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Why we love this deal

Trying to get a kitchen organized can feel impossible without enough storage. With little counter space or cabinets, it can get cluttered quickly. And it’s even harder to get your kitchen in order when you have a lot of snacks and pantry essentials. Freestanding pantry cabinets can help, as they provide additional storage for almost all of your kitchen needs.

The Asofer Pantry Storage Cabinet at Walmart is on sale for just $74 ahead of Labor Day, and it’s quite the steal. With four cabinets and a lot of shelving, it provides just the right amount of storage without taking up too much space, making it a great fit for small kitchens.

Asofer Pantry Storage Cabinet, $74 (was $160) at Walmart

Courtesy of Walmart

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Why do shoppers love it?

Some compact cabinets have limited storage, but at just 24 inches long, this Walmart find has a lot to offer. The top two doors have three compartments to store everything from food containers to baking necessities. But behind the two doors, there are additional open-shelf racks for items like cans, beverages, and more. The two bottom doors open up to reveal a compartment that you can use to house more pantry essentials or small kitchen appliances. It’s a great area to store a microwave if you have limited countertop space or want to hide it away for a more minimalist kitchen look.

In a crisp white color, you get the most timeless farmhouse design. The vertical slats on the door panel give it just the right amount of visual interest without taking away from its ability to blend into any space. Not only is the white colorway neutral, but it’s also the most affordable, with a sale price of $74. There are black and dark brown options available, too, but the prices vary.

Related: Walmart is selling a 3-drawer mini dresser for only $50

Details to know

Storage: Four compartments and shelving on doors.

Colors: White, dark brown, and black.

Material: Wood composite and medium-density fiberboard.

According to Walmart shoppers, this pantry storage cabinet “fits beautifully” in a kitchen, even if it’s a small space. One reviewer said it offers “lots of storage space,” adding that it’s just what they needed, since they have few cupboards in their home. “It is well made, the materials are nice and sturdy, [and it’s] not wobbly at all. Very easy to assemble, [and the] instructions are easy to follow,” they added.

In addition to being used as a kitchen pantry, some shoppers made the most of the extra storage space and used it for art supplies. It can also be used in a dining room to store extra dinnerware or in a bathroom for cleaning supplies, toiletries, and more.

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Lofka Pantry Cabinet, $86 (was $110) at Walmart

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Behost Kitchen Pantry Cabinet, $99 (was $190) at Walmart

The Asofer Pantry Storage Cabinet is on sale for only $74, which is a great deal for the storage you’re getting.

Kelly Clarkson walked away from her hit show after seven seasons. Here’s why leaving on top can be your best career growth move.

Every few years, someone promises Americans a fix for the number on the corner gas station sign.

Right now, that number reads $4.12 for a gallon of regular, according to AAA. In January, it read $2.81. That gap is one of the more expensive things to happen to American households this year, and almost none of it traces back to anything a household did.

It traces to a war. U.S. strikes on Iranian targets near the Strait of Hormuz have pushed Brent crude to roughly $95 a barrel and West Texas Intermediate to about $91, according to Trading Economics.

Crude is close to half of what you pay at the pump, so every dollar of that shows up in your tank within a couple of weeks. It’s why a fix involving the largest proven oil reserves on the planet gets everyone’s attention.

One arrived this week. I read the actual terms rather than the announcement, and my analysis says the relief most people are picturing is somewhere between one and 10 years away.

Venezuela’s National Assembly voted Sept. 1 to hand Washington preferential access to 17 oil fields holding about 65 billion barrels, roughly a fifth of the country’s reserves. Energy Secretary Chris Wright landed in Caracas that night. The deal was signed Wednesday, Sept. 2.

Then Chevron (CVX) put more than $7 billion behind it.

Why Venezuela’s oil reserves went dark for two decades

Venezuela sits on more than 303 billion barrels of proven crude, the largest stockpile on earth, according to OPEC. It is also, by any honest reading of the last 20 years, the worst-run oil patch on earth.

Production peaked above 3 million barrels a day in the late 1990s. Hugo Chávez completed nationalization of the industry in 2007, pushing ExxonMobil and ConocoPhillips out of the country. Both are still pursuing compensation nearly two decades later.

What followed was underinvestment, collapsing pipeline and power infrastructure, and sanctions. Output fell to roughly 1.1 million barrels a day by mid-2026, according to Reuters. Chevron stayed the whole time. It has operated in Venezuela since 1923.

That history matters because it sets the realistic clock on any recovery. Barrels in the ground are not barrels in a tanker.

Venezuela approved Washington access to 17 oil fields, while Chevron pledged more than $7 billion in investment.Bloomberg / Getty Images

What Washington actually got in the Venezuela oil deal

The structure is the part almost nobody is talking about, and it is genuinely without precedent in modern American energy policy.

The 17 fields carry 100-year rights held by North American Blue Energy Partners, Venezuela’s second-largest private oil company. A new entity is being created around them.

The U.S. Department of Defense’s Office of Strategic Capital takes a 35% equity stake in it, and the State Department is entitled to buy 20% of output at production cost, according to Euronews.

Related: Is Trump’s big, splashy Venezuela oil deal real?

U.S. citizens must form a majority of the board. Washington holds a veto over who sits on it.

Secretary of State Marco Rubio described the arrangement as an agreement with the U.S. government itself, specifically the Defense Department, “which holds a special account allowing it to take possession” of a share of the assets, according to Euronews.

Read that again. The Pentagon is now an equity holder in an oil company.

Here is the deal by the numbers:

65 billion barrels across 17 fields, on 100-year rights, Euronews noted

35% U.S. government equity stake in the new venture, according to Euronews

$7 billion Chevron investment through 2031, Reuters noted

600,000 barrels a day Chevron target, up from about 280,000, Reuters reported

303 billion barrels in total Venezuelan proven reserves, OPEC confirmed

The administration’s case is that U.S. control ends the corruption that hollowed out PDVSA, counters Russian and Chinese positions in the hemisphere, and lowers prices for American drivers. “Today is a transformative day,” Wright said in Caracas, according to NBC News.

The objections are on the record, too. Opposition lawmakers in Caracas abstained from the vote, saying they had not been shown the written terms.

NABEP is owned by Alejandro Betancourt, who has faced money-laundering investigations in Spain and Switzerland without charges being filed and has been accused of involvement in a PDVSA corruption scheme. A U.S. official called him a “proven operator,” the New York Post reported, although the official conceded that geopolitics sometimes means dealing with imperfect figures.

Why cheaper gas is not the near-term payoff here

Chevron’s commitment is the most concrete thing in this story. The company will invest more than $7 billion through 2031 to lift its Venezuelan output to roughly 600,000 barrels a day from about 280,000 now, with new acreage in the Orinoco Belt.

The number that actually matters is buried in the company’s own guidance. Total production costs are expected to run under $20 a barrel.

Chevron CEO Mike Wirth said the existing roads, water, and power make the economics unlike a greenfield project, noting that “our ability to grow at low cost is quite different,” according to Reuters.

More Energy:

Tesla stock investors stand to gain from U.S. power grid

Is Trump’s big, splashy Venezuela oil deal real?

Chevron stock turns heads as company strikes fresh oil

Sub-$20 barrels in a $90 world is a margin story, not a pump story.

Because on the pump side, the timing does not work. Analysts put the wait for meaningful new barrels at anywhere from one to 10 years. Washington is putting no money into the venture, arguing its backing alone will draw private capital. Wright projects Venezuelan output of 2 million barrels a day by the end of the decade.

The end of the decade is four years out. Your next fill-up might be tomorrow.

Exxon is not buying it, either. A spokesman recently said that nothing has changed at the company, according to the Associated Press, and Exxon’s CEO called Venezuela “uninvestable” earlier this year, as Politico reported.

President Donald Trump has said Exxon is going into Venezuela, Reuters noted. Exxon says otherwise.

What the Venezuela oil deal means for your money

If you own energy exposure, this is a cost-curve event, and you should treat it as one. A supermajor adding 320,000 barrels a day at less than $20 of cost while crude trades near $90 shows up in free cash flow long before it shows up at a gas station. That is the trade, and it is a slow one.

If you do not own energy exposure, the honest read is that nothing about your November heating bill or your commute changed on Sept. 2. What moves your pump price between now and the midterms is Hormuz, not Caracas.

The part worth filing away is the precedent. The U.S. government did not buy oil. It bought equity, board control, and a call on output at cost. If that structure works, it will not stay in Venezuela.

Watch the barrel count, not the announcements. Venezuela has produced ambitious oil plans for 20 years. What it has not produced is oil.

Related: $90 oil makes a sudden, unwelcome comeback

TheStreet aims to feature only the best products and services. If you buy something via one of our links, we may earn a commission.

Why we love this deal

Smartwatches are popular wearable devices that you can find on the wrists of people all over the country. They’ve become extensions of our smartphones, keeping us connected with notifications, but also serve as fitness trackers to keep an eye on overall health. While some brands are incredibly pricey, there are plenty that are budget-friendly, despite having so many features.

The Soudorv S50 Military Smartwatch is on sale for only $33 during Amazon’s big Labor Day sale. It was originally $130, but thanks to a limited-time deal, you can get the device for 75% off. With a rugged look, it has a unique appearance compared to traditional smartwatches on the market.

Soudorv S50 Military Smartwatch, $33 (was $130) at Amazon

Courtesy of Amazon

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Why do shoppers love it?

This isn’t your average smartwatch. With a military-style design, it has a rugged look with a durable design. It’s passed 12 military-grade tests and has the ability to withstand everything from dust to mud. Its IP68 waterproof rating means it can also hold up against water, whether you’re washing your hands or get caught in the rain. With a built-in LED flashlight, it can light the way in dark areas up to 5 meters ahead. 

With wellness tracking, it can monitor your heart rate, stress levels, and sleep patterns. It has more than 110 exercise modes to choose from, including hiking, yoga, and running. And it’s not just your health that it keeps you up to date on. Its Bluetooth connectivity syncs with your phone, giving you the ability to make and answer calls directly from your wrist. You can also get notifications from apps like Facebook, Instagram, and more.

Its long battery life is also worth noting. It can last up to 18 days with daily use, but on standby, it can stretch for up to 50 days. When you need to recharge, it only takes 2 hours to fully power back up.

Related: Amazon’s $156 luxury Seiko automatic watch uses the same tech as high-end Swiss timepieces

Details to know

Screen size: 1.53 inches.

Battery life: Up to 50 days.

Waterproof rating: IP68.

Amazon shoppers say this smartwatch has “many useful features, ” from fitness tracking to heart rate monitoring, that are easy to use. “I loved this smartwatch; it is versatile and suitable for both men and women. It is comfortable to wear, lightweight, and waterproof, and it measures and monitors your physical activity,” a reviewer said. 

Another customer praised the smartwatch as a great alternative to more expensive brands. “I wanted to move on from my Fitbit Versa3 and couldn’t bring myself to buy a high-dollar Apple Watch,” they said. “The face size is great, the band is plenty big, and [it has] a tremendous battery life.” They added that it’s also comfortable for all-day wear.

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Lvhop Military Smartwatch, $48 (was $80) at Amazon

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The Soudorv S50 Military Smartwatch is on sale for only $33 during Amazon’s Labor Day sale, and it’s a small price to pay for such a useful device.

Trump said earlier this week U.S. communities will be “backwards and poor” if they do not approve data centers.

You can save diligently for decades and still make a few retirement planning mistakes that put your financial security at risk.

Wes Moss, host of Ask an Advisor on the Clark Howard Podcast, has spent decades working on the front lines as a fiduciary financial advisor. After walking thousands of families through the pivotal transition from saving to spending, Wes has found that the most devastating pitfalls rarely involve picking the wrong individual stock or missing the latest investing fad. Instead, they almost always stem from foundational issues: debt structure, marital communication, and cash-flow reality.

We asked Wes to break down the most common — and costly — retirement planning mistakes he sees today, and what pre-retirees should do to protect themselves.

1. Carrying Mortgage Debt With No End in Sight

Entering retirement with housing debt is one of the heaviest financial anchors you can drag into your next chapter.

Through extensive research on what actually drives retiree satisfaction, Wes discovered a direct correlation between peace of mind and the amortization schedule on a home loan.

“Retirement happiness rises as the number of years left on your mortgage falls, and my latest research shows the ‘money green zone’ begins once you have 9 years or less remaining on your payoff schedule,” Wes explains. “Carrying an open-ended (long) mortgage into retirement, with no clear payoff date, is one of the heaviest rocks you can put in your retirement backpack.”

When a large mortgage payment follows you into retirement, it permanently inflates your baseline living expenses, forcing you to pull more money out of your investments regardless of market conditions.

If you are approaching retirement with significant housing debt, prioritize getting your remaining payoff window under that nine-year threshold — or wiping out the loan entirely before you clock out for the last time.

2. The Spousal Disconnect

Retirement isn’t just an individual financial balance sheet; for married couples, it is a complete lifestyle overhaul. When two partners aren’t operating from the same playbook, the consequences can be severe.

“Couples who are significantly misaligned on retirement spending, saving, and investing create a tornado of discontent that can derail even a well-funded plan,” Wes warns. “The fix isn’t necessarily more money, it’s a written plan or blueprint that both spouses actually agree on, so decisions get made from the same page instead of two different ones.”

One spouse might envision traveling abroad six months a year, while the other wants to stay home, renovate the kitchen, or financially assist adult children. If these differences aren’t hashed out in advance, the resulting friction quickly turns financial choices into emotional battlegrounds. Sitting down to write out shared priorities, expected spending targets, and risk tolerance ensures you enter retirement as a unified team.

3. Running a Rich Ratio Under 1.0

To determine whether someone can realistically afford to stop working, Wes bypasses arbitrary portfolio target numbers and instead points to a straightforward formula he calls the Rich Ratio:

Rich Ratio = Have (Sustainable Monthly Income) ÷ Need (Monthly Living Expenses)

Your “Have” includes all predictable monthly cash flow, including Social Security, pensions, and disciplined withdrawals from your investment accounts.

Your “Need” is what it genuinely costs to fund your day-to-day life and retirement activities.

“Your Rich Ratio is simply your income divided by your need, Have divided by Need,” Wes says. “If $8,000 a month in income is covering a $10,000 a month lifestyle, your ratio is 0.8, and no matter how big the account balance looks on paper, you’re financially strained until that ratio crosses back above 1.”

A portfolio worth $1.5 million might seem substantial, but if your spending burns through it faster than the portfolio can sustainably generate income, you are operating at a structural deficit. Before you step away from your paycheck, your Rich Ratio must be at or above 1.0 — meaning your dependable cash flow cleanly covers your living costs.

4. Overlooking the Long-Term Bite of Inflation

While dramatic, short-term spikes in consumer prices grab headlines, the more dangerous threat to your golden years is the quiet, compounding nature of rising costs over decades.

“Inflation is the quiet retirement killer because it doesn’t necessarily show up as a single bad year,” says Wes. “It compounds silently for decades and erodes purchasing power for anyone whose income isn’t structured to grow alongside it.”

If a basket of goods costs $5,000 a month when you retire at age 65, standard historical inflation will roughly double that cost by the time you reach your mid-80s. Relying strictly on flat, fixed-income sources means your real purchasing power gets halved over the course of a normal retirement. A well-constructed retirement strategy must maintain exposure to assets — such as dividend-growing equities — that have historically outpaced inflation.

5. Taking on Too Much Investment Risk

After extended bull markets, it is easy for investors to become complacent about market volatility. However, shifting from the accumulation phase of your working years to the distribution phase of retirement requires a fundamental change in risk management.

“Markets have been remarkably strong for the past 10 years, but markets don’t know or care when you personally decide to retire, and a multi-year bear market that hits right at the start of retirement can wreck an otherwise solid plan,” Wes cautions.

Wes notes that the remedy is not retreating entirely to cash and missing out on future market growth. Instead, it comes down to smart portfolio structure:

“The fix isn’t avoiding stocks, it’s baking in ‘dry powder’ to your asset allocation. This means having 3 or more years’ worth (of spending) assets held in cash and/or bonds sized to support your income gap, so you’re not forced to sell stock assets during a major correction.”

By holding three or more years of your net living expenses (your spending needs minus guaranteed sources like Social Security) in stable, liquid assets, you create an essential buffer. If a prolonged downturn hits the market, you can draw from your cash and bond reserves to pay the bills, giving your stock portfolio the time it needs to fully rebound without locking in steep paper losses.

Final Thoughts

A comfortable retirement doesn’t require predicting market tops or taking outsized speculative bets. By locking in a mortgage payoff timeline under nine years, getting on the same page with your spouse, keeping your Rich Ratio over 1.0, planning for decades of inflation, and buffering your portfolio with dry powder, you set up a framework designed to protect your wealth and your peace of mind.
The post 5 of the Most Common Retirement Planning Mistakes appeared first on Clark Howard.

The company’s Cybercab rollout won’t be as broad as some investors had hoped.

Micron is reportedly increasing production capacity of a more profitable memory offering that’s in high demand due to AI.

Long-term Treasurys are paying yields around 5%, giving investors an opportunity to lock in attractive income for decades.

But there’s still one major unknown: inflation.

A 5% return may look great today, but its buying power depends on how much prices rise over the years ahead. Treasury Inflation-Protected Securities, commonly called TIPS, offer a different approach. Instead of trying to predict inflation, investors can lock in a return designed to stay ahead of it.

Here’s how TIPS work, how to buy them, how they compare with regular Treasurys and I bonds, and why their current yields have caught investors’ attention.

What Are TIPS and How Do They Work?

Treasury Inflation-Protected Securities are U.S. government securities designed to protect investors from inflation.

TIPS are available in terms of five, 10 and 30 years. The easiest way to understand how they work is to think about them as having two elements:

A fixed interest rate. When a TIPS is issued, its interest rate (coupon rate) is set and does not change. Interest is paid every six months.

A principal value that adjusts with inflation. The amount you have invested rises or falls based on changes in the Consumer Price Index.

Those two pieces work together.

Suppose you buy $10,000 in TIPS with a 2% interest rate. Initially, 2% of $10,000 would equal $200 in interest per year, paid in two semiannual payments.

Now suppose inflation causes the principal to increase to $10,300. The interest rate is still 2%, but it is now applied to $10,300 instead of $10,000. That works out to $206 in annual interest.

As inflation continues to increase the principal, the dollar amount of your interest payments generally increases too.

That’s the key feature of TIPS: Inflation increases both the amount you ultimately get back and the dollar amount of interest you receive along the way.

If you hold an individual TIPS until maturity, you receive the inflation-adjusted principal or the security’s original face value, whichever is greater.

Here’s an illustration of how a hypothetical $10,000 TIPS investment with a fixed 2% coupon rate would have adjusted using actual annual inflation rates from 2016 through 2025.

How a $10,000 TIPS investment with a 2% coupon rate would have adjusted for inflation, 2016 to 2025

Year
Calendar year
Inflation rate
Starting principal
Inflation adjustment
Ending adjusted principal
Annual interest (2.0%)
Semi-annual payment (avg)

Year 1
2016
2.07%
$10,000.00
$207.00
$10,207.00
$204.14
~$102.07

Year 2
2017
2.11%
$10,207.00
$215.37
$10,422.37
$208.45
~$104.22

Year 3
2018
1.91%
$10,422.37
$199.07
$10,621.44
$212.43
~$106.21

Year 4
2019
2.29%
$10,621.44
$243.23
$10,864.67
$217.29
~$108.65

Year 5
2020
1.36%
$10,864.67
$147.76
$11,012.43
$220.25
~$110.12

Year 6
2021
7.04%
$11,012.43
$775.28
$11,787.71
$235.75
~$117.88

Year 7
2022
6.45%
$11,787.71
$760.31
$12,548.02
$250.96
~$125.48

Year 8
2023
3.35%
$12,548.02
$420.36
$12,968.38
$259.37
~$129.68

Year 9
2024
2.89%
$12,968.38
$374.78
$13,343.16
$266.86
~$133.43

Year 10
2025
2.74%
$13,343.16
$365.60
$13,708.76
$274.18
~$137.09

The coupon rate stays at 2%, but it is applied to a principal that grows with inflation, so the dollar amount of each interest payment rises along with prices. At maturity you receive the inflation-adjusted principal. Interest is paid twice a year, so each payment is roughly half the annual amount. Figures are illustrative and use annual inflation rates rather than the daily index ratio the Treasury applies.

One important point is that the inflation adjustments build on each other, just as inflation does. If a carton of eggs costs $4 and the price rises 3% annually for 10 years, it would cost about $5.38. If it then rises another 10%, that increase applies to $5.38 — not the original $4 price. TIPS work similarly: Each inflation adjustment is applied to the already-adjusted principal. Over time, the principal reflects the cumulative change in inflation, helping the investment maintain its purchasing power. You can see how inflation compounds over time using our inflation calculator.

How Do You Buy TIPS?

You can buy TIPS either directly from the U.S. government through TreasuryDirect or through a brokerage account.

TreasuryDirect allows you to buy newly issued TIPS at Treasury auctions. You can also buy newly issued TIPS through many brokerage firms.

A brokerage gives you another option: buying existing TIPS on the secondary market.

That’s where price becomes especially important. An existing TIPS may trade for more or less than its inflation-adjusted principal value depending on market conditions. If you pay a premium for a TIPS on the secondary market, the Treasury’s guarantee at maturity doesn’t protect that premium.

That’s also why you shouldn’t look only at a TIPS’ coupon rate when shopping. The yield to maturity — and, specifically for TIPS, the real yield — reflects the price you’re paying and provides a better picture of the return you could earn if you hold the security until maturity.

What’s the Difference Between TIPS and I Bonds?

If you’re a longtime Clark Howard listener, you may know that the money expert has held another inflation-protected investment, Series I Savings Bonds, commonly called I Bonds, since the 1990s. He has recently recommended I Bonds again.

While both TIPS and I bonds offer inflation protection and are backed by the federal government, they work very differently.

Think of I bonds as an inflation-protected savings tool for a small portion of your portfolio and TIPS as an inflation-protected investment that can be used within a larger bond portfolio.

Another important distinction is price stability. I bonds do not trade on the open market, so their value does not fluctuate based on investor demand or changing interest rates. TIPS are marketable securities, which means their price can rise or fall if you sell before maturity.

Why Are TIPS Particularly Interesting Right Now?

TIPS have offered inflation protection for decades. What makes them particularly interesting now is the amount investors can earn in addition to that protection.

As of Aug. 31, 2026, Treasury data showed approximate real yields of:

2.18% for five-year TIPS

2.44% for 10-year TIPS

2.99% for 30-year TIPS

Those rates change with market conditions. But they represent an opportunity to lock in a significant positive return above inflation — something investors couldn’t do when real yields were near or below zero.

For a simple example, consider a 10-year TIPS with a real yield of about 2.4%. The investment is designed to deliver a return of roughly 2.4% per year beyond inflation, before taxes, if held to maturity.

If inflation averaged 2%, the investment’s total nominal return would be roughly 4.4%.

If inflation averaged 4%, the nominal return would be roughly 6.4%.

The precise calculation is more complicated, but the central benefit remains the same: The investor doesn’t have to correctly predict inflation to maintain purchasing power.

If Regular Treasurys Yield Around 5%, Why Buy TIPS?

The key difference when comparing regular Treasurys and TIPS is nominal yield vs. real yield.

A regular Treasury’s yield is a nominal yield, which is the return before accounting for inflation. A TIPS’ real yield represents the return above inflation if held to maturity, with inflation protection coming through adjustments to the principal.

A regular Treasury may outperform TIPS if inflation turns out to be lower than investors expect. TIPS may outperform if inflation is higher than expected.

One way to compare the two is with the breakeven inflation rate. This is calculated by subtracting the real yield on a TIPS from the nominal yield on a regular Treasury with a similar maturity.

For example, on Aug. 31, 2026:

The 10-year Treasury yield was about 4.75%.

The 10-year TIPS real yield was about 2.44%.

The difference was approximately 2.31 percentage points.

That 2.31% difference is the approximate breakeven inflation rate.

If inflation averages more than roughly 2.3% over those 10 years, the TIPS would generally be expected to outperform the regular Treasury. If inflation averages less than that, the regular Treasury would generally be expected to do better.

The breakeven rate isn’t a perfect prediction of future inflation. But it provides a useful framework for comparing the two choices.

Your choice between long-term Treasury bonds and TIPS comes down to your personal outlook on inflation: Do you want to bet on a future of persistent low inflation or pay a small premium for built-in inflation insurance?

What Are the Risks and Tax Consequences of TIPS?

TIPS are backed by the federal government, but that doesn’t mean they are completely risk-free.

Their Market Value Can Fall

Like other marketable bonds, the price of a TIPS can rise or fall when interest rates change.

If real interest rates increase after you buy, the market value of your TIPS will generally decline. That may not matter if you hold an individual TIPS until maturity, but you could lose money if you need to sell early.

The longer the maturity, the more sensitive the price will generally be to changing interest rates.

Inflation Adjustments Can Create “Phantom Income”

TIPS can also create an unusual tax issue in a regular brokerage account.

The interest payments and any inflation-driven increases in principal are generally subject to federal income tax in the year they occur. That means you may owe taxes on an increase in principal even though you won’t receive that portion of the money until you sell the TIPS or it matures. TIPS interest and inflation adjustments are exempt from state and local income taxes.

This is sometimes called phantom income because you’re taxed on income you haven’t yet received in cash.

Holding TIPS in a tax-advantaged retirement account can avoid the need to pay taxes on those adjustments each year. However, the eventual tax treatment depends on the type of account. Withdrawals from a traditional IRA or 401(k), for example, are generally taxable, while qualified Roth withdrawals are tax-free.

Taxes shouldn’t automatically determine where you hold an investment, but they are an important consideration for where TIPS fit into your portfolio.

Final Thoughts

Locking in around 5% with a long-term Treasury sounds attractive. But what ultimately matters is how much purchasing power that money retains after inflation.

TIPS give investors another option: Instead of trying to guess what inflation will be, you can lock in a return above it.

That doesn’t make TIPS a replacement for stocks — or necessarily the right choice for your entire bond allocation. They are a tool designed for one particular job: protecting part of your portfolio from unexpected inflation.

For investors who want that protection and are comfortable with their nuance, today’s positive real yields make TIPS worth a closer look.

The post TIPS: The Inflation-Proof Alternative to Standard Bonds appeared first on Clark Howard.