I Bonds Mega Thread (I Bond Heads Rejoice!)

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Mel Lindauer
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

protagonist wrote: Mon Jan 24, 2022 11:17 am
Mel Lindauer wrote: Thu Jan 20, 2022 6:57 pm
protagonist wrote: Thu Jan 20, 2022 11:31 am
Mel Lindauer wrote: Sun Jan 16, 2022 4:43 pm
protagonist wrote: Sun Jan 16, 2022 4:11 pm

Yes, very good advice. Though if you are getting less than 1% on your cash, and especially if you are getting next to nothing, it might not be worth the effort to wait until late in the month....the interest you will lose by buying now is pretty trivial.
Agree, but it's a good habit to get into since interest rates will rise to levels that will make it more worthwhile. Remember the days of 15% interest? I do.
+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
Good for you. This not only gets you the nice current 7.12%, but it also gets the clock running on your one-year lockup.
I hadn't thought of that, but given that I am pushing 70, that's probably not a bad idea, Mel! *giggle*
Waiting an extra month when you really need the money can seem like an eternity! And worrying about whether we'll still be around is always another consideration! :beer
Best Regards - Mel | | Semper Fi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by protagonist »

Mel Lindauer wrote: Mon Jan 24, 2022 7:04 pm
protagonist wrote: Mon Jan 24, 2022 11:17 am
Mel Lindauer wrote: Thu Jan 20, 2022 6:57 pm
protagonist wrote: Thu Jan 20, 2022 11:31 am
Mel Lindauer wrote: Sun Jan 16, 2022 4:43 pm

Agree, but it's a good habit to get into since interest rates will rise to levels that will make it more worthwhile. Remember the days of 15% interest? I do.
+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
Good for you. This not only gets you the nice current 7.12%, but it also gets the clock running on your one-year lockup.
I hadn't thought of that, but given that I am pushing 70, that's probably not a bad idea, Mel! *giggle*
Waiting an extra month when you really need the money can seem like an eternity! And worrying about whether we'll still be around is always another consideration! :beer
*laughing* yes. That said, if I really need the money after a year, 3 months of interest isn't a big pill to swallow.
Especially given that CDs are paying around 1% with way stiffer early withdrawal penalties!
(btw I just saw the post about your birthday. ) Happy Birthday!! I wish I knew sooner. I would have gotten you a little something....like maybe a Harley...or a villa in the south of France....or a voyage on SpaceX......
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

protagonist wrote: Tue Jan 25, 2022 2:32 pm
Mel Lindauer wrote: Mon Jan 24, 2022 7:04 pm
protagonist wrote: Mon Jan 24, 2022 11:17 am
Mel Lindauer wrote: Thu Jan 20, 2022 6:57 pm
protagonist wrote: Thu Jan 20, 2022 11:31 am

+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
Good for you. This not only gets you the nice current 7.12%, but it also gets the clock running on your one-year lockup.
I hadn't thought of that, but given that I am pushing 70, that's probably not a bad idea, Mel! *giggle*
Waiting an extra month when you really need the money can seem like an eternity! And worrying about whether we'll still be around is always another consideration! :beer
*laughing* yes. That said, if I really need the money after a year, 3 months of interest isn't a big pill to swallow.
Especially given that CDs are paying around 1% with way stiffer early withdrawal penalties!
(btw I just saw the post about your birthday. ) Happy Birthday!! I wish I knew sooner. I would have gotten you a little something....like maybe a Harley...or a villa in the south of France....or a voyage on SpaceX......
That's my good friend and co-author, Taylor Larimore's birthday.
Best Regards - Mel | | Semper Fi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LadyGeek »

^^^ Taylor Larimore's birthday is today. See: Happy 98th Birthday to Taylor Larimore 🎂🍰🎉🎊❤️🎁⭐️
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Re: I Bonds variable rate @ 3.54% in May

Post by AlphaLess »

dcw213 wrote: Wed Apr 14, 2021 12:57 am
NYC_Guy wrote: Tue Apr 13, 2021 10:45 pm In theory, yes. In practice, a deferred purchase of the maximum annual amount will amount to less than $100 of extra interest.
Agree completely. The threads about optimizing iBond purchases are pretty amusing. The common advice to make sure to buy at the end of the month amounts to something like a $5-$10 swing most of the time. Bogleheads would do better paying more attention to grocery store coupons and sales.

This update is bigger news for those holding an existing portfolio rather than those considering when to purchase 2021 allotment.

By the way, I don’t think optimizing these things is silly but I do scratch my head at the airtime these iBond topics get on here and elsewhere given the minimal incremental value.
100% agree with you on that.

Might be a behavioral explanation:
-> it is a definite gain of dollars,
-> it is something that people can control,
-> it is something that people can execute on, and that gives them a sense of purpose.

Same thing holds with professional traders (of which there are very few left). Professional traders were replaced by computers and quants, because traders, while skilled and useful, just could not do as well as computers.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by whodidntante »

protagonist wrote: Tue Jan 25, 2022 2:32 pm Happy Birthday!! I wish I knew sooner. I would have gotten you a little something....like maybe a Harley...or a villa in the south of France....or a voyage on SpaceX......
What do I need to do to get on your gift list? :P
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by saolafan »

Sorry if this has been answered already. How difficult is it to redeem an electronic I-bond? If I have a payroll savings plan and purchase a small amount every month, I can imagine having 60 tiny I-bonds after 5 years.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by HueyLD »

saolafan wrote: Wed Jan 26, 2022 1:50 am Sorry if this has been answered already. How difficult is it to redeem an electronic I-bond? If I have a payroll savings plan and purchase a small amount every month, I can imagine having 60 tiny I-bonds after 5 years.
It is as easy as a walk in the park.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

HueyLD wrote: Wed Jan 26, 2022 6:57 am
saolafan wrote: Wed Jan 26, 2022 1:50 am Sorry if this has been answered already. How difficult is it to redeem an electronic I-bond? If I have a payroll savings plan and purchase a small amount every month, I can imagine having 60 tiny I-bonds after 5 years.
It is as easy as a walk in the park.
To add - it takes a few clicks for each individual electronic bond, but if you're willing to put up with the hassle and effort of performing dozens of clicks to navigate in and out of multiple discussion threads on an online financial message board for fun and even make posts of your own, this will probably not be an issue.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by robbierob03 »

Just to make sure I have the timing on purchasing this month correct, assuming I already have a TD account set up and linked. Purchases tomorrow should be relatively safe to clear, but purchases on Monday will essentially be up in the air as to whether it will process as a January or February purchase?

In case it matters, i'm not trying to squeeze a few extra cents out of a savings account. I just don't typically keep a lot of cash in my TD linked checking and for some reason my ACH transfer is taking longer to clear than normal.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grt2bOutdoors »

robbierob03 wrote: Thu Jan 27, 2022 8:35 am Just to make sure I have the timing on purchasing this month correct, assuming I already have a TD account set up and linked. Purchases tomorrow should be relatively safe to clear, but purchases on Monday will essentially be up in the air as to whether it will process as a January or February purchase?

In case it matters, i'm not trying to squeeze a few extra cents out of a savings account. I just don't typically keep a lot of cash in my TD linked checking and for some reason my ACH transfer is taking longer to clear than normal.
The last business day of the month is Monday, January 31st. If you put the order to buy in before Monday, January 31st - you should be able to get a January 31, 2022 issue date. To be safe, I recommend placing the order tonight or tomorrow at the latest. Never know what happens on weekends.

If you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by robbierob03 »

Grt2bOutdoors wrote: Thu Jan 27, 2022 9:07 am
robbierob03 wrote: Thu Jan 27, 2022 8:35 am Just to make sure I have the timing on purchasing this month correct, assuming I already have a TD account set up and linked. Purchases tomorrow should be relatively safe to clear, but purchases on Monday will essentially be up in the air as to whether it will process as a January or February purchase?

In case it matters, i'm not trying to squeeze a few extra cents out of a savings account. I just don't typically keep a lot of cash in my TD linked checking and for some reason my ACH transfer is taking longer to clear than normal.
The last business day of the month is Monday, January 31st. If you put the order to buy in before Monday, January 31st - you should be able to get a January 31, 2022 issue date. To be safe, I recommend placing the order tonight or tomorrow at the latest. Never know what happens on weekends.

If you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
Thanks @Grt2bOutdoors! For some reason I thought that I saw some reports of a few early morning 12/31/2021 purchases being dated for 12/1, but that could have been some sort of one time exception since it was the year cutoff. If for some reason the funds don't clear by tomorrow morning (which will be four business days) I'll at least make a TD purchase for the available funds amount.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Angst »

Grt2bOutdoors wrote: Thu Jan 27, 2022 9:07 amIf you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
To be precise, I think you're saying the same things as "if you enter the order on the last business day of the month to buy on that same day..." As such, I have no experience doing this kind of last minute purchasing. I have always entered my order before the last business day of the month, but scheduled to execute the purchase on the last business day of the month. I have orders scheduled for next Monday, Jan 31st, for all my I and EE Bonds for 2022 and expect them to have a Jan issue date, as I believe they always have in the past for me when I've done this.


EDIT: Follow-up... Early this morning (1/31/22) I checked my bank account and overnight it had dropped $20,000, and now I see in my TD account my new, 1/1/22, issue dated I & EE Bonds. :beer
Last edited by Angst on Mon Jan 31, 2022 7:48 am, edited 1 time in total.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grt2bOutdoors »

Angst wrote: Thu Jan 27, 2022 1:17 pm
Grt2bOutdoors wrote: Thu Jan 27, 2022 9:07 amIf you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
To be precise, I think you're saying the same things as "if you enter the order on the last business day of the month to buy on that same day..." As such, I have no experience doing this kind of last minute purchasing. I have always entered my order before the last business day of the month, but scheduled to execute the purchase on the last business day of the month. I have orders scheduled for next Monday, Jan 31st, for all my I and EE Bonds for 2022 and expect them to have a Jan issue date, as I believe they always have in the past for me when I've done this.
Precise you are! That is exactly what I mean.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

I figure it's kinda like sending money between banks (or paying bills)... If I schedule the transaction in advance, it should process on the day scheduled.

If I do it "same day" I run the risk of missing a cut-off, where they'll process it the following day.

So I never attempt to do last minute day of transactions... I'll submit it in advance, and select the last day (or more likely a day or two prior just to be safe) as the execution date.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by robbierob03 »

Thanks everyone for chiming in! Happily I won't have to cut it any closer than today - the ACH funds became available to withdraw this morning so I was able to make my full $10k purchase today.

Interestingly enough the TD transaction showed a 1/31/2022 purchase date even as I made the purchase around 8:30am eastern, which gives credence to the collected wisdom above to schedule the transaction in advance.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by graspau »

Quick question on gifting ibonds to my spouse. I read on another site that on a gift I make
, that I cannot be a secondary owner, only a beneficiary. Is that right?

We have separate linked checking accounts at TD. I will have some cash deposited to my checking this week, would be great to just gift it over to her TD account if I can be secondary owner, instead of writing her a check, deposit to her checking then buying directly from her account.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

graspau wrote: Sun Jan 30, 2022 3:40 pm Quick question on gifting ibonds to my spouse. I read on another site that on a gift I make
, that I cannot be a secondary owner, only a beneficiary. Is that right?

We have separate linked checking accounts at TD. I will have some cash deposited to my checking this week, would be great to just gift it over to her TD account if I can be secondary owner, instead of writing her a check, deposit to her checking then buying directly from her account.
If I understand correctly, you can't be anything while it's a gift.

Once the gift is "received" into her account, I think she can then add you as a secondary owner or beneficiary.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by muffin1358 »

My apologies if this is a basic question.

With the Fed expected to increase interest rates soon, might that mean the Fixed rate component of the IBond rate announced in May might increase too?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Angst »

muffin1358 wrote: Mon Jan 31, 2022 6:03 am My apologies if this is a basic question.

With the Fed expected to increase interest rates soon, might that mean the Fixed rate component of the IBond rate announced in May might increase too?
It's a reasonable question, but there is almost no chance that the fixed rate will rise above 0% in May. I think that is also true for the rest of 2022 and I've followed I Bonds for years. Officially, the fixed rate is set at the discretion of the Secretary of the Treasury, but I suspect it's likely something of a compromise between an assessment of current real rates (see link below) and managers' discretion at Treasury. I've already ordered my purchase for my full $10,000 of I Bonds this year. I'd be extremely surprised if the fixed rate goes up at all this year and believe grabbing the latest 7.12% inflation rate (before it changes in May) is by far the best strategy.

https://www.treasury.gov/resource-cente ... &year=2022
Regarding this link, marketable Treasury TIPS (inflation protected bonds) currently are yielding these kinds of negative real rates, which is why I Bonds with their fixed 0% yield floor are presently such a good deal. When the real rates in this link get back up to just 0%, the "playing field" will be more level, but I Bonds have other interesting features that are compelling. You can learn more below:

https://www.bogleheads.org/wiki/I_savings_bonds
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Angst »

Grt2bOutdoors wrote: Thu Jan 27, 2022 2:02 pm
Angst wrote: Thu Jan 27, 2022 1:17 pm
Grt2bOutdoors wrote: Thu Jan 27, 2022 9:07 amIf you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
To be precise, I think you're saying the same things as "if you enter the order on the last business day of the month to buy on that same day..." As such, I have no experience doing this kind of last minute purchasing. I have always entered my order before the last business day of the month, but scheduled to execute the purchase on the last business day of the month. I have orders scheduled for next Monday, Jan 31st, for all my I and EE Bonds for 2022 and expect them to have a Jan issue date, as I believe they always have in the past for me when I've done this.
Precise you are! That is exactly what I mean.

Follow-up:

Early this morning (1/31/22) I checked my bank account and overnight it had dropped $20,000, and now I see in my TD account my new, 1/1/22, issue dated I & EE Bonds. :beer
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by evelynmanley »

graspau wrote: Sun Jan 30, 2022 3:40 pm Quick question on gifting ibonds to my spouse. I read on another site that on a gift I make
, that I cannot be a secondary owner, only a beneficiary. Is that right?

We have separate linked checking accounts at TD. I will have some cash deposited to my checking this week, would be great to just gift it over to her TD account if I can be secondary owner, instead of writing her a check, deposit to her checking then buying directly from her account.
Maybe this link to Harry Sit's article will answer your question:

https://thefinancebuff.com/buy-i-bonds-as-gift.html

His other articles about I-Bonds:
https://thefinancebuff.com/tag/i-bonds
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by z3r0c00l »

Angst wrote: Mon Jan 31, 2022 7:53 am
Grt2bOutdoors wrote: Thu Jan 27, 2022 2:02 pm
Angst wrote: Thu Jan 27, 2022 1:17 pm
Grt2bOutdoors wrote: Thu Jan 27, 2022 9:07 amIf you put the order to buy in on the last business day of the month, January 31, 2022, the issue date will be February 1, 2022.
To be precise, I think you're saying the same things as "if you enter the order on the last business day of the month to buy on that same day..." As such, I have no experience doing this kind of last minute purchasing. I have always entered my order before the last business day of the month, but scheduled to execute the purchase on the last business day of the month. I have orders scheduled for next Monday, Jan 31st, for all my I and EE Bonds for 2022 and expect them to have a Jan issue date, as I believe they always have in the past for me when I've done this.
Precise you are! That is exactly what I mean.

Follow-up:

Early this morning (1/31/22) I checked my bank account and overnight it had dropped $20,000, and now I see in my TD account my new, 1/1/22, issue dated I & EE Bonds. :beer
Nicely done : )
70% Global Stocks / 30% Bonds
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by muffin1358 »

Angst wrote: Mon Jan 31, 2022 6:40 am
muffin1358 wrote: Mon Jan 31, 2022 6:03 am My apologies if this is a basic question.

With the Fed expected to increase interest rates soon, might that mean the Fixed rate component of the IBond rate announced in May might increase too?
It's a reasonable question, but there is almost no chance that the fixed rate will rise above 0% in May. I think that is also true for the rest of 2022 and I've followed I Bonds for years. Officially, the fixed rate is set at the discretion of the Secretary of the Treasury, but I suspect it's likely something of a compromise between an assessment of current real rates (see link below) and managers' discretion at Treasury. I've already ordered my purchase for my full $10,000 of I Bonds this year. I'd be extremely surprised if the fixed rate goes up at all this year and believe grabbing the latest 7.12% inflation rate (before it changes in May) is by far the best strategy.

https://www.treasury.gov/resource-cente ... &year=2022
Regarding this link, marketable Treasury TIPS (inflation protected bonds) currently are yielding these kinds of negative real rates, which is why I Bonds with their fixed 0% yield floor are presently such a good deal. When the real rates in this link get back up to just 0%, the "playing field" will be more level, but I Bonds have other interesting features that are compelling. You can learn more below:

https://www.bogleheads.org/wiki/I_savings_bonds
Thank you!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by OpenMinded1 »

I have never sold any of my digital I Bonds. Using the online process, how long does it usually take for money from them to be transferred to the bank account they are linked to?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by HueyLD »

OpenMinded1 wrote: Mon Jan 31, 2022 9:36 am I have never sold any of my digital I Bonds. Using the online process, how long does it usually take for money from them to be transferred to the bank account they are linked to?
One business day.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by OpenMinded1 »

HueyLD wrote: Mon Jan 31, 2022 9:38 am
OpenMinded1 wrote: Mon Jan 31, 2022 9:36 am I have never sold any of my digital I Bonds. Using the online process, how long does it usually take for money from them to be transferred to the bank account they are linked to?
One business day.
Excellent! Thanks.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by 10ks and 401ks »

This was the first month that my I bond showed interest on the website and just a quick question (that may have already been asked) on a difference in TD's interest calculation vs what I expected:

I expected $29.50 of interest for one month at 3.54% (the rate from 10/1 issuance) @ 10,000 * 3.54%/12. The amount posted was $28. Is there an explanation for this difference or am I just totally missing something on the calculation?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by #Cruncher »

10ks and 401ks wrote: Tue Feb 01, 2022 12:52 pmI expected $29.50 of interest for one month at 3.54% (the rate from 10/1 issuance) @ 10,000 * 3.54%/12. The amount posted was $28. Is there an explanation for this difference or am I just totally missing something on the calculation?
You're missing two aspects of the calculation as shown in the Wiki's How interest is calculated:
  • The growth in value after one month is (1 + 0.0354 / 2) ^ (1 / 6).
  • The value is calculated for a $25 bond, rounded to the nearest penny, and then multiplied by 400 to get the value for a $10,000 bond.
25 * (1 + 0.0354 / 2) ^ (1 / 6) --> 25.0732 --> 25.07 * 400 --> 10,028

Here is this method repeated for the first 12 months of your $10,000 I Bond with 0.00% Fixed Rate Purchased October 2021:

Code: Select all

                Inflat  Compos    6 mo     Value    Roun   Scaled  Inte
         Month    Rate    Rate    Base  Grows To     ded    X 400  rest   Formula for "Value Grows To"

Code: Select all

Sep 2021     1   1.77%   3.54%   25.00             25.00   10,000      
Oct 2021     2   1.77%   3.54%   25.00   25.0732   25.07   10,028    28   25.00 * (1 + 0.0354 / 2) ^ (1 / 6)
Nov 2021     3   1.77%   3.54%   25.00   25.1466   25.15   10,060    32   25.00 * (1 + 0.0354 / 2) ^ (2 / 6)
Dec 2021     4   1.77%   3.54%   25.00   25.2203   25.22   10,088    28   25.00 * (1 + 0.0354 / 2) ^ (3 / 6)
Jan 2022     5   1.77%   3.54%   25.00   25.2941   25.29   10,116    28   25.00 * (1 + 0.0354 / 2) ^ (4 / 6)
Feb 2022     6   1.77%   3.54%   25.00   25.3682   25.37   10,148    32   25.00 * (1 + 0.0354 / 2) ^ (5 / 6)
Mar 2022     1   3.56%   7.12%   25.44   25.4425   25.44   10,176    28   25.00 * (1 + 0.0354 / 2) ^ (6 / 6)
Apr 2022     2   3.56%   7.12%   25.44   25.5888   25.59   10,236    60   25.44 * (1 + 0.0712 / 2) ^ (1 / 6)
May 2022     3   3.56%   7.12%   25.44   25.7384   25.74   10,296    60   25.44 * (1 + 0.0712 / 2) ^ (2 / 6)
Jun 2022     4   3.56%   7.12%   25.44   25.8889   25.89   10,356    60   25.44 * (1 + 0.0712 / 2) ^ (3 / 6)
Jul 2022     5   3.56%   7.12%   25.44   26.0402   26.04   10,416    60   25.44 * (1 + 0.0712 / 2) ^ (4 / 6)
Aug 2022     6   3.56%   7.12%   25.44   26.1925   26.19   10,476    60   25.44 * (1 + 0.0712 / 2) ^ (5 / 6)
Sep 2022                                 26.3457   26.35   10,540    64   25.44 * (1 + 0.0712 / 2) ^ (6 / 6)
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by 10ks and 401ks »

#Cruncher wrote: Tue Feb 01, 2022 2:56 pm
10ks and 401ks wrote: Tue Feb 01, 2022 12:52 pmI expected $29.50 of interest for one month at 3.54% (the rate from 10/1 issuance) @ 10,000 * 3.54%/12. The amount posted was $28. Is there an explanation for this difference or am I just totally missing something on the calculation?
You're missing two aspects of the calculation as shown in the Wiki's How interest is calculated:
  • The growth in value after one month is (1 + 0.0354 / 2) ^ (1 / 6).
  • The value is calculated for a $25 bond, rounded to the nearest penny, and then multiplied by 400 to get the value for a $10,000 bond.
25 * (1 + 0.0354 / 2) ^ (1 / 6) --> 25.0732 --> 25.07 * 400 --> 10,028

Here is this method repeated for the first 12 months of your $10,000 I Bond with 0.00% Fixed Rate Purchased October 2021:

Code: Select all

                Inflat  Compos    6 mo     Value    Roun   Scaled  Inte
         Month    Rate    Rate    Base  Grows To     ded    X 400  rest   Formula for "Value Grows To"

Code: Select all

Sep 2021     1   1.77%   3.54%   25.00             25.00   10,000      
Oct 2021     2   1.77%   3.54%   25.00   25.0732   25.07   10,028    28   25.00 * (1 + 0.0354 / 2) ^ (1 / 6)
Nov 2021     3   1.77%   3.54%   25.00   25.1466   25.15   10,060    32   25.00 * (1 + 0.0354 / 2) ^ (2 / 6)
Dec 2021     4   1.77%   3.54%   25.00   25.2203   25.22   10,088    28   25.00 * (1 + 0.0354 / 2) ^ (3 / 6)
Jan 2022     5   1.77%   3.54%   25.00   25.2941   25.29   10,116    28   25.00 * (1 + 0.0354 / 2) ^ (4 / 6)
Feb 2022     6   1.77%   3.54%   25.00   25.3682   25.37   10,148    32   25.00 * (1 + 0.0354 / 2) ^ (5 / 6)
Mar 2022     1   3.56%   7.12%   25.44   25.4425   25.44   10,176    28   25.00 * (1 + 0.0354 / 2) ^ (6 / 6)
Apr 2022     2   3.56%   7.12%   25.44   25.5888   25.59   10,236    60   25.44 * (1 + 0.0712 / 2) ^ (1 / 6)
May 2022     3   3.56%   7.12%   25.44   25.7384   25.74   10,296    60   25.44 * (1 + 0.0712 / 2) ^ (2 / 6)
Jun 2022     4   3.56%   7.12%   25.44   25.8889   25.89   10,356    60   25.44 * (1 + 0.0712 / 2) ^ (3 / 6)
Jul 2022     5   3.56%   7.12%   25.44   26.0402   26.04   10,416    60   25.44 * (1 + 0.0712 / 2) ^ (4 / 6)
Aug 2022     6   3.56%   7.12%   25.44   26.1925   26.19   10,476    60   25.44 * (1 + 0.0712 / 2) ^ (5 / 6)
Sep 2022                                 26.3457   26.35   10,540    64   25.44 * (1 + 0.0712 / 2) ^ (6 / 6)
Thank you for this! A bit more complicated than my simplified method, but it'll give me something to do updating my spreadsheets lol.
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Post by Angst »

10ks and 401ks wrote: Tue Feb 01, 2022 5:14 pm
#Cruncher wrote: Tue Feb 01, 2022 2:56 pm
10ks and 401ks wrote: Tue Feb 01, 2022 12:52 pmI expected $29.50 of interest for one month at 3.54% (the rate from 10/1 issuance) @ 10,000 * 3.54%/12. The amount posted was $28. Is there an explanation for this difference or am I just totally missing something on the calculation?
You're missing two aspects of the calculation as shown in the Wiki's How interest is calculated:
  • The growth in value after one month is (1 + 0.0354 / 2) ^ (1 / 6).
  • The value is calculated for a $25 bond, rounded to the nearest penny, and then multiplied by 400 to get the value for a $10,000 bond.
25 * (1 + 0.0354 / 2) ^ (1 / 6) --> 25.0732 --> 25.07 * 400 --> 10,028

Here is this method repeated for the first 12 months of your $10,000 I Bond with 0.00% Fixed Rate Purchased October 2021:

Code: Select all

                Inflat  Compos    6 mo     Value    Roun   Scaled  Inte
         Month    Rate    Rate    Base  Grows To     ded    X 400  rest   Formula for "Value Grows To"

Code: Select all

Sep 2021     1   1.77%   3.54%   25.00             25.00   10,000      
Oct 2021     2   1.77%   3.54%   25.00   25.0732   25.07   10,028    28   25.00 * (1 + 0.0354 / 2) ^ (1 / 6)
Nov 2021     3   1.77%   3.54%   25.00   25.1466   25.15   10,060    32   25.00 * (1 + 0.0354 / 2) ^ (2 / 6)
Dec 2021     4   1.77%   3.54%   25.00   25.2203   25.22   10,088    28   25.00 * (1 + 0.0354 / 2) ^ (3 / 6)
Jan 2022     5   1.77%   3.54%   25.00   25.2941   25.29   10,116    28   25.00 * (1 + 0.0354 / 2) ^ (4 / 6)
Feb 2022     6   1.77%   3.54%   25.00   25.3682   25.37   10,148    32   25.00 * (1 + 0.0354 / 2) ^ (5 / 6)
Mar 2022     1   3.56%   7.12%   25.44   25.4425   25.44   10,176    28   25.00 * (1 + 0.0354 / 2) ^ (6 / 6)
Apr 2022     2   3.56%   7.12%   25.44   25.5888   25.59   10,236    60   25.44 * (1 + 0.0712 / 2) ^ (1 / 6)
May 2022     3   3.56%   7.12%   25.44   25.7384   25.74   10,296    60   25.44 * (1 + 0.0712 / 2) ^ (2 / 6)
Jun 2022     4   3.56%   7.12%   25.44   25.8889   25.89   10,356    60   25.44 * (1 + 0.0712 / 2) ^ (3 / 6)
Jul 2022     5   3.56%   7.12%   25.44   26.0402   26.04   10,416    60   25.44 * (1 + 0.0712 / 2) ^ (4 / 6)
Aug 2022     6   3.56%   7.12%   25.44   26.1925   26.19   10,476    60   25.44 * (1 + 0.0712 / 2) ^ (5 / 6)
Sep 2022                                 26.3457   26.35   10,540    64   25.44 * (1 + 0.0712 / 2) ^ (6 / 6)
Thank you for this! A bit more complicated than my simplified method, but it'll give me something to do updating my spreadsheets lol.

Perhaps you've already noticed this detail from #Cruncher's results above, but I find it interesting how the rounding up or down of "just" 1 penny's worth of 1/400th of the total monthly interest earned on a $10,000 I Bond can cause each of the 6 months of interest earnings to move about. Noting the Interest column above, consider how differently the first 6 months and the second 6 months of this new I Bond's interest earnings happen to unfold:

Code: Select all

                              Months:     1    2    3    4    5    6   
1st 6 months at 3.54% composite rate:    $28  $32  $28  $28  $32  $28  
2nd 6 months at 7.12% composite rate:    $60  $60  $60  $60  $60  $64  
Of course, it's worth noting here that 1¢ X 400 = $4.00 :wink:
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Post by protagonist »

whodidntante wrote: Tue Jan 25, 2022 10:28 pm
protagonist wrote: Tue Jan 25, 2022 2:32 pm Happy Birthday!! I wish I knew sooner. I would have gotten you a little something....like maybe a Harley...or a villa in the south of France....or a voyage on SpaceX......
What do I need to do to get on your gift list? :P
Not sure, but being in your late 90's certainly helps.
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Post by mary1492 »

xyzzy
Last edited by mary1492 on Fri Sep 30, 2022 12:07 pm, edited 1 time in total.
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Post by SuperTrooper87 »

mary1492 wrote: Thu Feb 10, 2022 1:32 pm Nobody wants to mention the rocketing CPI number released this morning?

By my calculations, if February and March numbers are the same as a year ago, new rate May 1 will be 7.5%.
This was the post I was looking for. Thanks.

I’d imagine since the rate increase isn’t coming until March this may happen. Even with the rate increase, highly unlikely to have much impact correct?
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Post by mary1492 »

xyzzy
Last edited by mary1492 on Fri Sep 30, 2022 12:06 pm, edited 1 time in total.
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Post by Da5id »

mary1492 wrote: Fri Feb 11, 2022 6:22 am
SuperTrooper87 wrote: Thu Feb 10, 2022 3:40 pm
mary1492 wrote: Thu Feb 10, 2022 1:32 pm Nobody wants to mention the rocketing CPI number released this morning?

By my calculations, if February and March numbers are the same as a year ago, new rate May 1 will be 7.5%.
This was the post I was looking for. Thanks.

I’d imagine since the rate increase isn’t coming until March this may happen. Even with the rate increase, highly unlikely to have much impact correct?
The rate reset comes in May.

What your definition of "much impact"? I Bond rates above 3% are high based on where we've been for years. The new rate will be well above that. We've now seen that the inflation genie is out of the bottle and the Fed has clearly lost control.

Depending on where February and March numbers come in, we're going to see a new rate in May of 5% to 8% and my belief is that it's going to be towards the higher end of that range - extremely high by what we've seen in a very long time. It's possible that it goes even higher from there come November.
He means the Federal Reserve setting the fed funds
rate in March, not the I-bond rate I presume.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SuperTrooper87 »

Da5id wrote: Fri Feb 11, 2022 7:07 am
mary1492 wrote: Fri Feb 11, 2022 6:22 am
SuperTrooper87 wrote: Thu Feb 10, 2022 3:40 pm
mary1492 wrote: Thu Feb 10, 2022 1:32 pm Nobody wants to mention the rocketing CPI number released this morning?

By my calculations, if February and March numbers are the same as a year ago, new rate May 1 will be 7.5%.
This was the post I was looking for. Thanks.

I’d imagine since the rate increase isn’t coming until March this may happen. Even with the rate increase, highly unlikely to have much impact correct?
The rate reset comes in May.

What your definition of "much impact"? I Bond rates above 3% are high based on where we've been for years. The new rate will be well above that. We've now seen that the inflation genie is out of the bottle and the Fed has clearly lost control.

Depending on where February and March numbers come in, we're going to see a new rate in May of 5% to 8% and my belief is that it's going to be towards the higher end of that range - extremely high by what we've seen in a very long time. It's possible that it goes even higher from there come November.
He means the Federal Reserve setting the fed funds
rate in March, not the I-bond rate I presume.
That is correct. I suppose we can add that neither a .25 or .5 increase from the fed in March will have much impact on the new may inflation number.
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Post by mary1492 »

xyzzy
Last edited by mary1492 on Fri Sep 30, 2022 12:05 pm, edited 1 time in total.
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Post by Ketawa »

The 5-year breakeven inflation rate is about 2.8%. The 5-year, 5-year forward inflation expectation rate is about 2.1%. These are undoubtedly too high when the Fed has a stated average inflation target of 2.0% over a 10-year period. The 10-year breakeven inflation rate is about 2.4%. However, statements that the Fed has clearly lost control, implying we should expect inflation in the realm of 7% for the foreseeable future, indicate that the poster believes they know more than the market.
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Post by mary1492 »

xyzzy
Last edited by mary1492 on Fri Sep 30, 2022 11:57 am, edited 1 time in total.
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Post by Ketawa »

mary1492 wrote: Fri Feb 11, 2022 9:19 am
Ketawa wrote: Fri Feb 11, 2022 9:06 amHowever, statements that the Fed has clearly lost control, implying we should expect inflation in the realm of 7% for the foreseeable future, indicate that the poster believes they know more than the market.
So, it's your view that inflation numbers of 7% and higher is what the Fed had in mind with statements of inflation being transitory? Highly unlikely. The Fed does not have control. I'm seeing stories of a potential emergency rate hike even before the March meeting.

We'll see what happens through the remainder of the year and how the Fed and markets take it.
That is not my view. My view is that the Fed can control inflation if it wants to, and the market expects it to. It is going to miss its 2% average inflation target, which is a policy error, but we shouldn't expect 7% inflation for the next year.

My view is also that the market is efficient. The 5-year breakeven inflation rate was 2.0% one year ago. I didn't see anyone predicting high inflation on Bogleheads, and if they did, they only succeeded because a broken clock is right twice a day.
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Post by SnowBog »

Ketawa wrote: Fri Feb 11, 2022 9:31 am
mary1492 wrote: Fri Feb 11, 2022 9:19 am
Ketawa wrote: Fri Feb 11, 2022 9:06 amHowever, statements that the Fed has clearly lost control, implying we should expect inflation in the realm of 7% for the foreseeable future, indicate that the poster believes they know more than the market.
So, it's your view that inflation numbers of 7% and higher is what the Fed had in mind with statements of inflation being transitory? Highly unlikely. The Fed does not have control. I'm seeing stories of a potential emergency rate hike even before the March meeting.

We'll see what happens through the remainder of the year and how the Fed and markets take it.
That is not my view. My view is that the Fed can control inflation if it wants to, and the market expects it to. It is going to miss its 2% average inflation target, which is a policy error, but we shouldn't expect 7% inflation for the next year.

My view is also that the market is efficient. The 5-year breakeven inflation rate was 2.0% one year ago. I didn't see anyone predicting high inflation on Bogleheads, and if they did, they only succeeded because a broken clock is right twice a day.
There were more than a few concerned that inflation was going to go up...

But IMHO the overwhelming majority were convinced rates could continue to fall, citing negative rates in other countries, etc.

Which to me comes back to "nobody knows nothing". The times I'm most concerned is when everyone seems convinced of a particular outcome...
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Post by alluringreality »

Ketawa wrote: Fri Feb 11, 2022 9:06 am The 5-year breakeven inflation rate is about 2.8%. The 5-year, 5-year forward inflation expectation rate is about 2.1%. These are undoubtedly too high when the Fed has a stated average inflation target of 2.0% over a 10-year period. The 10-year breakeven inflation rate is about 2.4%. However, statements that the Fed has clearly lost control, implying we should expect inflation in the realm of 7% for the foreseeable future, indicate that the poster believes they know more than the market.
Just so everyone is on the same page, the Fed target uses PCE. TIPS and I bonds pay based on CPI-U, so the market breakeven rate would revolve around CPI-U. Typically there is some difference between PCE and CPI-U, and a quick search suggests CPI-U has been higher than PCE for the last four reported months (Sept-Dec, since PCE hasn't released for Jan). Personally I wouldn't classify a 5-10 year breakeven rate around 2.1% as being necessarily higher than the Fed target. Anyway, I agree that current market rates do not anticipate for inflation to remain higher than the Fed's target long-term.
Ketawa wrote: Fri Feb 11, 2022 9:31 am My view is also that the market is efficient. The 5-year breakeven inflation rate was 2.0% one year ago. I didn't see anyone predicting high inflation on Bogleheads, and if they did, they only succeeded because a broken clock is right twice a day.
I followed financial news during the first half of 2020. During that time Goldman Sachs released the following that classified historical declines into three categories. In that document they repeated comments from 2002, which essentially suggested that from a historical perspective the 2020 event could result in inflation.

“Event-driven bear markets have typically emerged with fairly modest inflation. When
there has been deflation, it has been very modest. To some extent it was this more
stable monetary environment that prevented the event from causing the stresses that
would have turned it into a more sustained bear market. There have been no deflationary
periods during event-driven bear markets.”
https://www.goldmansachs.com/insights/p ... ntials.pdf
45% US Indexes, 25% Ex-US Indexes, 30% Fixed Income - Buy & Hold
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Post by SuperTrooper87 »

mary1492 wrote: Fri Feb 11, 2022 9:19 am
Ketawa wrote: Fri Feb 11, 2022 9:06 amHowever, statements that the Fed has clearly lost control, implying we should expect inflation in the realm of 7% for the foreseeable future, indicate that the poster believes they know more than the market.
So, it's your view that inflation numbers of 7% and higher is what the Fed had in mind with statements of inflation being transitory? Highly unlikely. The Fed does not have control. I'm seeing stories of a potential emergency rate hike even before the March meeting.

We'll see what happens through the remainder of the year and how the Fed and markets take it.
Would that emergency rate be driven more by politics? Such as a certain political group being blamed, etc). Not trying to point fingers at any official or party, just trying to understand what is driving that. Do they think doing it now versus 2-4 weeks from now has a meaningful impact, that it’s time to pull the band aid off, or perhaps it’s politically driven?

If this question violates the politics and forum rules I apologize. Don’t want it to divert to politics but I’m trying to wrap my head around why they are saying one thing, doing another and potentially escalating even that. Thanks.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Whakamole »

Ketawa wrote: Fri Feb 11, 2022 9:31 am My view is also that the market is efficient. The 5-year breakeven inflation rate was 2.0% one year ago. I didn't see anyone predicting high inflation on Bogleheads, and if they did, they only succeeded because a broken clock is right twice a day.
The counterpoint to "the market is efficient" is "the markets can remain irrational longer than you can remain solvent."
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LadyGeek »

The discussion is starting to derail on monetary / economic policy. Please stay on-topic, which is about I savings bonds.
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Post by VictoriaF »

protagonist wrote: Thu Jan 20, 2022 11:31 am
+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
This week, I was attending over Zoom the conference of the Society of Judgment and Decision Making. One of the talks was relevant to your decision. In general, behavioral scientists consider it a bias to accept less money today than more money later, after taking into account interest rates. They call this bias hyperbolic discounting.

However, in some situations, an immediate action is rational even if it's less financially advantageous. The example given in the talk was Christmas gifts: After you have bought all the gifts except one, and the last gift is more expensive today than it could be in a few days (not today, but still before Christmas), many people buy it just to be done with it. A task hanging over you is stressful (Zeigarnik effect) and a finished task gives you the pleasure of having a closure.

For the record, I bought my 2022 I Bonds early in January, well before I've heard the talk. Now, I have additional satisfaction of being "rational."

Victoria
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Post by changingtimes »

Just want to wave and say thank you for this thread, which I finally decided to dip into and am now the proud owner of $20k in I Bonds, $10k for me and $10k for my trust. I'm a very good bandwagon-jumper-on-er!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by protagonist »

VictoriaF wrote: Sun Feb 13, 2022 5:58 pm
protagonist wrote: Thu Jan 20, 2022 11:31 am
+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
This week, I was attending over Zoom the conference of the Society of Judgment and Decision Making. One of the talks was relevant to your decision. In general, behavioral scientists consider it a bias to accept less money today than more money later, after taking into account interest rates. They call this bias hyperbolic discounting.

However, in some situations, an immediate action is rational even if it's less financially advantageous. The example given in the talk was Christmas gifts: After you have bought all the gifts except one, and the last gift is more expensive today than it could be in a few days (not today, but still before Christmas), many people buy it just to be done with it. A task hanging over you is stressful (Zeigarnik effect) and a finished task gives you the pleasure of having a closure.

For the record, I bought my 2022 I Bonds early in January, well before I've heard the talk. Now, I have additional satisfaction of being "rational."

Victoria
I never doubted your rationality, Victoria.
That said, let's say you bought $10K worth and if you waited you would have gotten another 30 days of interest at 1% in a high yielding bank account.
I am not sure forfeiting, at best, roughly $8 for convenience really confirms a bias to accept less money today than more later.....it is too trivial an amount to read too much into it. Don't you think?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by VictoriaF »

protagonist wrote: Mon Feb 14, 2022 9:46 pm
VictoriaF wrote: Sun Feb 13, 2022 5:58 pm
protagonist wrote: Thu Jan 20, 2022 11:31 am
+1. I bought mine already....but that is mainly because I know my weaknesses, and I don't want to risk "spacing out" and forgetting to do so on the 30th or 31st.
This week, I was attending over Zoom the conference of the Society of Judgment and Decision Making. One of the talks was relevant to your decision. In general, behavioral scientists consider it a bias to accept less money today than more money later, after taking into account interest rates. They call this bias hyperbolic discounting.

However, in some situations, an immediate action is rational even if it's less financially advantageous. The example given in the talk was Christmas gifts: After you have bought all the gifts except one, and the last gift is more expensive today than it could be in a few days (not today, but still before Christmas), many people buy it just to be done with it. A task hanging over you is stressful (Zeigarnik effect) and a finished task gives you the pleasure of having a closure.

For the record, I bought my 2022 I Bonds early in January, well before I've heard the talk. Now, I have additional satisfaction of being "rational."

Victoria
I never doubted your rationality, Victoria.
That said, let's say you bought $10K worth and if you waited you would have gotten another 30 days of interest at 1% in a high yielding bank account.
I am not sure forfeiting, at best, roughly $8 for convenience really confirms a bias to accept less money today than more later.....it is too trivial an amount to read too much into it. Don't you think?
You are right, protagonist, that the amount makes difference. In the SJDM talk examples, the amounts were relatively small. Also, there was some uncertainty: the history may show that a potential Christmas gift may become cheaper in a few days but that by no means is certain.

In the case of a bank account vs. I bonds, all the numbers are known in advance and the calculations are certain. For me, the foregone gain is less than $8, because (1) my highest yielding account returns only 0.55% and (2) I bought I bonds early but not on the first day of the month.

Thank you for your thoughts,
Victoria
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