TIPS is short for Treasury Inflation Protected Securities. TIPS are government bonds that have their principal indexed to inflation. The coupon rate remains unchanged, but as the principal adjusts according to the rate of inflation, the actual interest payment--which is paid twice per year--changes. In this way, the owner of Treasury inflation protected securities is shielded from the erosive effects of inflation. While the principal is adjusted upwards in inflationary conditions, it does not fall below its original amount, even in deflation. TIPS interest is exempt from state and local taxes, but is subject to federal tax. TIPS are issued in 5, 10 and 30 year maturities and can be purchased direct through a Treasury auction or in the secondary market. It is important to note that the consumer price index (CPI) is the inflation benchmark used to adjust TIPS principal.

What Does $3 Million Buy

$3 million in savings buys roughly $5,000 per month or $60,000 per year in inflation adjusted income.

This is inflation adjusted fixed income rather than annuity-based income.

Click here for more on TIPS and inflation adjusted retirement income.

Roth IRA Conversion Tips to Consider

In January 2010, many investors who had previously been prevented from considering a Roth IRA conversion because of income limits will be able to consider converting to a Roth IRA. Asset manager Charles Schwab recently published a useful list of tips that are worth considering in light of the Roth IRA conversion opportunities. Much of the content naturally focuses on tax considerations and differences between traditional and Roth IRAs. Source: Charles Schwab Full Story
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Review of Free Retirement Planning Tools

U.S. News & World Report featured a review of five free retirement planning tools that can be found online. The review includes retirement planning software from: AARP Fidelity MetLife T. Rowe Price The U.S. Department of Labor The general conclusion is that the tools do "an inconsitent and poor job," often ignoring critical factors such as longevity risk , inflation and medical expenses. Source: U.S. News & World Report Full Story

Retirement Planning with TIPS and Longevity Annuities

Gowri Shankar of the University of Washington has published an article on the use of Treasury Inflation -Protected Securities (TIPS) and longevity annuities. Shankar suggests that a combination of TIPS and longevity insurance provides an optimal strategy when the objective is guaranteed retirement income . Shankar demonstrates that the combination affords the ability to sustain relatively high withdrawal rates while minimizing the probability of financial ruin in retirement. The strategy also...