Is this a good time to invest in short term Bonds,if so how do I go about picking a Bond? I am 61 years old and plan to retire soon.
Should I contribute as much as I can in my 457 plan even though taxes will probably be higher when I start withdrawing money?
Terry Says: OK, these are two separate questions. First, you know that bond prices FALL when interest rates RISE. Now, it is tempting to get a bit higher yields in short-term bonds. But don’t go longer than two years. If interest rates start to rise, then prices will fall — and you’ll have to stick it out until the bonds mature. Choose a bond fund that will manage this risk, and reinvest in higher yielding bonds as old ones mature. Or you can buy two-year Treasuries direct from the government at www.TreasuryDirect.gov, with a minimum of $100 purchase.
Contribute as much as you can to your 457, especially if you get a matching contributions, which you won’t if this is deferred comp. The benefit is the money will grow tax-deferred until you’re required to take it out, which won’t be for at least ten years. Who knows what tax rates will be then, but at least the money will keep growing on a tax-deferred basis through your retirement.