dboeger1 wrote: ↑Wed Oct 13, 2021 12:31 pm
Just keep in mind that rate won't last forever, especially if the inflation ends up being transient. You may end up getting 7.12% for 6 months followed by 0% for the foreseeable future. If you look at historical rates, 0% variable was not uncommon. Then there are the early redemption penalties/restrictions. So I wouldn't necessarily recommend going overboard on your bond allocation just for this temporary rate. But if you're looking to increase your bond allocation or establish a higher-return tier of your cash reserves, it seems to be as good a time as any to do it.
I am slowly transitioning some of my EF to I bonds given the very low interest rates available in HYSAs at the moment. So I don't include the I Bonds in my overall AA as part of the bond holding, they're part of my EF/sinking fund.
It is true that the variable rate is likely to drop. But the question for me is, will it drop below the interest rate on my HYSA EF?
Even if it does drop all the way to zero, on an annualized basis the 6 months of the MUCH higher ~7% interest combined with 6 months of zero interest would still be more than the 0.5% I'm getting at the HYSA, and after the 1 year lockout period I could sell if I wanted, only the losing the last 3 months of interest, which if the rate has dropped below the HYSA rate is not much of a penalty. Plus, I think it is unlikely that the I bond variable rate would drop to less than 1% at the same time that the HYSA interest rate would rise to more than 1%, given how those things are calculated.
Basically I'm talking myself into doing this. The big question then becomes whether the IRS will process my refund and issue the I bonds prior to May 1.
Does anyone have experience with the time-frame between filing a return requesting an I bond refund? If I file in, say, February, how likely is it that the bonds will be issued by the end of April?
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