2021 I Bonds: what's your plan?

[CardinalRule]

The fixed rate went to 0.0% on November 2020. Bonds bought until April 2021 will earn a composite annualized interest rate of 1.68% for six months, with the inflation adjustment.

For those planning to buy I Bonds: Do so at the beginning of the year, or wait to see if the fixed-rate component rises on May 1?

[TheTimeLord]

I will wait until May. If it is still 0% in May I will buy half and wait until November for the rest, if it is over 0% I will buy my max.

[JoMoney]

Payroll deduction should automatically hit a $5k purchase in second half of June and a $5k purchase in second half of December.

[Angst]

Last year I bought at the end of February. That way, I got the existing 0.2% fixed rate that was expected to be eliminated in May 2020, and it was. This year, given where the real and nominal yield curves have been I find it very hard to imagine anything but a continuing 0.0% fixed rate in May 2021. Nov 2021? Anything's possible, but I'm going to be buying my full $10k on Jan 29th. That'll at least get the clock ticking on the 1-yr countdown until my 2021 I Bonds become cashable.

[z3r0c00l]

I don't think the odds of a fixed rate increase are very good and so will buy as soon as possible. It is a good rate of return compared to almost anything safe and the sooner you buy, the sooner you can redeem it without 1 year lockup or 5 year EWP. Just a funny coincidence, I bonds currently pay the same as 30 year treasuries without the significant volatility of the latter. And if inflation kicks up your I bonds get paid more without a cent of harm to the principal.

Had a sudden, unexpected expense this month that may force me to wait until February, else my plan is to buy at the end of January using funds that now earn a sad .5% in a bank account.

[Pizza_and_Beer]

I don't think the odds of a fixed rate increase are very good and so will buy as soon as possible. It is a good rate of return compared to almost anything safe and the sooner you buy, the sooner you can redeem it without 1 year lockup or 5 year EWP. Just a funny coincidence, I bonds currently pay the same as 30 year treasuries without the significant volatility of the latter. And if inflation kicks up your I bonds get paid more without a cent of harm to the principal.

Had a sudden, unexpected expense this month that may force me to wait until February, else my plan is to buy at the end of January using funds that now earn a sad .5% in a bank account.

+1

[Hebell]

I'm going to wait until May. I know the intent is to keep things at 0, but with all the Fed interventions, and potentials for shortages for similar such inflation pressures, I'm waiting till May.

[Gill]

My order is already in for a 1/28/21 purchase.
Gill

[Jack FFR1846]

$5k federal refund in paper iBonds, as usual.

[superhawk]

For those buying I Bonds at the end of January, why not purchase at the beginning of January? Since several folks are buying at the end of the month, there must be a good reason.

[aristotelian]

I will wait until May. The upside of a positive fixed rate compounded over 30 years is worth way more than a couple months of interest.

[neurosphere]

For those buying I Bonds at the end of January, why not purchase at the beginning of January? Since several folks are buying at the end of the month, there must be a good reason.

A purchase on Jan 28th is the same as a purchase on Jan 4 (for example). That is, come February 1, both purchase dates will have counted as a one-month holding period and earn the same interest. Note of course a 1-month old savings bond can't be redeemed. But in general waiting until the end of the month allows time to ensure you don't need/want that cash for something else, but doesn't hurt you in the long run when the bonds are eventually cashed.

Personally, I just buy anytime during the month, once I've made an active decision to buy. I like to check off that box on my to-do list and move on.

[feh]

For those buying I Bonds at the end of January, why not purchase at the beginning of January? Since several folks are buying at the end of the month, there must be a good reason.

You get the interest for the entire month regardless of when you buy. Might as well leave that money working somewhere else until then.

[neurosphere]

For those buying I Bonds at the end of January, why not purchase at the beginning of January? Since several folks are buying at the end of the month, there must be a good reason.

You get the interest for the entire month regardless of when you buy. Might as well leave that money working somewhere else until then.

High yield savings accounts are paying 0.5% right now. If one waits 30 days to buy $20,000 in bonds, one can earn an extra $10 in interest.

Waiting until the end of the month was much more satisfying when my ING savings account was paying 5%. Although, at that time in my life I could not afford to buy any savings bonds!

[50/50]

Right now we plan to buy half at the end of January and hold off on the other half until around March or April to see if we can get some kind of indication of the May rates.

[tipswatcher]

I am the guy who is always suggesting waiting until the March inflation report, which will come out on April 13, so you can know what the new variable rate will be and get a better idea of the future fixed rate. But ... being practical ... I have a big 10-year TIPS maturing in January, and I am just going to use those proceeds to buy my complete allocation late in the month in January.

The I Bond's fixed rate (equivalent to its real yield) is 0.0%. Is that unattractive? HELL NO. It is amazingly attractive. A 5-year TIPS auctioned today in a reopening with a real yield to maturity of -1.575%, which is 157 or 158 (which way do you round?) basis points lower than the current I Bond, which is exactly equivalent to a 5-year TIPS, since it can be redeemed after 5 years with no penalty. That auctioned TIPS yield was the lowest in history for this term: https://tipswatch.com/2020/12/22/5-year ... this-term/

My reason for buying in January is ... I will have the money available. Might as well put it to work. If I had to scheme to raise the money, I'd probably wait until after April 13, just to see how the current real yields are running. But does anyone expect real yields in the 10-year range to rise anywhere above zero in 2021? I don't. So I will feel comfortable buying I Bonds in January, up to the limit.

This violates all my past advice, but ... let's be realistic.

[dh]

My order is already in for a 1/28/21 purchase.
Gill

I am with you. If the fixed rate rises in 2021, I am glad to take my licks. I just don't believe it will happen and am glad to max out 2021 I-bonds in January.

[JBTX]

I'll buy in January. I have some cash from a cash out refi, and the chance that fixed rates go up is near zero.

[CardinalRule]

Thanks for the thoughts on this, all. And of course it is always good to see tipswatcher weigh in on this topic.

[000]

My I bond plan is the same as in past years: tell myself that I might need the money within the next year, not invest in I bonds, and find myself in the same spot next year.

[dcabler]

$10K for each of us in January then $5K from tax refund. Same as every year but likely the last year for the $10K each.

[loukycpa]

Will buy max 10k for spouse and I in January. No realistic chance that Treasury will raise the fixed rate.

Could the fixed rate ever be reset at a negative rate? Apparently there was speculation about this. See tipswatch blog post below.

https://tipswatch.com/2020/11/03/i-bond ... -20-years/

Can't see anything stopping the Treasury for doing this. Why continue to sell these to the public at above market interest rates for comparable Treasury notes and TIPS?

I'd be concerned too Treasury could end the guarantee that EE bonds double in value at the end of 20 years for the same reason. 3.5% yield is way above current market.

Until they do, I'll be shifting as much as possible of my bond allocation each year into I and EE bonds. Pretty close to a no brainer. If you don't want equity risk, what is your alternative these days?

[bpg1234]

I know this is a 2021 iBonds thread but curious if you didn't buy iBonds in 2020 yet, would you consider buying still at end of December for 2020 (could do $20K for spouse and me or lesser amount), and then also consider buying again for 2021 at end of January 2021 or possibly wait until May 2021 (could also do $20K or lesser amount)? Thanks in advance for any thoughts.

[Hebell]

If you haven't bought your allocations for 2020 what are you waiting for? Yes, buy right now and again in January!

[CardinalRule]

I agree with Hebell. You can consider timing for 2021, but you should get your 2020 allocation locked and loaded now.

I know this is a 2021 iBonds thread but curious if you didn't buy iBonds in 2020 yet, would you consider buying still at end of December for 2020 (could do $20K for spouse and me or lesser amount), and then also consider buying again for 2021 at end of January 2021 or possibly wait until May 2021 (could also do $20K or lesser amount)? Thanks in advance for any thoughts.

[bpg1234]

As for what I'm waiting for, I bought iBonds several years ago for 4 or so years but haven't bought any since as I felt we had a decent allotment and were getting some really great 3+% rates on CDs.

In light though of recently having a 5-year CD mature and the current interest rate environment with the potential for inflation at some point with all of the government stimulus spending, I'm now considering adding more.

[anon_investor]

The fixed rate went to 0.0% on November 2020. Bonds bought until April 2021 will earn a composite annualized interest rate of 1.68% for six months, with the inflation adjustment.

For those planning to buy I Bonds: Do so at the beginning of the year, or wait to see if the fixed-rate component rises on May 1?

Personally, I likely will not buy until April 2021 at the earliest, as I will likely try to do a mortgage refi in January/February and may need to have cash in my bank account to cover escrow funding while I wait for the escrow refund from my existing mortgage.

However, if you hold off buying I Bonds until at least April 2021, based on the CPI numbers release in April you can figure out what the inflation adjustment will be on May 1. I am just going to assume the fixed rate will remain 0%. But by waiting until April 2021, you can see whether the inflation adjustment for the next 6 months will be greater than 1.68% or not, and decide to buy in April 2021 or wait until May 2021. This strategy might have made a difference for someone waiting until October 2020 to buy to take a peak before November 1, 2020, since the inflation adjustment went from 1.06% to 1.68%.

[anon_investor]

As for what I'm waiting for, I bought iBonds several years ago for 4 or so years but haven't bought any since as I felt we had a decent allotment and were getting some really great 3+% rates on CDs.

In light though of recently having a 5-year CD mature and the current interest rate environment with the potential for inflation at some point with all of the government stimulus spending, I'm now considering adding more.

In light of current interest rates on CDs, I Bonds are pretty hard to beat.

[billthecat]

Not quite- my strategy goes like this:

In April, you decide whether to buy (expect rate to drop) or wait until October (expect rate flat/rising). Buying in May makes no sense: the new fixed rate will be around for six months, but in Oct you have more insight into whether it's likely about to go up again.

In October, you decide whether to buy (expect rate to drop) or wait until November/December (expect rate to rise).

If you get to Nov/Dec, hopefully you were right and the rate went up, but anyway it's a take-it-or-leave-it decision.

I am the guy who is always suggesting waiting until the March inflation report, which will come out on April 13, so you can know what the new variable rate will be and get a better idea of the future fixed rate. But ... being practical ... I have a big 10-year TIPS maturing in January, and I am just going to use those proceeds to buy my complete allocation late in the month in January.

The I Bond's fixed rate (equivalent to its real yield) is 0.0%. Is that unattractive? HELL NO. It is amazingly attractive. A 5-year TIPS auctioned today in a reopening with a real yield to maturity of -1.575%, which is 157 or 158 (which way do you round?) basis points lower than the current I Bond, which is exactly equivalent to a 5-year TIPS, since it can be redeemed after 5 years with no penalty. That auctioned TIPS yield was the lowest in history for this term: https://tipswatch.com/2020/12/22/5-year ... this-term/

My reason for buying in January is ... I will have the money available. Might as well put it to work. If I had to scheme to raise the money, I'd probably wait until after April 13, just to see how the current real yields are running. But does anyone expect real yields in the 10-year range to rise anywhere above zero in 2021? I don't. So I will feel comfortable buying I Bonds in January, up to the limit.

This violates all my past advice, but ... let's be realistic.

I saved the note above from ivk5 to remind me how to deal with the strategy each year. ivk5 considered the whole year, all the way through October. Indeed, your note above seems like you're looking not just through April but all the way through October, and concluding that it won't rise above zero for the whole year. So might as well buy in January.

[GuySmiley]

My I bond plan is the same as in past years: tell myself that I might need the money within the next year, not invest in I bonds, and find myself in the same spot next year.

Love it, that is my plan also for Treasury Direct! I will get the paper ones from IRS overpayment though.

[MathIsMyWayr]

Pros and cons of paying down a mortgage a little bit ($20k or $30k) vs. purchasing I bonds?

[whodidntante]

My I bond plan is the same as in past years: tell myself that I might need the money within the next year, not invest in I bonds, and find myself in the same spot next year.

LOL. You never know.

[crystalbank]

Pros and cons of paying down a mortgage a little bit ($20k or $30k) vs. purchasing I bonds?

Payoff Mortgage, unless you're thin on your emergency funds. I've used up all my emergency funds this year to buy equities so I maxed out I-bonds.

[whodidntante]

Pros and cons of paying down a mortgage a little bit ($20k or $30k) vs. purchasing I bonds?

Pro:
Better rate of return.

Con:
Houses aren't very nutritious.

[neb2020]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

[Ice-9]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

If you currently allocate a portion on your portfolio to inflation-protected bonds, such as the Swensen "Unconventional Success" portfolio, the TIPS available today currently all have negative real rates; if you're talking as short term as five-year, then that means lower than -1.50%. If your contributions towards inflation-protected bonds for the year are expected to be less than $10k and you can swing it from post-tax money, then I-Bonds would be advantageous.

https://www.treasury.gov/resource-cente ... =realyield

Also, for those with an allocation to nominal bonds but not interested in the 20-year wait of EE bonds, I-bonds might still be useful at the current time. What's currently 1.68% on a non-marketable security certainly might still be an attractive alternative. The SEC Yield on Total Bond Market is currently showing as slightly above 1%, and unlike the EE Bonds, I-Bonds don't lose most of their full potential earnings with earlier withdrawal than 20 years. It's just three months interest between one and five years, and then no penalty after that.

[neb2020]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

If you currently allocate a portion on your portfolio to inflation-protected bonds, such as the Swensen "Unconventional Success" portfolio, the TIPS available today currently all have negative real rates; if you're talking as short term as five-year, then that means lower than -1.50%. If your contributions towards inflation-protected bonds for the year are expected to be less than $10k and you can swing it from post-tax money, then I-Bonds would be advantageous.

https://www.treasury.gov/resource-cente ... =realyield

Also, for those with an allocation to nominal bonds but not interested in the 20-year wait of EE bonds, I-bonds might still be useful at the current time. What's currently 1.68% on a non-marketable security certainly might still be an attractive alternative. The SEC Yield on Total Bond Market is currently showing as slightly above 1%, and unlike the EE Bonds, I-Bonds don't lose most of their full potential earnings with earlier withdrawal than 20 years. It's just three months interest between one and five years, and then no penalty after that.

That's fair. I don't need bond liquidity right now, so EE-bond 20-year lockup is not an issue.

I just checked Ally 5-yr CD rates at 0.8%... OMG. Yeah I would go with i-Bonds if I needed liquidity...

[billthecat]

Pros and cons of paying down a mortgage a little bit ($20k or $30k) vs. purchasing I bonds?

I Bonds: increases your inflation protection, can get money back if you need it (after 1 year), scarce (up to 10K + 5K per year), lower yield

Mortgage: higher "yield," can't get money back if you need it, reduces inflation protection (debtor benefits from inflation)

[Noobvestor]

I buy the maximum of both Series I and EE savings bonds (the latter for 20-year-doubling, not the face value interest) at the beginning of each year. Figure that'll make things easier when they come due in a decade or two or three. In this case, for me, simplicity beats micro-optimization, but to each their own. Doing it this way, I have a ladder of each and also don't have to bother logging into TreasuryDirect more than once a year.

Right now, yields on short TIPS are crazy negative, but even at 30 years they're negative. As many I Bonds as possible, please!

[Noobvestor]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

Both EE bonds (with doubling) and I bonds beat their open-market equivalents: Treasuries and TIPS, respectively. Both seem like obviously good deals.

Why not both? EE wins if inflation averages up to ~3.5%. I Bonds win if it averages more than that. I prefer not to bet heavily either way. On top of that, I Bonds have more flexibility should a better deal come along. Don't get me wrong, I like both types, but that flexibility is worth something.

[kramer]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

If I am reading the Treasury Direct page correctly, there is a separate $10,000 purchase limit on I-bonds and EE-bonds? So a single person could purchase $10,000 of each of these each year?

https://www.treasurydirect.gov/indiv/re ... s_0406.htm

Savings Bonds
Different purchase limits apply for electronic savings bonds and paper savings bonds.

Electronic (TreasuryDirect)

Through your TreasuryDirect account - which is established using your name and social security number, bank information, driver’s license and e–mail address – you can invest in electronic savings bonds (also referred to as book–entry savings bonds) each calendar year by purchasing as much as:

$10,000 in Series EE bonds, and
$10,000 in Series I bonds.
Paper

Paper Series I savings bonds may be purchased only with your IRS tax refund. For these bonds, the purchase limit per calendar year is:

$5,000
Exceptions: Savings bonds purchased as gifts aren't included in your annual limit. Also, the purchase amount of electronic savings bonds you transfer, deliver as gifts, or de-link to another TreasuryDirect account holder is applied to the receiver's annual purchase limit in the year the transaction occurs, and not to your own limit.

Note: The three purchase limits above apply separately. That is, in a single calendar year you could buy $10,000 in electronic Series EE bonds, $10,000 in electronic Series I bonds, and $5,000 in paper Series I bonds.

[Pomegranate]

Will wait till >0% happens. If it’d be still 0% in Dec 21 then I’ll buy half of allowed maximum

[Noobvestor]

Why even bother with i-Bonds at 0% fixed rate? Serious question, not trolling here.

Personally, I'm buying EE-Bonds instead of i-Bonds now. And yes, I have to hold it for 20 years exactly. I know.

If I am reading the Treasury Direct page correctly, there is a separate $10,000 purchase limit on I-bonds and EE-bonds? So a single person could purchase $10,000 of each of these each year?

Correct. So you could buy $10K of each type for yourself now, and then do it again in just over a week (2021). Spouses, kids, etc... are all separate, so if you have a partner (married or otherwise), they can do the same - the rule is basically $10K per type per person per year. Some people also use a workaround, overpaying taxes to get themselves an extra $5K/year in Series I bonds as part of a tax refund, which still works as far as I know.

Re: refund workaround -- viewtopic.php?t=318987

[Lyrrad]

Correct. So you could buy $10K of each type for yourself now, and then do it again in just over a week (2021). [...]

I've even seen people mention using Trust(s) to buy more, since each Trust has a separate limit: viewtopic.php?t=213142

My bond asset allocation is currently satisfied by the purchase limits, so if the rates remain above market I plan to research this in a couple of years to see if it makes sense for me to open a trust to be able to buy more than the individual limits.

[z3r0c00l]

For those buying I Bonds at the end of January, why not purchase at the beginning of January? Since several folks are buying at the end of the month, there must be a good reason.

You get the interest for the entire month regardless of when you buy. Might as well leave that money working somewhere else until then.

High yield savings accounts are paying 0.5% right now. If one waits 30 days to buy $20,000 in bonds, one can earn an extra $10 in interest.

Waiting until the end of the month was much more satisfying when my ING savings account was paying 5%. Although, at that time in my life I could not afford to buy any savings bonds!

Welcome to Bogleheads where many, myself included, take an almost unnatural pleasure in saving money of any amount. Remember that $5 extra interest in an I bond will become, over 20 years, inflation adjusted... about $5 in retirement. 65 y/o me will enjoy that cup of space coffee.

Sincerely yours, the toothpaste squeezers.

https://www.amazon.com/kwmobile-Metal-T ... B07G2MTDNK

[ImUrHuckleberry]

We're going to buy the full amount for me and my wife on Jan 4th. I'm moving part of the EF into I-Bonds (keeping 3 or 4 months in cash) so I want to get the 1 year counter ticking.

[Mel Lindauer]

We're going to buy the full amount for me and my wife on Jan 4th. I'm moving part of the EF into I-Bonds (keeping 3 or 4 months in cash) so I want to get the 1 year counter ticking.

There's no rush. You'll earn the same amount of interest for January as long as you purchase your I Bonds any time prior to the end of the month.

[ImUrHuckleberry]

We're going to buy the full amount for me and my wife on Jan 4th. I'm moving part of the EF into I-Bonds (keeping 3 or 4 months in cash) so I want to get the 1 year counter ticking.

There's no rush. You'll earn the same amount of interest for January as long as you purchase your I Bonds any time prior to the end of the month.

Thanks. I wasn't aware of that, but the money is sitting in our checking account doing nothing so I'll probably just go ahead on the 4th anyway. But this is good to know for the future.

Does the 1 year count start on the day invested or at the end of the month? That is the primary reason I want to put it in right away.

[billthecat]

We're going to buy the full amount for me and my wife on Jan 4th. I'm moving part of the EF into I-Bonds (keeping 3 or 4 months in cash) so I want to get the 1 year counter ticking.

There's no rush. You'll earn the same amount of interest for January as long as you purchase your I Bonds any time prior to the end of the month.

Thanks. I wasn't aware of that, but the money is sitting in our checking account doing nothing so I'll probably just go ahead on the 4th anyway. But this is good to know for the future.

Does the 1 year count start on the day invested or at the end of the month? That is the primary reason I want to put it in right away.

I've wondered this myself but I think the answer is the first of the month - i.e., the start date of the bonds, regardless of when you purchased them during the month. TreasuryDirect says "After they are 12 months old." But I'm not sure.

[ImUrHuckleberry]

Thank you.