can’t honestly say that it provides any protection at all because a taxable account amplifies inflation. It is wrong to assume that our savings is inflation protected just because we hold a TIPS.

One Safe Place

If you open a tax advantaged account such as a 401k or an IRA at a brokerage that allows you to hold TIPS within it, your savings is guaranteed to be protected. That’s because all growth in a tax advantaged account is either not taxable or tax deferred. This means that all inflation adjustments to your TIPS principle will only be taxed once, either before you put it into a Roth IRA or 401k or after you take it out of a traditional IRA or 401k.

The combination of a tax advantaged account and TIPS is currently the only option that I am aware of that will guarantee inflation protection to a person attempting to save money in United States.

I Bonds are Only Guaranteed in Certain Cases

I Bonds are tax advantaged in that they are exempt from state and local taxes. That makes them an even better option than other “safe” investments. This still does not protect them from a total loss of real gains through federal taxation on inflationary gains. There is one more advantage though. If an I Bond is used for tuition, it is tax free and becomes a great way to save for a child’s education.

It is also possible to sell your I bonds at a time in which your taxable income is below your exemption allowance. If your total income falls below the your permitted exemption, then your I Bonds are tax free for that year.

A Problem for All Investments

It’s very important for all investors to understand that this problem exists outside of TIPS and I Bonds. As far as I know, all investments have the potential of losing all of their real gains through taxes that are amplified by inflation. Here’s an explanation of the effects on capital gains:

It’s not just a problem for investors, though. Inflationary gains are taxed in your very own bank account. Your interest may be only $1 per year, and you may have actually lost $5 of purchasing power in your account. You would think that would mean that you lost $4 in purchasing power. Since you pay taxes on your inflationary gain of $1, it pushes the loss even lower than $4. Inflation amplifies your taxation because the more inflation there is, the more tax you pay.

Important Things to Remember about Tax Advantaged Accounts

If you have the ability to have 401k, I highly suggest that you do that. IRAs only allow you to contribute $6,000 per year for those under the age of 50 and $7,000 per year for those over 50. 401k’s allow you to hold far more depending on your income.

If you are a high-income individual. You currently have no guaranteed protection from inflation for savings that I know of. It may be a good idea to consider moving your investments overseas. There are several nations that don’t have capital gains taxes including Mexico and New Zealand.

Building Your Own TIPS Annuity

Posted on April 4, 2018 by Troy

Building a Cube I got an interest payment from one of my TIPS recently. It feels pretty good to watch your income automatically go up with inflation. As I mentioned in the article: “Introducing Treasury Inflation Protected Securities (TIPS)“, these bonds pay out interest on your inflation adjusted principle. The percentage of interest stays the same, but the bond amount itself goes up as it is adjusted for inflation. That means that your income goes up too.

What I feel when I get my inflation adjusted income, may be a result of the fact that I’m so used to being charged an inflation premium. All I’m really experiencing is consistency. I’m just getting the same purchasing power from my money as I had when I purchased my bond. As I considered the fact that loaning out money is capable of producing an ongoing, inflation protected income, I realized that this could be used to create a reliable income and preserve the principal at the same time.

Considering the Possibilities

I don’t talk very much about the income from TIPS because I primarily focus on their ability to protect our savings, but if you have enough money and don’t want to risk it somewhere else, you could use TIPS as a way of getting inflation adjusted income for the rest of your life while also protecting your principal.

You’re intention would be to preserve the principal for the rest of your life. Perhaps you already have a large sum that is intended for your heirs or for charitable giving in your will. You could be using that money to generate an income while keeping the principle safe and adjusted for inflation.

Even if you don’t really need the income, you could generate it and give it away while you are still alive.

Making Your Own Annuity

There’s really nothing new to creating your own “annuity” with TIPS. It’s just a frame of mind. The only difference is that you are using TIPS for the purpose of generating income. If you do plan to use them in this way, you might consider getting the 30 year TIPS. Not only will the income stay consistent for 30 years, you usually get the highest amount of income from the longer term bonds.

Keeping it Real

You might be wondering why you wouldn’t just use CD’s for this purpose. Remember, that the interest rate for TIPS is a “real” interest rate. That means that inflation has already been calculated into the TIPS interest. You have to subtract the inflation rate from your CD’s current interest rate and then compare it to the TIPS rate.

If, for instance, the interest rate on your CD is 2.04%, and inflation is currently at 1.90%, your real interest rate for the CD is only .14%. If you compare that to a 1% interest rate on a TIPS, you would see that you would earn .86% more “real interest.” That’s a whopping 614% more income on the same principal.

Fee Considerations

There really aren’t any fees when you buy a TIPS, but I like to consider any bond premiums and taxes as fees when you make an annuity out of them.

A premium is when you pay more than the face value for the bond. This happens when you buy a TIPS at auction and the price for the TIPS goes above the TIPS amount itself. It can also happen when you buy a TIPS from someone else on the market. For instance, you may end up buying a $1000 TIPS for $1100 at auction. If you do, you are paying a premium of $100 to get a $1000 TIPS. That $100 is like a fee because you had to pay it up front just to get the bond. It could take a while to recover that fee, but if you are doing it to protect a future income stream from inflation, it may not matter much to you. You are paying for a guarantee, just like you would with insurance. As long as you are still working, you can pay that fee with current income. This is a way of protecting future income while you have current income.

Taxes are a similar kind of thing. With TIPS, taxes are like an annual fee. You could think of it as a fee to the government for using their system to protect your money. The fee is paid at your tax rate. The bad thing about this fee is that it goes up with inflation. That makes this fee pretty expensive in a high inflation environment.

These fees may still be acceptable to you for protecting your income stream. With a commercial annuity, you may end up in the same place when you calculate in the loss of principal to your heirs.

If you were to put this annuity in an IRA or 401k, you would completely remove the tax “fee” and if you were careful to only buy your TIPS at a discount instead of a premium, you would also not have to pay the premium “fee.”

You’re the Boss

The thing that makes this so much better than a commercial annuity, is that you have complete control over the principal. The terms are very clear and your investment is backed by the full credit of the United States. All of the money is still under your control.

If you are wondering why you’ve never heard of this before, it might be because there is no money in this kind of annuity for anyone else but you. When you build your own TIPS annuity, you get to decide what to do with the principal and your heirs get it all back in the end without any exposure to the markets.

How to Buy an I Bond

Posted on March 28, 2018 by Troy

Picture of the front page of the Treasury Direct website

If you looking to buy an I Bond, but you’re not sure where you need to go or what you need to do, you’ve come to the right place. Just follow these simple step-by-step instructions. They will help you set up your TreasuryDirect.gov account and buy your first I Bond. If you have a printer, you may want to print these instructions so that you don’t have to go back and forth between these instructions and TreasuryDirect.

This could take 15 – 30 minutes. It’s good to take your time. There’s no reason to hurry. I suggest doing this on a computer, not a cell phone because you may be asked to allow your computer to use “Flash.” One of the demos provided at TresuryDirect uses Flash and should work fine on IE, Edge, Firefox and Chrome browsers.

If you are wondering why you would want to buy an I bond, please read the articles: “I Just Want to Save My Money!” and “Why Bonds are Smart for Savings“.

Step 1: Gather Your Info

You need to be a “U. S. Person” and have a Social Security Number in order to buy U. S. savings bonds. It’s one of the special privileges you have just for being a United States citizen.

You will need an address in the United States if you want to participate in buying I Bonds directly from the government, so have that ready too.

You will need to have a checking or savings account so that you have a way to pay for your I Bond. You can’t pay with a credit card but it’s ok if you don’t have paper checks. You just need to call your credit union or bank and get your checking account’s routing number and account number so you can pay Treasury Direct with electronic checks.

Like most online services these days, you will need to provide Treasury Direct with a valid email address. They intend to contact you electronically with information about your account.

You have to have a computer with a browser that can create a private line to Treasury Direct. Pretty much all computers for the last ten years have been able to do this. The computer you are using to read this should work as long as it is a private one. It’s probably not a good idea to do your finances on a public computer.

Step 2: Take the Guided Tour at TreasuryDirect.gov

Picture of the TreasuryDirect Guided Tour page

Although this government site has its own oddities, they’ve done a great job of holding your hand through the process of setting up your account. You and anyone in your household that has a Social Security Number is entitled to have a free account directly with the United States Treasury. They have a pretty nice “Guided Tour” that shows you the steps that you will go through when you set up your account. Here it is:

TreasuryDirect.gov’s Guided Tour

If you need to type the address in, here it is:

https://www.treasurydirect.gov/indiv/TDTour/default.htm

Step 3: Complete the Application Process at TreasuryDirect.gov

The application process will allow you to set up your TreasuryDirect.gov account by entering the information that you have collected.

From the Guided Tour page, you can find the application link in the upper-right corner of the page. It’s called “OPEN YOUR ACCOUNT NOW“. At the time that I write this, the letters are pretty small but they are all orange.

f you are on the Treasury Direct starting page, you will find the place to open the account underneath the orange login button. Just click on the words: “Open an Account”

Make sure that you record:

Your new account number
Your new password
The answers to your security questions (they will ask them sometimes and it will lock you out if you don’t answer them correctly)

It’s a good idea not to save these things on any computer or cell phone. You might consider writing these down and saving them with other vital records and information you keep. Physically locking the information in a safe would be one good idea.

Step 4: Watch the Accessing Your TreasuryDirect Account Demo

Accessing Your TreasuryDirect Account Demo Page

The TreasuryDirect site has quite a few security features. It’s a good thing but it also makes it a bit harder to use. I highly suggest that you watch the Flash Demo that they have created at the TreasuryDirect.gov site. You can click on the graphic on the right or click here. Make sure that you say “yes” if your browser asks if you want to us “Flash”.

Here’s the address if you need to type it in:

https://www.treasurydirect.gov/indiv/myaccount/myaccount_demo.htm

Step 5: Sign In to TreasuryDirect

To log in, locate the “Account Login” section in the upper right corner of the TreasuryDirect.gov website.

Select the “TreasuryDirect” link in that section. On the next page, select the orange “LOGIN” button.

If this is the first time that you have logged in, you may be asked to check your email for a special passcode. This is a security protection to make sure that it is really you. You must enter that code that you get from your email. You can choose the option to allow TresuryDirect to remember your browser. That way you won’t have to get special codes in your email every time you attempt to log in.

On the next screen you must enter your new Account Number. That’s not the passcode. That’s the one that you used when you first applied in step two above. After typing in your account number, hit the “submit” button.

You will then be taken to a screen that allows you to choose an image and a phrase. This might seem a bit silly, but it is actually a good security method. TreasuryDirect will show you this picture and phrase every time you log in. It’s a way for you to know you are actually accessing TreasuryDirect and not a fake.

If that image is ever not the one you remember. It’s a good idea to close your browser and contact TreasuryDirect by phone and tell them that something is wrong before going on. All these things are there to make sure that you are protected and that’s a good thing.

Below that you will see a graphical keyboard. Instead of typing your password using your keyboard, you need to type your password using the graphical keyboard, with your mouse.

After you hit the “submit” button, the weirdness is pretty much over. You will now be signed into TreasuryDirect. You should see a welcome message with your name at the top of the screen.

One other strange thing to keep in mind about the TreasuryDirect website: Don’t try to use your “back” button in the browser. That will force you out, requiring you to log in. TreasuryDirect will only allow you to use the buttons on the page to navigate. All these things help the web site give you a very secure environment.

I did find some graphical instructions at WikiHow that may also be very helpful.

Step 6: Buy Your I Bond

Now for the fun part. We are finally to the point at which you can buy your first I Bond.

Now that you have logged into your account, you will need to click on the button at the top called: “Buy Direct”

You will then see a list of options of things you can buy. In the list you will see an option for “Series I – An accrual-type security with a combination interest rate of a fixed and an inflation rate”

Select that option and Hit the blue “Submit“ button.

You will a place to enter your “Purchase Amount“. Enter the bond amount here. You can have a bond as low as $25 and if this is the only bond you plan on buying this year, you should be able to have one for as high as $10,000. I haven’t tried that before but it should work as long as you have the money. Make sure that the “Select a source of funds” drop-down box shows your checking account and then hit the “Submit” button.

That’s it. When you log back into TreasuryDirect, you will be able to check up on your I Bond and see its current value. This is also the place to go when you are ready to sell your bond. You can’t do that for the first year, because that’s one of the rules. It’s best to hold on to your bond for five years so that you get all the interest.

You can also buy other kinds of treasury investments this way including TIPS. That’s all it takes to take advantage of one of the safest and most effective ways to save for your future.