I Bonds Mega Thread (I Bond Heads Rejoice!)

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tj
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Re: I Bonds variable rate @ 3.54% in May

Post by tj »

Thesaints wrote: Tue Oct 12, 2021 4:38 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
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anon_investor
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

tj wrote: Tue Oct 12, 2021 4:54 pm
Thesaints wrote: Tue Oct 12, 2021 4:38 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
jmch1990
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Re: I Bonds variable rate @ 3.54% in May

Post by jmch1990 »

I asked this question in a separate thread but didn't get a response and I'd like to get a second opinion on the strategy. In short: I'm thinking of buying IBonds this month and funding them by redeeming EE bonds slightly ahead of schedule. Here's my situation:

I have three EE bonds each earning 4% interest that are set to fully mature at different points in the next couple of years (October 2022, December 2022, and November 2023). Since I Bonds are likely to return a little over 5% over the next 12 months (combining the current 3.54% rate with the expected ~6.5% rate to come in November), I am thinking it makes sense to redeem one of these bonds and purchase $15K of IBonds (we currently have bought $5k for the year and there are two of us) with the redemption.

We are slightly overweight in bonds/cash according to our AA, not enough to trigger a rebalancing, which is why I am considering this exchange vs. a cash purchase or rebalancing from stocks. The downside is that we would trigger taxes on the interest for any of the bonds we sell... but that would come in the next year or two anyway.

Does this make sense? If the answer is yes (as I am leaning towards), are there any factors that would make selling one EE bond better than another? For example, if we redeem the largest one (which matures first, in October of next year), we would have the highest tax bill, but it's a bill we would be paying soon anyway, and we would also keep that 4% interest (still good for bonds) on the other two for a bit longer.
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Re: I Bonds variable rate @ 3.54% in May

Post by billthecat »

anon_investor wrote: Tue Oct 12, 2021 5:00 pm
tj wrote: Tue Oct 12, 2021 4:54 pm
Thesaints wrote: Tue Oct 12, 2021 4:38 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
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anon_investor
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

billthecat wrote: Tue Oct 12, 2021 5:42 pm
anon_investor wrote: Tue Oct 12, 2021 5:00 pm
tj wrote: Tue Oct 12, 2021 4:54 pm
Thesaints wrote: Tue Oct 12, 2021 4:38 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.
Me too I Bonds are part of my 5-10% "fixed income" allocation.
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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

billthecat wrote: Tue Oct 12, 2021 5:42 pm
anon_investor wrote: Tue Oct 12, 2021 5:00 pm
tj wrote: Tue Oct 12, 2021 4:54 pm
Thesaints wrote: Tue Oct 12, 2021 4:38 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.
Very rarely do people bring up that bonds can outperform stocks (though it does happen viewtopic.php?t=352394 viewtopic.php?t=314053 ).

However agree with billthecat. Comparing stocks to bonds in this way kind of misses the point. The point of owning bonds is to reduce risk, which implies lower expected returns. Once one has decided what portion of their assets they want to allocate to bonds (less risky assets), then it comes down to which bonds one would like to hold (I Bond being one of many choices).

One can't then go back and say, "But I don't like the return on these bonds, let's take more risk". Because if one could have taken more risk, one would have done that in the first place, right? The fact that one did not want to take that risk means one necessarily must be ok with lower returns on safer assets.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Re: I Bonds variable rate @ 3.54% in May

Post by grogu »

I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.

Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
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Re: I Bonds variable rate @ 3.54% in May

Post by whodidntante »

Can't we all just market time? :wink:

Long-term:
Those who are concerned about inflation and demand an expected real return should be in stocks, not 0% fixed rate series I bonds. 0% series I bonds are a guaranteed money loser unless you hold for over five years and you're able to pay 0% tax on them.

Short-term:
Nice rate and unbeatable for a no-risk investment. Go ahead if you want.
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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

grogu wrote: Tue Oct 12, 2021 10:39 pm I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.

Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
Again the question is not should I hold this or that bond, the question is do I choose to hold bonds at all? If the answer is yes, I can go through and select what bonds fit my goals, risk profile, etc. If they happen to be I Bonds, great. If it's Total Bond, Intermediate Treasuries, Munis, or something else, so be it. Choosing to hold none is also a choice one can make.

Also if I'm choosing to hold bonds (whatever the reason) and I am a long ways off retirement, it may simply be the case that I'm planning to hold some bonds regardless until retirement. So choosing something I can hold at least that long would make sense.

One can reasonably invest their emergency fund and generally come out ahead even on a risk adjusted basis. Though again the question even there is what are one's goals, risk tolerance, timeline for needing the money, etc.

This gets at a more important point (of which the emergency fund is merely an example), is frequently people don't simply have one time horizon far off into the future that they are saving for. Instead they may be saving for a whole variety of different time horizons and may have different levels of risk they are comfortable taking with them. Just to list a few examples to make this concrete, planning for having a child (sometimes expensive fertility treatments are required, also high daycare expenses), buying a house, house maintenance, car maintenance, saving for kids' college, vacation planning, medical expenses, etc. In planning and saving for all these different goals (not to mention the various surprises that come up along the way), having some optionality in terms of what assets to tap and a view for a variety of different time horizons where they might be used, is quite useful. It provides one flexibility. Yes it can mean taking less risk and giving up some return. Though it can also mean taking a bit more risk than one would otherwise (as covered above with the emergency fund). Finding harmony between these different goals is key.

Sure have no problem in diversifying one's fixed income holdings. Agree different options may do well in different time periods (HYSA & T-Bills included). It's also a bit clearer (though can still be hazy) to estimate different future fixed income returns. So having some in various buckets can be useful. Reallocating between them can also be reasonable.

Think most of the people buying EE Bonds are similarly already committing some money to fixed income. IOW they already chose to hold some bonds. Then are deciding which fixed income makes sense to them (in this case EE Bonds). For example a common theme is to use them to handroll an annuity, which can aid in deferring SS or provide more guaranteed income during early retirement (where expenses can be higher). While there is a tendency to view their zero-coupon nature as a bug, it can actually be a feature as one can effectively shelter some future earnings from income/wealth tests (like FAFSA when helping kids apply for college aid). Can understand why such a long lockup can be unnerving. Though it is worth noting that with retirement accounts we are already accepting lockup for a long period of time. Not to say you should by EE Bonds :wink: , but there can be a case for them.

Though to get to your larger overarching point, there is a common belief shared by many here that stocks are for the long run. Jeremy Siegel said as much :wink: While I certainly hope that is true like most here, not everyone agrees with that assumption. In fact stocks may be even more volatile over the long run. If that's true, I think it is fair to really scrutinize how much risk one is willing to take.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
MIretired
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Re: I Bonds variable rate @ 3.54% in May

Post by MIretired »

tomsense76 wrote: Wed Oct 13, 2021 12:46 am
grogu wrote: Tue Oct 12, 2021 10:39 pm I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.

Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
Again the question is not should I hold this or that bond, the question is do I choose to hold bonds at all? If the answer is yes, I can go through and select what bonds fit my goals, risk profile, etc. If they happen to be I Bonds, great. If it's Total Bond, Intermediate Treasuries, Munis, or something else, so be it. Choosing to hold none is also a choice one can make.

Also if I'm choosing to hold bonds (whatever the reason) and I am a long ways off retirement, it may simply be the case that I'm planning to hold some bonds regardless until retirement. So choosing something I can hold at least that long would make sense.

One can reasonably invest their emergency fund and generally come out ahead even on a risk adjusted basis. Though again the question even there is what are one's goals, risk tolerance, timeline for needing the money, etc.

This gets at a more important point (of which the emergency fund is merely an example), is frequently people don't simply have one time horizon far off into the future that they are saving for. Instead they may be saving for a whole variety of different time horizons and may have different levels of risk they are comfortable taking with them. Just to list a few examples to make this concrete, planning for having a child (sometimes expensive fertility treatments are required, also high daycare expenses), buying a house, house maintenance, car maintenance, saving for kids' college, vacation planning, medical expenses, etc. In planning and saving for all these different goals (not to mention the various surprises that come up along the way), having some optionality in terms of what assets to tap and a view for a variety of different time horizons where they might be used, is quite useful. It provides one flexibility. Yes it can mean taking less risk and giving up some return. Though it can also mean taking a bit more risk than one would otherwise (as covered above with the emergency fund). Finding harmony between these different goals is key.

Sure have no problem in diversifying one's fixed income holdings. Agree different options may do well in different time periods (HYSA & T-Bills included). It's also a bit clearer (though can still be hazy) to estimate different future fixed income returns. So having some in various buckets can be useful. Reallocating between them can also be reasonable.

Think most of the people buying EE Bonds are similarly already committing some money to fixed income. IOW they already chose to hold some bonds. Then are deciding which fixed income makes sense to them (in this case EE Bonds). For example a common theme is to use them to handroll an annuity, which can aid in deferring SS or provide more guaranteed income during early retirement (where expenses can be higher). While there is a tendency to view their zero-coupon nature as a bug, it can actually be a feature as one can effectively shelter some future earnings from income/wealth tests (like FAFSA when helping kids apply for college aid). Can understand why such a long lockup can be unnerving. Though it is worth noting that with retirement accounts we are already accepting lockup for a long period of time. Not to say you should by EE Bonds :wink: , but there can be a case for them.

Though to get to your larger overarching point, there is a common belief shared by many here that stocks are for the long run. Jeremy Siegel said as much :wink: While I certainly hope that is true like most here, not everyone agrees with that assumption. In fact stocks may be even more volatile over the long run. If that's true, I think it is fair to really scrutinize how much risk one is willing to take.
[In the decumulation stage,]

The weird realization to me is : you have a recurring (or just annual expense) that comes over a long (~20 yrs time) that you know ahead of time. Say vacations or a car repeatedly.
I would call this a floor expense?, and want to more or less guarantee the money's there for quite a length of time (~15-20 Yrs?)
To me , this signifies annuities or laddered bonds; nothing else.
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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

MIretired wrote: Wed Oct 13, 2021 1:01 am [In the decumulation stage,]

The weird realization to me is : you have a recurring (or just annual expense) that comes over a long (~20 yrs time) that you know ahead of time. Say vacations or a car repeatedly.
I would call this a floor expense?, and want to more or less guarantee the money's there for quite a length of time (~15-20 Yrs?)
To me , this signifies annuities or laddered bonds; nothing else.
Yeah that makes perfect sense.

Annuities have been around for quite a long time (at least since the Romans if not earlier) for exactly that reason. They are fairly intuitive. People have generally always understood the goal is to provide a long stream of income. Maybe that gets lost in many of the investment conversations we have today?

Though agree there's a lot of similarities between laddered bonds and annuities.

On a recent Rational Reminder episode John Cochrane argued, that actually long TIPS are the riskless asset for a long term investor...
Okay, so what's the riskless asset? You're going to tell me it's T-bills, overnight federal funds. No, for a long term investor, the riskless asset is an indexed perpetuity, the longest tip you can get.
He's referencing an idea from a John Campbell and Luis Viceira paper entitled, "Who should buy long-term bonds?". From the paper...
We show that an infinitely risk-averse investor with zero intertemporal elasticity of substitution in consumption will choose an indexed bond portfolio that is equivalent to an indexed perpetuity, that is, a portfolio that delivers a riskless stream of real consumption. In this way we are able to support the commonsense view that long-term bonds are appropriate for long-lived investors who desire stability of income.
This has also been discussed on the forum as well. In particular the "First 20% of bonds in long-term Treasuries" thread ( viewtopic.php?t=287627 ), it is suggested that young investors thinking about bonds go long. The reason being their time horizon is long. Since equities and professional income are presumed to be sufficient for hedging inflation, one doesn't necessarily need them to be TIPS, but one could go that route as noted in this comment ( viewtopic.php?p=4686146#p4686146 ).

Though it is hard to find a fund that goes long enough with TIPS. So I Bonds or individual TIPS could be purchased to the same effect.
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Re: I Bonds variable rate @ 3.54% in May

Post by maywood »

Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Wowzer! I predict an uptick in threads about how to get a signature guarantee for TD accounts. :twisted:
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Re: I Bonds variable rate @ 3.54% in May

Post by Sheepdog »

maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
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Re: I Bonds variable rate @ 3.54% in May

Post by sapphire96 »

maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
:moneybag :moneybag :moneybag :moneybag :moneybag

7% bond yields on a government security? I never thought I would see those again!
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Re: I Bonds variable rate @ 3.54% in May

Post by goodenyou »

This thread has run its course.

The new thread will be "I Bonds Variable Rate @ 7.12% in November"
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Re: I Bonds variable rate @ 3.54% in May

Post by sapphire96 »

goodenyou wrote: Wed Oct 13, 2021 8:27 am This thread has run its course.

The new thread will be "I Bonds Variable Rate @ 7.12% in November"
Or just rename it to “I Bonds Mega Thread.”
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New I Bond Variable Rate 7.12% for November 2021

Post by HueyLD »

[Thread merged into here --admin LadyGeek]

The title says it all.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Da5id »

For people who want to read more details about this, https://tipswatch.com/2021/10/13/inflat ... la-at-5-9/
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by pizzy »

If you buy on November 1, you get the 7.12% rate immediately?

If you buy today, you get 3.54% for 6 months, and then 7.12% for the 6 months after that?
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Escapevelocity »

Is this the highest rate since the I-Bonds were introduced?
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by ModifiedDuration »

pizzy wrote: Wed Oct 13, 2021 8:54 am If you buy on November 1, you get the 7.12% rate immediately?

If you buy today, you get 3.54% for 6 months, and then 7.12% for the 6 months after that?
Exactly
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Re: I Bonds variable rate @ 3.54% in May

Post by mary1492 »

.....
Last edited by mary1492 on Thu Sep 29, 2022 8:19 am, edited 1 time in total.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Grt2bOutdoors »

pizzy wrote: Wed Oct 13, 2021 8:54 am If you buy on November 1, you get the 7.12% rate immediately?

If you buy today, you get 3.54% for 6 months, and then 7.12% for the 6 months after that?
Nothing is immediate, you will earn an annualized rate of 7.12 percent over a period of 6 months. Correct on the second question- 3.54 percent for 6 months and 7.12 percent for the following 6 months. That’s a rate of 5.33 percent on a 12 month basis.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by goodenyou »

Escapevelocity wrote: Wed Oct 13, 2021 8:55 am Is this the highest rate since the I-Bonds were introduced?
It is the highest VARIABLE rate portion since I-Bonds were introduced.
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Re: I Bonds variable rate @ 3.54% in May

Post by Whakamole »

I've bought my allocation already - what would buying in January give me? Six months of the 7% rate?
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Re: I Bonds variable rate @ 3.54% in May

Post by Da5id »

mary1492 wrote: Wed Oct 13, 2021 8:58 am Just opened new TD account for spouse. $10k going in soon. May also do one for DD and put $10k in it for her.

This is insane. The government is borrowing money at 7% for the next 6 to 12 months when 6 to 12 month treasuries are yielding 0.05% to 0.12%.
Well it doesn't make sense in terms of open market lending rates. On the other hand it is such small scale in terms of the government budget that it doesn't move the needle.
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Re: I Bonds variable rate @ 3.54% in May

Post by SmallSaver »

Whakamole wrote: Wed Oct 13, 2021 9:28 am I've bought my allocation already - what would buying in January give me? Six months of the 7% rate?
Yes, you get six months at whatever rate you bought at, then after that you'll get six months of whatever the most recent rate was, ad infinitum.
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Sheepdog wrote: Wed Oct 13, 2021 8:04 am
maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
How old are your 3.6% fixed rate I Bonds???
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Re: I Bonds variable rate @ 3.54% in May

Post by donaldfair71 »

sapphire96 wrote: Wed Oct 13, 2021 8:32 am
goodenyou wrote: Wed Oct 13, 2021 8:27 am This thread has run its course.

The new thread will be "I Bonds Variable Rate @ 7.12% in November"
Or just rename it to “I Bonds Mega Thread.”
"I Bond Heads Rejoice!"
Tom_T
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Tom_T »

I am getting some money soon in time for my first-ever I Bond purchase in November. Myself and spouse. :)
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bligh
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by bligh »

That's crazy. On the one hand I am glad I have built up a large (for me) I-Bond holding. On the other hand I lament the loss in real terms of my much larger cash/bond holding in my tax deferred accounts.

Just another reminder to diversify. Glad to see the inflation protection paying off, sad to see the inflation.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by AlmstRtrd »

Tom_T wrote: Wed Oct 13, 2021 10:34 am I am getting some money soon in time for my first-ever I Bond purchase in November. Myself and spouse. :)
DW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Soon2BXProgrammer »

AlmstRtrd wrote: Wed Oct 13, 2021 10:41 am
Tom_T wrote: Wed Oct 13, 2021 10:34 am I am getting some money soon in time for my first-ever I Bond purchase in November. Myself and spouse. :)
DW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
and... unless an I-bond has a positive fixed rate, they are guaranteed to lose money after taxes..

however, they are better then any TIPS that can be bought currently.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
masteraleph
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by masteraleph »

One heck of a lot better than a CD!

Edit: Not sure if I have the spare cash flow at the moment, but seriously considering selling some taxable bonds (with little appreciation) to buy bonds here.
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Re: I Bonds variable rate @ 3.54% in May

Post by Sheepdog »

anon_investor wrote: Wed Oct 13, 2021 9:38 am
Sheepdog wrote: Wed Oct 13, 2021 8:04 am
maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
How old are your 3.6% fixed rate I Bonds???
They were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof

p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by shess »

goodenyou wrote: Wed Oct 13, 2021 9:03 am
Escapevelocity wrote: Wed Oct 13, 2021 8:55 am Is this the highest rate since the I-Bonds were introduced?
It is the highest VARIABLE rate portion since I-Bonds were introduced.
I find myself wondering: What would cause a change to the fixed rate at this point? AFAICT, it's just by whim of the Treasury rather than some derived metric. Given an uncertain world, I'm hard-pressed to think of any reason for a rational seller not to just keep everything on the variable side and leave the fixed side at 0%.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Orangutan »

Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
Tom_T
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Tom_T »

AlmstRtrd wrote: Wed Oct 13, 2021 10:41 am
Tom_T wrote: Wed Oct 13, 2021 10:34 am I am getting some money soon in time for my first-ever I Bond purchase in November. Myself and spouse. :)
DW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
Given all the alternatives for "fixed" these days, I don't see a problem.
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Re: I Bonds variable rate @ 3.54% in May

Post by billthecat »

anon_investor wrote: Tue Oct 12, 2021 5:52 pm
billthecat wrote: Tue Oct 12, 2021 5:42 pm
anon_investor wrote: Tue Oct 12, 2021 5:00 pm
tj wrote: Tue Oct 12, 2021 4:54 pm
Thesaints wrote: Tue Oct 12, 2021 4:38 pm

Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.
Me too I Bonds are part of my 5-10% "fixed income" allocation.
Out of my total net worth, I slice off the top 12 mos. of expenses (at a moderate level), in cash. Of the remainder, my age - 11 is fixed income. Of the fixed income, 1/8th is cash (which, to me, includes anything that is not marked to market - checking, savings, I Bonds, CDs, money market, etc.). The other 7/8ths of my FI is total bond. And so 1/8th of FI plus the 12 mos. expenses is in cash (which currently translates to 6.3% of total net worth, 14.7% of FI).
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

Sheepdog wrote: Wed Oct 13, 2021 10:55 am
anon_investor wrote: Wed Oct 13, 2021 9:38 am
Sheepdog wrote: Wed Oct 13, 2021 8:04 am
maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
How old are your 3.6% fixed rate I Bonds???
They were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof

p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
You're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!
Best Regards - Mel | | Semper Fi
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

billthecat wrote: Wed Oct 13, 2021 11:15 am
anon_investor wrote: Tue Oct 12, 2021 5:52 pm
billthecat wrote: Tue Oct 12, 2021 5:42 pm
anon_investor wrote: Tue Oct 12, 2021 5:00 pm
tj wrote: Tue Oct 12, 2021 4:54 pm

So...the solution is to market time and hope for the best? :-P
The moral of the story is S&P500 and chill... I think...
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.
Me too I Bonds are part of my 5-10% "fixed income" allocation.
Out of my total net worth, I slice off the top 12 mos. of expenses (at a moderate level), in cash. Of the remainder, my age - 11 is fixed income. Of the fixed income, 1/8th is cash (which, to me, includes anything that is not marked to market - checking, savings, I Bonds, CDs, money market, etc.). The other 7/8ths of my FI is total bond. And so 1/8th of FI plus the 12 mos. expenses is in cash (which currently translates to 6.3% of total net worth, 14.7% of FI).
I am currently targeting a very aggressive 95/5-90/10 AA. I count my EF as part of my FI AA. Currently my AA is around 93/7. My goal is to keep about 2 months of expenses in FDIC insured accounts and the rest of my fixed income in I Bonds. I am also in the process of trying to get my FI% closer to 10%, which I will do with my 2022 I Bond purchase (funded from my anticipated 2021 bonus). Right now my FI allocation is about 60% I Bonds and 40% "cash" (FDIC insured savings accounts and no penalty CDs).
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Mel Lindauer »

Orangutan wrote: Wed Oct 13, 2021 11:03 am Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
Yes, less any pittance of a yield they're providing.
Best Regards - Mel | | Semper Fi
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Mel Lindauer wrote: Wed Oct 13, 2021 11:21 am
Sheepdog wrote: Wed Oct 13, 2021 10:55 am
anon_investor wrote: Wed Oct 13, 2021 9:38 am
Sheepdog wrote: Wed Oct 13, 2021 8:04 am
maywood wrote: Wed Oct 13, 2021 7:34 am Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
How old are your 3.6% fixed rate I Bonds???
They were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof

p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
You're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!
And I was happy just to snag some 0.2% fixed rate I Bonds in early 2020... :shock:
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by bligh »

Orangutan wrote: Wed Oct 13, 2021 11:03 am Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
This is mostly correct. If you are yielding 0.5% a year and inflation is at, say 7.5% you are yielding -7% in real terms.

The way you hope to offset this is that if nominal yields continue to fall (for example to 0.1% or -0.5% .. yes several European countries have had negative nominal yields for years now) your bonds will go up in value. Of course if interest rates go up then your bonds will get crushed (how much, will depend on their average maturity) and you will face an even larger negative real return.
Last edited by bligh on Wed Oct 13, 2021 11:29 am, edited 4 times in total.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by anon_investor »

masteraleph wrote: Wed Oct 13, 2021 10:51 am One heck of a lot better than a CD!

Edit: Not sure if I have the spare cash flow at the moment, but seriously considering selling some taxable bonds (with little appreciation) to buy bonds here.
You will get a guaranteed 6 months of 7.12% as long as you buy before May 1, 2022, so you have some time to scrounge up some cash!!!
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

anon_investor wrote: Wed Oct 13, 2021 11:26 am
Mel Lindauer wrote: Wed Oct 13, 2021 11:21 am
Sheepdog wrote: Wed Oct 13, 2021 10:55 am
anon_investor wrote: Wed Oct 13, 2021 9:38 am
Sheepdog wrote: Wed Oct 13, 2021 8:04 am

Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
How old are your 3.6% fixed rate I Bonds???
They were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof

p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
You're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!
And I was happy just to snag some 0.2% fixed rate I Bonds in early 2020... :shock:
I'm sure a lot of folks who own the 0% fixed rate would love to have a boatload of those 0.2% fixed rate I Bonds that you own.
Best Regards - Mel | | Semper Fi
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Thesaints »

Orangutan wrote: Wed Oct 13, 2021 11:03 am Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
It means they have lost 7% to inflation, except that the 7.12% is an annualized rate extrapolated from semi-annual data, so that is not correct. You have to take into account the previous 6 months 3.54% rate and calculate the composite annual rate: 5.31%.
More simply, you can directly read the 12-months data: 5.39%
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Re: I Bonds variable rate @ 3.54% in May

Post by FactualFran »

Sheepdog wrote: Wed Oct 13, 2021 8:04 am Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
You will get slightly more than that because the composite rate is not simply the sum of fixed rate and inflation rate. The composite rate for those bonds will be 10.85%.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Orangutan »

Mel Lindauer wrote: Wed Oct 13, 2021 11:25 am
Orangutan wrote: Wed Oct 13, 2021 11:03 am Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
Yes, less any pittance of a yield they're providing.
Well, at least I’ll get $10k of it tucked away today after eating my lunch.
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