I Bonds Mega Thread (I Bond Heads Rejoice!)

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

Post by LearnFin »

Hi.

I am Interested in buying I-Bonds. I have never dabbled in I-bonds. Tips, EE etc.

I have read a lot of the above posts and am confused on the timings of the purchase.

If I buy before the month end, I will get 5.33 percent. If I buy first week of Nov, I will get 7+ percent (annual rate) for first six months and the prevalent rate for next six months. With raging inflation, I suspect the next 6 months too might be higher. As long as the next six months inflation rate is higher than 3.54 percent - doesn’t it make sense to buy during November?

I read an article that suggested that for long term investment, rush and buy now and not wait for Nov.

Please guide me. I expect to park these bonds for next several years.

Thanks
BrokerageZelda
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

LearnFin wrote: Tue Oct 19, 2021 1:43 pm Hi.

I am Interested in buying I-Bonds. I have never dabbled in I-bonds. Tips, EE etc.

I have read a lot of the above posts and am confused on the timings of the purchase.

If I buy before the month end, I will get 5.33 percent. If I buy first week of Nov, I will get 7+ percent (annual rate) for first six months and the prevalent rate for next six months. With raging inflation, I suspect the next 6 months too might be higher. As long as the next six months inflation rate is higher than 3.54 percent - doesn’t it make sense to buy during November?

I read an article that suggested that for long term investment, rush and buy now and not wait for Nov.

Please guide me. I expect to park these bonds for next several years.

Thanks
Even if the next (May 2022) inflation rate goes to the moon, an October-issue I Bond will get that rate for six months as well, just with a five-month lag (starting in October 2022 instead of May 2022). Same with all future rate changes.

Before too long, since they will both earn at the same interest rates six months at a time going forward, the difference in value between an October-issue bond with a 0% fixed rate and a November-issue bond with an (expected) 0% fixed rate will fade to near-irrelevance.
mall0c
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mall0c »

Mel Lindauer wrote: Tue Oct 19, 2021 11:31 am
LukeHeinz57 wrote: Tue Oct 19, 2021 8:36 am
mall0c wrote: Fri Oct 15, 2021 7:37 am I have been buying ibonds for about ten years now and often take advantage of the tax refund method to get another $5k into the account. My personal experience with this transaction is that it can be quite stressful. They send you 12 paper bonds of varying denominations (6x$50, 1x$200, 1x$500, 4x$1k), each in a separate envelope. That is 12 opportunities for something to get lost. This year all my bonds but one showed up on the same day, guess which denomination was missing - on of the $1k bonds. Luckily 10 days later the missing $1k bond showed up. I figured for sure it was lost. Then you have to register them on TD and send them all back again. Luckily I have never actually had to get on the phone with the treasury and convince them to send me a new bond, but I fear that day will come someday. It makes me seriously consider every year whether I want to put myself through it again.
I really appreciate you sharing this as I have been contemplating overpaying my taxes by $5K in December to get the IBonds...knowing what I do now from your experience will allow me to feel better about not doing it if I end up taking a pass...sigh, I don't think I'll be able to resist though! :twisted:
You don't have to register them at TD and send them in. You can simply keep them and redeem them at a local bank when you need money.

Don't make things any more complicated than necessary. Your paper bonds could sure come in handy when/if your TD account gets locked just when you need money.

As with all things investing - diversify!
Registering them at TD is the easy part. Actually receiving them all in the first place is what I’m worried about. Like I said I thought for sure the $1k bond was lost and that I would have to spend days on hold with the Treasury.
FIRE'd. Mid-40s.
MrJedi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by MrJedi »

LearnFin wrote: Tue Oct 19, 2021 1:43 pm Hi.

I am Interested in buying I-Bonds. I have never dabbled in I-bonds. Tips, EE etc.

I have read a lot of the above posts and am confused on the timings of the purchase.

If I buy before the month end, I will get 5.33 percent. If I buy first week of Nov, I will get 7+ percent (annual rate) for first six months and the prevalent rate for next six months. With raging inflation, I suspect the next 6 months too might be higher. As long as the next six months inflation rate is higher than 3.54 percent - doesn’t it make sense to buy during November?

I read an article that suggested that for long term investment, rush and buy now and not wait for Nov.

Please guide me. I expect to park these bonds for next several years.

Thanks
You will still get the new inflation rates for 6 months regardless if you buy in October or November. The difference is the fixed rate (unlikely to change with what we know) and the 3.54% rate. If you don't like the 3.54% rate then you can skip it. 3.54% is way above average compared to other risk free options, so there doesn't seem to be a point in skipping it. As mentioned you still get future inflation rate changes so it doesn't really make sense to to wait just because you think May 2022 rate will be higher...you will get that rate for 6 months either way, just different timing on when it starts
Bama12
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Bama12 »

I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
angelescrest
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by angelescrest »

I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
Whakamole
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Whakamole »

angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
I count them as bonds. Not a perfect fit, but close enough. I also consider them tax-deferred with a basis since I don't pay tax on earnings until I cash them in.

Currently they make up 23% of my fixed income allocation.
jwfails
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by jwfails »

I have slowly converted my emergency fund into I-bonds. I count them in my bond portion and it only accounts for about 7%.
MrJedi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by MrJedi »

I label them bonds but I don't fuss too much about cash vs bonds. I consider it all fixed income and I maintain my asset allocation primarily based on stocks vs fixed income.
jst
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by jst »

Has anyone been buying these in their trust as well as individually for any length of time?

I can't decide if this is a risky idea or not (buy another $10K in a trust).

I definitely don't want to run afoul of the US Treasury and I haven't seen any guidance directly from them that persuades me.
Whakamole
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Whakamole »

jst wrote: Wed Oct 20, 2021 9:17 am Has anyone been buying these in their trust as well as individually for any length of time?

I can't decide if this is a risky idea or not (buy another $10K in a trust).

I definitely don't want to run afoul of the US Treasury and I haven't seen any guidance directly from them that persuades me.
I have. No issues yet.

There is an issue if you buy a bond in a personal account and transfer it to the trust - TD somehow thinks you bought all bonds in the trust account, exceeding the limit for a single account. This is one case where you don't want to put everything into a trust.
jst
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by jst »

Thanks. You've been doing this for a few years at least?
Tom_T
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Tom_T »

Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
Randolph Mortimer
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Randolph Mortimer »

MrJedi wrote: Wed Oct 20, 2021 8:37 am I label them bonds but I don't fuss too much about cash vs bonds. I consider it all fixed income and I maintain my asset allocation primarily based on stocks vs fixed income.
This is the way.
Bama12
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Bama12 »

Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
CD's and Savings or not bonds.

I-Bonds are bonds why not just buy Vanguard Total Bond-VBTLX?
Shorty
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Shorty »

They are very different from marketable securities. Read discussion here:

viewtopic.php?t=358732
Bama12 wrote: Wed Oct 20, 2021 12:26 pm
Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
CD's and Savings or not bonds.

I-Bonds are bonds why not just buy Vanguard Total Bond-VBTLX?
Tom_T
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Tom_T »

Bama12 wrote: Wed Oct 20, 2021 12:26 pm
Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
CD's and Savings or not bonds.

I-Bonds are bonds why not just buy Vanguard Total Bond-VBTLX?
Total Bond isn't a "bond", either.
LincolnTunnel
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LincolnTunnel »

I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
SnowBog
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

LincolnTunnel wrote: Thu Oct 21, 2021 1:38 am I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
No. They can only be purchased within the Treasury Direct account or as paper bonds via tax refunds.

You could create an account for a child, but be aware that a child can't use I Bonds tax free for education (not sure why). But if a parent buys them (and meets the income threshold), they can be used tax free for education.
SnowBog
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

Whakamole wrote: Wed Oct 20, 2021 9:39 am
jst wrote: Wed Oct 20, 2021 9:17 am Has anyone been buying these in their trust as well as individually for any length of time?

I can't decide if this is a risky idea or not (buy another $10K in a trust).

I definitely don't want to run afoul of the US Treasury and I haven't seen any guidance directly from them that persuades me.
I have. No issues yet.
Been buying I Bonds (and EE Bonds) in individual accounts for a few years.

Started buying I Bonds in our living trust accounts (one for each spouse) this year as well.

Combined with $5k from tax refund, we've purchased $45k of I Bonds this year. Plan to repeat again next year.

No issues.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

LincolnTunnel wrote: Thu Oct 21, 2021 1:38 am I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
There's no reason to tie up valuable IRA space with I Bonds, since they're already tax-deferred for up to 30 years.
Best Regards - Mel | | Semper Fi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by donaldfair71 »

Mel Lindauer wrote: Thu Oct 21, 2021 1:05 pm
LincolnTunnel wrote: Thu Oct 21, 2021 1:38 am I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
There's no reason to tie up valuable IRA space with I Bonds, since they're already tax-deferred for up to 30 years.
Agree.

The only way I could remotely justify it is in a traditional IRA, but even then you might/(probably?) have low enough income that it just makes sense to pay the tax on it now anyway.
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anon_investor
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by anon_investor »

Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
I don't think Jack Bogle loved Total Bond either. He said in interviews and in his books that he thought Total Bond had "too many damn treasuries" and instead described holding 50% treasuries and 50% corporate bonds, which is more akin to the intermediate-term bond index.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by billthecat »

anon_investor wrote: Thu Oct 21, 2021 2:33 pm
Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
I don't think Jack Bogle loved Total Bond either. He said in interviews and in his books that he thought Total Bond had "too many damn treasuries" and instead described holding 50% treasuries and 50% corporate bonds, which is more akin to the intermediate-term bond index.
I'm confused. Isn't BND 44% treasury and BIV 54% treasury?
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Post by anon_investor »

billthecat wrote: Thu Oct 21, 2021 2:48 pm
anon_investor wrote: Thu Oct 21, 2021 2:33 pm
Tom_T wrote: Wed Oct 20, 2021 10:25 am
Bama12 wrote: Tue Oct 19, 2021 7:19 pm I thought the bogle way was to buy Vanguard Total Bond-VBTLX?
I don't think Jack Bogle ever said "don't buy anything other than Total Bond. No CDs, no savings accounts, nothing."
I don't think Jack Bogle loved Total Bond either. He said in interviews and in his books that he thought Total Bond had "too many damn treasuries" and instead described holding 50% treasuries and 50% corporate bonds, which is more akin to the intermediate-term bond index.
I'm confused. Isn't BND 44% treasury and BIV 54% treasury?
I assume Bogle lumped in government mortgaged back securities with regular treasuries, in which case BND is 65%+ of those 2 types of bonds.
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bligh
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by bligh »

donaldfair71 wrote: Thu Oct 21, 2021 1:12 pm
Mel Lindauer wrote: Thu Oct 21, 2021 1:05 pm
LincolnTunnel wrote: Thu Oct 21, 2021 1:38 am I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
There's no reason to tie up valuable IRA space with I Bonds, since they're already tax-deferred for up to 30 years.
Agree.

The only way I could remotely justify it is in a traditional IRA, but even then you might/(probably?) have low enough income that it just makes sense to pay the tax on it now anyway.
I think you misunderstood Mel. You can opt to pay your taxes on the I Bonds when you redeem them. ie. If you are 30 years old right now and in your prime earning years, you can in theory buy your I Bonds and let it compound tax free until you turn 60 years old, by which time you may have retired and be at a much lower tax bracket. For that 30 year old, their IRA functions in much the same way, where they could contribute into it and let it grow tax free until they redeem it when they turn 60.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Monkeyseeanddo »

We’re interested in buying I-bonds for the first time because we need somewhere to hold funds for the next 15 months or so. We’re planning to buy $20k now and $20k in January. Given that information, does it make sense to make the first $20k purchase in October or on November 1?
IamLaura
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by IamLaura »

BrokerageZelda wrote: Sat Oct 16, 2021 8:43 am TreasuryDirect allows you to establish a "Minor Linked Account" in the name and SSN of a minor in order to purchase bonds in the minor's name.

https://www.treasurydirect.gov/indiv/he ... bMinor.htm

Keep in mind that there are no take-backsies on gifts to minors - this is a custodial form of account. The money belongs to the child and the money can only be withdrawn for the child's benefit or by the child themselves once they grow up. Treating the money in a custodial account as an unrestricted extension of your own savings is unethical and illegal.

There are other, legal ways of 'hacking the limits' (trusts, sole proprietorships, etc) that don't involve roping in other people.
Could you point me to the law it would violate? I'm not seeing how this would be an ethical issue if it's not illegal.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grt2bOutdoors »

IamLaura wrote: Thu Oct 21, 2021 5:03 pm
BrokerageZelda wrote: Sat Oct 16, 2021 8:43 am TreasuryDirect allows you to establish a "Minor Linked Account" in the name and SSN of a minor in order to purchase bonds in the minor's name.

https://www.treasurydirect.gov/indiv/he ... bMinor.htm

Keep in mind that there are no take-backsies on gifts to minors - this is a custodial form of account. The money belongs to the child and the money can only be withdrawn for the child's benefit or by the child themselves once they grow up. Treating the money in a custodial account as an unrestricted extension of your own savings is unethical and illegal.

There are other, legal ways of 'hacking the limits' (trusts, sole proprietorships, etc) that don't involve roping in other people.
Could you point me to the law it would violate? I'm not seeing how this would be an ethical issue if it's not illegal.
The spirit of the UTMA is that contributions into such a titled account is a completed gift to the minor. Go to fairmark.com, look up the pros and cons of an UTMA.

I will tell you from my own experience, buying under an UTMA is no problem. Redeeming - the Treasury Direct system will hammer home to the custodian who the money belongs to. And they will issue the 1099 in the name of the child, if you redeem you will be reporting it on a tax return. The IRS will be looking for it, trust me on that.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mary1492 »

xyzzy
Last edited by mary1492 on Wed Oct 05, 2022 1:32 pm, edited 1 time in total.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

mary1492 wrote: Thu Oct 21, 2021 6:57 pm
Monkeyseeanddo wrote: Thu Oct 21, 2021 5:02 pm We’re interested in buying I-bonds for the first time because we need somewhere to hold funds for the next 15 months or so. We’re planning to buy $20k now and $20k in January. Given that information, does it make sense to make the first $20k purchase in October or on November 1?
If you want to be guaranteed 5.33% for the next 12 months (=[3.54% + 7.12%]/2), then get the first $20k in before end of October. If you're ok with 7.12% for the first 6 months and then a roll of the dice on the following 6 months, then wait for November.
In today's ultra-low interest rate environment, I personally would be more than happy with the known 5.33%. While the next adjustment might be higher than 3.54%, it also might be lower. You feeling lucky?

Remember that holding for less than five years, which you've indicated you plan to do, you'll lose the last three month's interest.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

Mel Lindauer wrote: Thu Oct 21, 2021 7:39 pm
mary1492 wrote: Thu Oct 21, 2021 6:57 pm
Monkeyseeanddo wrote: Thu Oct 21, 2021 5:02 pm We’re interested in buying I-bonds for the first time because we need somewhere to hold funds for the next 15 months or so. We’re planning to buy $20k now and $20k in January. Given that information, does it make sense to make the first $20k purchase in October or on November 1?
If you want to be guaranteed 5.33% for the next 12 months (=[3.54% + 7.12%]/2), then get the first $20k in before end of October. If you're ok with 7.12% for the first 6 months and then a roll of the dice on the following 6 months, then wait for November.
In today's ultra-low interest rate environment, I personally would be more than happy with the known 5.33%. While the next adjustment might be higher than 3.54%, it also might be lower. You feeling lucky?
Also currently 30yr TIPS are offering -0.26% real. I Bonds, which can also be held for 30yrs, are offering 0% real. IOW people are paying a premium for inflation protection in the TIPS market, which I Bond purchasers are not. So it seems unlikely that the fixed rate on I Bonds will change.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by #Cruncher »

Monkeyseeanddo wrote: Thu Oct 21, 2021 5:02 pm... we need somewhere to hold funds for the next 15 months or so.
Buy an I Bond before the end of October and you can pocket a 5.4% gain if you redeem after 15 months. For example a $10,000 bond will grow to $10,540 after one year. But because of the 3-month interest penalty for redemptions before five years, you'll need to hold another three months until January 2023 to get that amount. Here is the calculation based on a $25 bond as described in the Wiki's How interest is calculated:

Code: Select all

         Compos
 Month     Rate   ------ $25 Bond ------   --- $10,000 Bond ---
Oct 2021          25.00                    10,000 = 25.00 * 400
Apr 2022  3.54%   25.44 = 25.00 * 1.0177   10,176 = 25.44 * 400
Oct 2022  7.12%   26.35 = 25.44 * 1.0356   10,540 = 26.35 * 400
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by smectym »

angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Shorty »

This is fantastic!!! Also, you’ll see the next 6 month rate to inform your decision (e.g 0%, redeem at 15 mi. Great rate, wait another 6 months).
#Cruncher wrote: Thu Oct 21, 2021 10:29 pm
Monkeyseeanddo wrote: Thu Oct 21, 2021 5:02 pm... we need somewhere to hold funds for the next 15 months or so.
Buy an I Bond before the end of October and you can pocket a 5.4% gain if you redeem after 15 months. For example a $10,000 bond will grow to $10,540 after one year. But because of the 3-month interest penalty for redemptions before five years, you'll need to hold another three months until January 2023 to get that amount. Here is the calculation based on a $25 bond as described in the Wiki's How interest is calculated:

Code: Select all

         Compos
 Month     Rate   ------ $25 Bond ------   --- $10,000 Bond ---
Oct 2021          25.00                    10,000 = 25.00 * 400
Apr 2022  3.54%   25.44 = 25.00 * 1.0177   10,176 = 25.44 * 400
Oct 2022  7.12%   26.35 = 25.44 * 1.0356   10,540 = 26.35 * 400
Lucien786
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Lucien786 »

When are they going to post the actual, official rates?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

Lucien786 wrote: Fri Oct 22, 2021 8:09 am When are they going to post the actual, official rates?
At the beginning of November, on the first day that I Bonds with the new rates will be offered for sale.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by J295 »

smectym wrote: Fri Oct 22, 2021 12:58 am
angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
Somewhat similar here. Purchased $100k over 5 year time period in our 50s for the two of us when I retired (100% equities prior to retirement). Part of our "non-equity" AA. Mentally sort of sit and forget/stashed away in the coffee can. Rather nice when times like this come along, and the safety with lower returns is fine when inflation not high.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by angelescrest »

J295 wrote: Fri Oct 22, 2021 8:20 am
smectym wrote: Fri Oct 22, 2021 12:58 am
angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
Somewhat similar here. Purchased $100k over 5 year time period in our 50s for the two of us when I retired (100% equities prior to retirement). Part of our "non-equity" AA. Mentally sort of sit and forget/stashed away in the coffee can. Rather nice when times like this come along, and the safety with lower returns is fine when inflation not high.
Appreciate both of you sharing. I could see myself putting away up to 5-10% of my portfolio by the time I’m retired.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by goodenyou »

angelescrest wrote: Fri Oct 22, 2021 8:26 am
J295 wrote: Fri Oct 22, 2021 8:20 am
smectym wrote: Fri Oct 22, 2021 12:58 am
angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
Somewhat similar here. Purchased $100k over 5 year time period in our 50s for the two of us when I retired (100% equities prior to retirement). Part of our "non-equity" AA. Mentally sort of sit and forget/stashed away in the coffee can. Rather nice when times like this come along, and the safety with lower returns is fine when inflation not high.
Appreciate both of you sharing. I could see myself putting away up to 5-10% of my portfolio by the time I’m retired.
Low 6-digits in I-Bonds between two accounts. Started to purchase when $30k per person per year digitally was the limit. No paper bonds purchased. Stopped for a while when fixed and variable COMBINED was 0%. Wish I had loaded up more over the years. Will continue to faithfully purchase $20k per year from now on. I count it in my bond allocation.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by donaldfair71 »

bligh wrote: Thu Oct 21, 2021 3:45 pm
donaldfair71 wrote: Thu Oct 21, 2021 1:12 pm
Mel Lindauer wrote: Thu Oct 21, 2021 1:05 pm
LincolnTunnel wrote: Thu Oct 21, 2021 1:38 am I am just learning about I Bonds. Is it possible to own these within an IRA or a child's UTMA account? I think not since it seems they have to be bought directly from the treasury buy I just want to make sure I'm not missing something.
There's no reason to tie up valuable IRA space with I Bonds, since they're already tax-deferred for up to 30 years.
Agree.

The only way I could remotely justify it is in a traditional IRA, but even then you might/(probably?) have low enough income that it just makes sense to pay the tax on it now anyway.
I think you misunderstood Mel. You can opt to pay your taxes on the I Bonds when you redeem them. ie. If you are 30 years old right now and in your prime earning years, you can in theory buy your I Bonds and let it compound tax free until you turn 60 years old, by which time you may have retired and be at a much lower tax bracket. For that 30 year old, their IRA functions in much the same way, where they could contribute into it and let it grow tax free until they redeem it when they turn 60.
I understood Mel, my paragraph wasn't commenting on anything from his post, of which I agree. It was commenting further on another reason it likely doesn't make sense to stuff them in an IRA, even if you can have access to a traditional and take the tax benefit right now in a write off.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by MP46 »

Do we still think the fixed rate will be 0 in Nov? Just bought 10K for myself and thinking of buying some for minor kids. How does the fixed rate get calculated?
thank you!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by z3r0c00l »

MP46 wrote: Sat Oct 23, 2021 11:28 am Do we still think the fixed rate will be 0 in Nov? Just bought 10K for myself and thinking of buying some for minor kids. How does the fixed rate get calculated?
thank you!
Almost certainly not going up. Thus far a good predictor has been to compare to 10 year TIPS yield. There is no sure link there, but it has been a good rule of thumb. An increase is less likely now than it was on several other occasions where it also stayed at 0. I bonds are an incredible offering right now, I don't think they will need to add any sweetener. In fact I have to wonder if some day too many people will try to buy them and it will raise the visibility to the point where someone might try to discontinue the offering entirely. The government can borrow much more cheaply now.
70% Global Stocks / 30% Bonds
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by MP46 »

z3r0c00l wrote: Sat Oct 23, 2021 11:33 am
MP46 wrote: Sat Oct 23, 2021 11:28 am Do we still think the fixed rate will be 0 in Nov? Just bought 10K for myself and thinking of buying some for minor kids. How does the fixed rate get calculated?
thank you!
Almost certainly not going up. Thus far a good predictor has been to compare to 10 year TIPS yield. There is no sure link there, but it has been a good rule of thumb. An increase is less likely now than it was on several other occasions where it also stayed at 0. I bonds are an incredible offering right now, I don't think they will need to add any sweetener. In fact I have to wonder if some day too many people will try to buy them and it will raise the visibility to the point where someone might try to discontinue the offering entirely. The government can borrow much more cheaply now.
thank you, will then go ahead and get some this weekend to catch the 12 month wave.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by angelescrest »

goodenyou wrote: Fri Oct 22, 2021 9:58 am
angelescrest wrote: Fri Oct 22, 2021 8:26 am
J295 wrote: Fri Oct 22, 2021 8:20 am
smectym wrote: Fri Oct 22, 2021 12:58 am
angelescrest wrote: Tue Oct 19, 2021 11:19 pm I remember I Bonds being discussed very heavily here during the Great Recession. But I failed to understand what it was, only coming back to them again this month after revisiting the Wiki and the various I Bonds discussions. I'm quite sold now, and made my first purchase.

I'm curious, for those of you who are dyed in the wool I Bond Bogleheads and have purchased them for years on end, how much are you holding, and why? Are you treating it like cash, or as part of your bond allocation--or something else entirely?
1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
Somewhat similar here. Purchased $100k over 5 year time period in our 50s for the two of us when I retired (100% equities prior to retirement). Part of our "non-equity" AA. Mentally sort of sit and forget/stashed away in the coffee can. Rather nice when times like this come along, and the safety with lower returns is fine when inflation not high.
Appreciate both of you sharing. I could see myself putting away up to 5-10% of my portfolio by the time I’m retired.
Low 6-digits in I-Bonds between two accounts. Started to purchase when $30k per person per year digitally was the limit. No paper bonds purchased. Stopped for a while when fixed and variable COMBINED was 0%. Wish I had loaded up more over the years. Will continue to faithfully purchase $20k per year from now on. I count it in my bond allocation.
That’s sizable. What percentage of your bond allocation is in I Bonds?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by RobotsRock »

I'm new to the I-bond world and the Treasury Direct world. I was trying to understand the rules around gifting I-bonds that would potentially allow front-loading more purchases, and wanted to make sure I got this right:

Rule: Gifted I-bonds only count against the recipient's limit in the year they are transferred to the recipient, not the year they are bought for the recipient (up to $10k/year per gift recipient from any TreasuryDirect account)

Strategy: Myself (Son) + Mom + Dad

My Treasury Direct Account:
2021 Nov: Buy $10k for my limit, Buy $10k gift for dad, Buy $10k gift for mom
2022 Jan: Buy $10k for my limit, Buy $10k gift for dad, Buy $10k gift for mom

Dad's Treasury Direct Account:
2021 Nov: Buy $10k for dad limit, Buy $10k gift for me (son), Buy $10k gift for mom
2022 Jan: Buy $10k for dad limit, Buy $10k gift for me (son), Buy $10k gift for mom

Mom's Treasury Direct Account:
2021 Nov: Buy $10k for mom limit, Buy $10k gift for me (son), Buy $10k gift for dad
2022 Jan: Buy $10k for mom limit, Buy $10k gift for me (son), Buy $10k gift for dad

This would get $180k invested starting at the November semi-annual rate. Because of the $10k recipient limit per year, this means the gifted I-bonds would have to be transferred over 4-years from 2023 to 2026 to the gift recipient's TreasuryDirect account assuming no other purchases were made from each TreasuryDirect account for the account holder themselves over this period, and the I-bond interest would accrue as normal in the gift box account in the interim.

Do I have the rules right here to potentially get in $180k at the November semi-annual rate (hypothetically)?
Since the folks are old, what would happen if there was a life event before the gift-box held I-bonds could be transferred to the recipient?

Thank you for the insights!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

RobotsRock wrote: Sat Oct 23, 2021 11:52 am I'm new to the I-bond world and the Treasury Direct world. I was trying to understand the rules around gifting I-bonds that would potentially allow front-loading more purchases, and wanted to make sure I got this right:

Rule: Gifted I-bonds only count against the recipient's limit in the year they are transferred to the recipient, not the year they are bought for the recipient (up to $10k/year per gift recipient from any TreasuryDirect account)

Strategy: Myself (Son) + Mom + Dad

My Treasury Direct Account:
2021 Nov: Buy $10k for my limit, Buy $10k gift for dad, Buy $10k gift for mom
2022 Jan: Buy $10k for my limit, Buy $10k gift for dad, Buy $10k gift for mom

Dad's Treasury Direct Account:
2021 Nov: Buy $10k for dad limit, Buy $10k gift for me (son), Buy $10k gift for mom
2022 Jan: Buy $10k for dad limit, Buy $10k gift for me (son), Buy $10k gift for mom

Mom's Treasury Direct Account:
2021 Nov: Buy $10k for mom limit, Buy $10k gift for me (son), Buy $10k gift for dad
2022 Jan: Buy $10k for mom limit, Buy $10k gift for me (son), Buy $10k gift for dad

This would get $180k invested starting at the November semi-annual rate. Because of the $10k recipient limit per year, this means the gifted I-bonds would have to be transferred over 4-years from 2023 to 2026 to the gift recipient's TreasuryDirect account assuming no other purchases were made from each TreasuryDirect account for the account holder themselves over this period, and the I-bond interest would accrue as normal in the gift box account in the interim.

Do I have the rules right here to potentially get in $180k at the November semi-annual rate (hypothetically)?
Since the folks are old, what would happen if there was a life event before the gift-box held I-bonds could be transferred to the recipient?

Thank you for the insights!
Putting aside your first question, I believe the 'life event/gift box' question falls under one of those situations that isn't explicitly spelled out in the rules. If that happened, you would have to call up TreasuryDirect customer service (who are quite good) and ask for guidance on untangling the situation.

Also, it sounds to me that you could deliver all the gift bonds by 2024 if you do it in a forward/backward cycle:
2023: Me to Mom, Mom to Dad, Dad to Me
2024: Me to Dad, Dad to Mom, Mom to Me
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by maywood »

The Treasury Direct website says this:

"The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver."

So it's my understanding that if Dad is buying his own $10K of I bonds, you can't also buy him another $10K as a gift. You could buy him $10K as a gift if he wasn't buying any for himself.

Where does it say "Gifted I-bonds only count against the recipient's limit in the year they are transferred to the recipient, not the year they are bought for the recipient". ETA: Oh I do see where it says that on another part of the TD website! Those two statements (both on the TD website) seem to contradict each other. Seems like the statement you found is more recent since it is on the FAQ page of the Concerning the Change in the Annual Purchase Limit.

That's interesting, I did not know you could purchase a bond for someone else in your own account and then "deliver" it at a later date. I wonder if there is a time limit on delivering it.

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

Post by Mel Lindauer »

maywood wrote: Sat Oct 23, 2021 7:33 pm The Treasury Direct website says this:

"The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver."

So it's my understanding that if Dad is buying his own $10K of I bonds, you can't also buy him another $10K as a gift. You could buy him $10K as a gift if he wasn't buying any for himself.

Where does it say "Gifted I-bonds only count against the recipient's limit in the year they are transferred to the recipient, not the year they are bought for the recipient". ETA: Oh I do see where it says that on another part of the TD website! Those two statements (both on the TD website) seem to contradict each other. Seems like the statement you found is more recent since it is on the FAQ page of the Concerning the Change in the Annual Purchase Limit.

That's interesting, I did not know you could purchase a bond for someone else in your own account and then "deliver" it at a later date. I wonder if there is a time limit on delivering it.

maywood
Seems like it would be a good strategy for a couple to double up when the rates are high, like now (buy the limit for themselves and the limit as a gift to their spouse) and only gift them later when the rates are low. That way, they're getting $40k at the good rate and nothing when the rates are low and they wouldn't be buying anyway.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by goodenyou »

angelescrest wrote: Sat Oct 23, 2021 11:49 am
goodenyou wrote: Fri Oct 22, 2021 9:58 am
angelescrest wrote: Fri Oct 22, 2021 8:26 am
J295 wrote: Fri Oct 22, 2021 8:20 am
smectym wrote: Fri Oct 22, 2021 12:58 am

1) hold mid six figure allocation. Why? Nominally risk-free, nominal inflation protection
2) treat it as background to the main portfolio: I.e. do not count it toward the bond allocation in our portfolio held at, e.g., Vanguard
Somewhat similar here. Purchased $100k over 5 year time period in our 50s for the two of us when I retired (100% equities prior to retirement). Part of our "non-equity" AA. Mentally sort of sit and forget/stashed away in the coffee can. Rather nice when times like this come along, and the safety with lower returns is fine when inflation not high.
Appreciate both of you sharing. I could see myself putting away up to 5-10% of my portfolio by the time I’m retired.
Low 6-digits in I-Bonds between two accounts. Started to purchase when $30k per person per year digitally was the limit. No paper bonds purchased. Stopped for a while when fixed and variable COMBINED was 0%. Wish I had loaded up more over the years. Will continue to faithfully purchase $20k per year from now on. I count it in my bond allocation.
That’s sizable. What percentage of your bond allocation is in I Bonds?
It is about 5% of my FI and 10% of my bond allocation.
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
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