I Bonds Mega Thread (I Bond Heads Rejoice!)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

Re: New I Bond Variable Rate 7.12% for November 2021

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 4:40 pm, edited 1 time in total.
Blue456
Posts: 2152
Joined: Tue Jun 04, 2019 5:46 am

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

Post by Blue456 »

If I bought I bonds in September, can I buy them again in January? Is it once per calendar year or once every 12 months?
ModifiedDuration
Posts: 1408
Joined: Sat Dec 05, 2015 3:33 pm

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

Post by ModifiedDuration »

Blue456 wrote: Tue Nov 02, 2021 5:03 am If I bought I bonds in September, can I buy them again in January? Is it once per calendar year or once every 12 months?
It is once per calendar year, so you can buy again in January (and get the annualized rate of 7.12% for the first 6 months on that purchase).
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

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

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 4:40 pm, edited 1 time in total.
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: iBonds @ 7.12%

Post by Grt2bOutdoors »

anon_investor wrote: Mon Nov 01, 2021 10:06 pm
Mel Lindauer wrote: Mon Nov 01, 2021 10:05 pm
anon_investor wrote: Mon Nov 01, 2021 9:52 pm
Starfish wrote: Mon Nov 01, 2021 9:42 pm
SteadyOne wrote: Mon Nov 01, 2021 9:06 pm
And if spouses both contributed - $200,000. At 7% - not bad
It's pretty bad. The fixed rate is 0%! 3.5% for 10 years of bad returns? In 2009 was almost -3%. How do you know next 6 months is not -3%?
FYI I Bonds cannot have a composite rate below 0%. So even if CPI was -3%, the composite rate would be 0%.
Correct. And the higher the rate of DEflation, the higher the REAL return on even those 0% I Bonds.
Which makes I Bonds an amazing long term fixed income investment, all weather!
It’s all about optics which is why some posters are focusing on the 0% fixed rate return. They obviously don’t like “floating” rate instruments with a “zero floor” or “base rate of zero”. They also confuse TIPS with I bonds. Those who say it’s not worth it must not understand that “savings rate” is a major factor in accumulating assets in any asset class. Clearly, I bonds are not worth it to them as they never allocated any savings to them and can not benefit in a meaningful way from $500+ in gross interest income.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
exodusNH
Posts: 10344
Joined: Wed Jan 06, 2021 7:21 pm

Re: New I Bond Variable Rate 7.12% for November 2021

Post by exodusNH »

SnowBog wrote: Tue Nov 02, 2021 12:55 am I think exodusNH's point is that doesn't necessarily mean you are losing by 7%...

First, I'll add that the 7% rate is really only for 6 months of the year, the prior 6 months was 3.5%. If you average that out, its roughly 5.25% for the 12 month period. Maybe the next 6 months will be a lower rate - time will tell...

Second, as exodusNH was pointing out - Treasury sets the rate based a specific "basket of goods" as noted here: https://www.treasurydirect.gov/indiv/re ... s.htm#infl
Correct! I was replying on my phone. Thank you for restating everything more eloquently.
User avatar
fishandgolf
Posts: 794
Joined: Fri Nov 25, 2016 1:50 pm

Re: New I Bond Variable Rate 7.12% for November 2021

Post by fishandgolf »

mary1492 wrote: Tue Nov 02, 2021 4:27 am
SnowBog wrote: Tue Nov 02, 2021 12:55 am
non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy
I don't know the details of the CPI-U well enough to cite specifics... But let's use an example... Maybe the "basket of goods" includes 2 pounds of bacon, 3 dozen eggs, and 3 gallons of milk for a month. But in your house - you don't eat bacon or drink milk - but eat 2x the amount of eggs. Your particular inflation would be different - as the massive price change of bacon wouldn't apply to you - but any price change in eggs would have double the impact. Or maybe another example is 40 gallons of gas for your car for the month, but you drive an electric vehicle (or don't have a car at all) - so the difference in gas is meaningless to you.

So your personal inflation rate - which is really "how much more do the things I buy cost" - may be more or less than the CPI-U inflation rate (which is based on "buying" a specific set of items - and tracking changes over time). But for most people - the CPI-U is a "good enough" approximation...
This is a key point that many folks either overlook or do not understand. They simply go around giving blanket statements how folks that are not fully invested or don't have a high equity allocation are going to lose their shirts to inflation over time, and that's not necessarily the case.

I want to take your point to a major relevant item which impacts everyone ... Housing. If you listen to economists in the know (I like Danielle DiMartino Booth - go check her out on Youtube), they will point to the recent rise in housing costs, primarily rent, but also mortgage/ownership as well. Rent increases have been a major recent contributor to CPI increases, and are "sticky". Now, do you own your home? Have a fixed rate mortgage or no mortgage? Live rent free in your parent's basement? If so, then this major CPI component does not affect you, or affects you less than others. So, of the recent inflation increases, you do not feel the effects as much and your personal buying power has not lost as much ground.
+100%

Well said. DW and I are in the group of retired folks with no debt, good retirement income so inflation will have less impact on us. Now, for our kids...that's another story. However, they have secure jobs with good pay so they'll move along just fine....... :sharebeer
Whakamole
Posts: 1765
Joined: Wed Jan 13, 2016 8:59 pm

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

Post by Whakamole »

whodidntante wrote: Mon Nov 01, 2021 10:48 pm
calwatch wrote: Mon Nov 01, 2021 10:43 pm When do the new rates update in Treasury Direct?
Image
They blew their budget on that 7.12% image, only to realize that the Treasury-owned abacus could not count that high. :P
This has updated.

My November 2018 bonds updated and are paying 7.64% :beer

http://kirklindstrom.com/Articles/iBond ... Bonds.html shows interest rates for I-bonds depending on purchase date. The high is bonds purchased in May 2000 - 10.85%! :moneybag My oldest bonds will only be paying 10.23% once the interest rate is refreshed at the six-month mark.

The downside is transitory inflation means 10% doesn't go as far as it used to, but it's better than any fixed income investment is paying.
BogleMelon
Posts: 3181
Joined: Mon Feb 01, 2016 10:49 am

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

Post by BogleMelon »

I still have this question open, hope someone can answer it. On the long term, is it better to fill the ibonds space first before investing in BND (total bond index ETF)? Or BND is more likely to beat inflation?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather
Kaizen Soze
Posts: 351
Joined: Thu Apr 11, 2019 1:47 pm

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

Post by Kaizen Soze »

If inflation remains high, then it's a great investment. If inflation drops and the composite rate becomes garbage, then sell. I'm not seeing a downside to purchasing I-bonds to use as an EF besides the one-year hold period. Or for a retiree with a low risk tolerance sitting on cash worried about inflation, it sounds great at the moment.
User avatar
user9532
Posts: 257
Joined: Sun Dec 18, 2016 9:08 pm
Contact:

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

Post by user9532 »

How do I set up a beneficiary on my TreasuryDirect account? Can my wife be my beneficiary and I her beneficiary if we both hold I bonds?
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

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

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 4:39 pm, edited 1 time in total.
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

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

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 3:21 am, edited 1 time in total.
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: New I Bond Variable Rate 7.12% for November 2021

Post by Ron Ronnerson »

fishandgolf wrote: Tue Nov 02, 2021 8:43 am
mary1492 wrote: Tue Nov 02, 2021 4:27 am
SnowBog wrote: Tue Nov 02, 2021 12:55 am
non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy
I don't know the details of the CPI-U well enough to cite specifics... But let's use an example... Maybe the "basket of goods" includes 2 pounds of bacon, 3 dozen eggs, and 3 gallons of milk for a month. But in your house - you don't eat bacon or drink milk - but eat 2x the amount of eggs. Your particular inflation would be different - as the massive price change of bacon wouldn't apply to you - but any price change in eggs would have double the impact. Or maybe another example is 40 gallons of gas for your car for the month, but you drive an electric vehicle (or don't have a car at all) - so the difference in gas is meaningless to you.

So your personal inflation rate - which is really "how much more do the things I buy cost" - may be more or less than the CPI-U inflation rate (which is based on "buying" a specific set of items - and tracking changes over time). But for most people - the CPI-U is a "good enough" approximation...
This is a key point that many folks either overlook or do not understand. They simply go around giving blanket statements how folks that are not fully invested or don't have a high equity allocation are going to lose their shirts to inflation over time, and that's not necessarily the case.

I want to take your point to a major relevant item which impacts everyone ... Housing. If you listen to economists in the know (I like Danielle DiMartino Booth - go check her out on Youtube), they will point to the recent rise in housing costs, primarily rent, but also mortgage/ownership as well. Rent increases have been a major recent contributor to CPI increases, and are "sticky". Now, do you own your home? Have a fixed rate mortgage or no mortgage? Live rent free in your parent's basement? If so, then this major CPI component does not affect you, or affects you less than others. So, of the recent inflation increases, you do not feel the effects as much and your personal buying power has not lost as much ground.
+100%

Well said. DW and I are in the group of retired folks with no debt, good retirement income so inflation will have less impact on us. Now, for our kids...that's another story. However, they have secure jobs with good pay so they'll move along just fine....... :sharebeer
I agree with the concept of one’s personal inflation rate mattering too. I’m not sure if your kids have debt, but if it’s at a low rate, I wouldn’t necessarily worry about those debt loads impacting personal inflation negatively. It could potentially have the opposite effect. I loaded up on mortgage debt earlier this year by doing a cash-out refinance on my mortgage. The rate is locked for 30 years at 2.375% (effectively 2.28% due to itemizing on state taxes). The mortgage is by far my biggest expense and my property taxes are second biggest. Due to Prop 13 in California, the property taxes don’t change much over time. About half of my spending goes toward housing and that portion is basically immune to inflation.

By the way, the extra $150k in cash that I took out of the house at 2.3% is costing me $3500/year in interest. I’ve used that same money to earn $10k this year, however. Currently, $20k of the money I’m paying 2.3% interest on is paying me 7.12% (6.27% after tax). In January, I’ll direct another $20k toward I Bonds. Debt can be a money-maker in times like these as it can provide protection against inflation and maybe even be a net positive. I’m planning to go into credit card debt next (at 0%). I never thought I’d say those words but these are bizarre times.

Edit: I need to make a correction. $20k of the money I took out is currently earning 3.54%, not 7.12% quite yet. But it will in a few months.
User avatar
ApeAttack
Posts: 915
Joined: Wed Dec 23, 2020 7:28 pm
Location: Gorillatown, USA

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

Post by ApeAttack »

BogleMelon wrote: Tue Nov 02, 2021 9:58 am I still have this question open, hope someone can answer it. On the long term, is it better to fill the ibonds space first before investing in BND (total bond index ETF)? Or BND is more likely to beat inflation?
We can't know that ahead of time. Investing in a bond fund allows you rebalance easily and there are no limits on how much you can buy (unlike the 10k limit per year with I-Bonds).

I-Bonds Savings Bonds are designed for savings... buying-and-holding for long periods of time. I am using them for part of my EF because they offer better rates than a HYSA. Hopefully I won't need to sell them until they mature or there is a significant increase in the fixed rate.
May all your index funds gain +0.5% today.
User avatar
user9532
Posts: 257
Joined: Sun Dec 18, 2016 9:08 pm
Contact:

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

Post by user9532 »

mary1492 wrote: Tue Nov 02, 2021 10:30 am
user9532 wrote: Tue Nov 02, 2021 10:19 am Can my wife be my beneficiary and I her beneficiary if we both hold I bonds?
Yes - go through the procedure in each TD account.
Thank you!
SnowBog
Posts: 4699
Joined: Fri Dec 21, 2018 10:21 pm

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

Post by SnowBog »

ApeAttack wrote: Tue Nov 02, 2021 10:56 am
BogleMelon wrote: Tue Nov 02, 2021 9:58 am I still have this question open, hope someone can answer it. On the long term, is it better to fill the ibonds space first before investing in BND (total bond index ETF)? Or BND is more likely to beat inflation?
We can't know that ahead of time. Investing in a bond fund allows you rebalance easily and there are no limits on how much you can buy (unlike the 10k limit per year with I-Bonds).

I-Bonds Savings Bonds are designed for savings... buying-and-holding for long periods of time. I am using them for part of my EF because they offer better rates than a HYSA. Hopefully I won't need to sell them until they mature or there is a significant increase in the fixed rate.
And I'd maybe split and/or reverse the question...

In the context of "emergency fund" and/or alternative to "savings" accounts - it likely makes sense to prioritize I Bonds.

But beyond that, trying to compare I Bonds with say BND, misses some broader context.

It's generally recommended to put bonds in tax-deferred accounts like your 401k first. That let's you do things like rebalance in the account, avoid [defer] taxes, probably save on long term taxes (bonds will grow less, meaning the account will grow less and thus have smaller RMDs and smaller taxes).

Conversely, it's better to put "total stock index" in taxable accounts. With qualified dividends and capital gains, they are very tax efficient (more then bonds).

Now, if you are running out of space for bonds in your tax-deferred accounts, then you may want to think about adding bonds to your taxable accounts. Savings Bonds (like I Bonds) - while an after-tax (aka taxable) account, they can optionally have interest be tax-deferred. If you are in a high tax bracket, that expended tax-deferred space may be useful.

As for which will have the best return over time (I Bonds vs. BND), as was stated we'll only know after the fact.

But the way I think about it, I Bonds are a great "reserve" of money - at 0% fixed - you arguably aren't gaining or losing anything (other than eventual taxes) - just tracking inflation. If inflation is high and prolonged, they'll probably have better results than nominal bonds. But that's highly subject to the bond duration, your investment horizon, and the timing of the inflation.

Funds like BND benefit from both dividends (similar to I Bonds interest) but also market gains. That combination usually means that if your bond duration is aligned with your investment time line, impacts of inflation should balance out. As an example, while a higher interest rate will lower the current "value" of a bond fund, over time the higher bond payments from that higher interest rates will offset that.

More to the point, I generally don't think of it being I Bonds or BND (or similar), more likely its both. Having both provides extra diversification. I Bonds are not exposed to inflation or market risks. BND (or similar) is exposed to inflation but my benefit from market forces (and can be used for rebalancing).
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

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

Post by calwatch »

I think there is kind of an overlap between the Treasury side of BND and I Bonds. This is why I only hold corporate bond funds elsewhere.
expat
Posts: 787
Joined: Mon Mar 10, 2008 9:07 pm

7.12% for bonds issued November 2021 - April 2022

Post by expat »

[Merged into ongoing I-bond discussion -- moderator oldcomputerguy]

What did I just read? This is an obvious buy, right?

https://www.treasurydirect.gov/indiv/pr ... glance.htm
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: 7.12% for bonds issued November 2021 - April 2022

Post by Grt2bOutdoors »

expat wrote: Wed Nov 03, 2021 12:43 pm What did I just read? This is an obvious buy, right?

https://www.treasurydirect.gov/indiv/pr ... glance.htm
Go read the I-Bond mega thread.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Tamalak
Posts: 1988
Joined: Fri May 06, 2016 2:29 pm

Re: 7.12% for bonds issued November 2021 - April 2022

Post by Tamalak »

This looks kinda weird. Maximum (electronic) purchase of $10,000 worth?
User avatar
cflannagan
Posts: 1208
Joined: Sun Oct 21, 2007 11:44 am
Location: Working Remotely

Re: 7.12% for bonds issued November 2021 - April 2022

Post by cflannagan »

Tamalak wrote: Wed Nov 03, 2021 12:45 pm This looks kinda weird. Maximum (electronic) purchase of $10,000 worth?
Nothing particularly weird about that. I remember similar (if not same) limits all the way back in April 2008 when I bought my first I-Bonds.
User avatar
FoundingFather
Posts: 407
Joined: Fri Dec 18, 2020 9:20 pm

Re: 7.12% for bonds issued November 2021 - April 2022

Post by FoundingFather »

expat wrote: Wed Nov 03, 2021 12:43 pm What did I just read? This is an obvious buy, right?

https://www.treasurydirect.gov/indiv/pr ... glance.htm
If you have money to allocate to fixed income, and $10,000 per person per year is a meaningful sum, and you are okay having no access to this money for 1 year, and you don't plan to use the money for rapid rabalancing, then yes, they are a great buy.

Since the above all applies to my wife and I, I bought $20,000 for my wife and I this year, and I plan to buy another $20,000 in January. You can also get up to $5,000 in paper I bonds with federal tax return money per return, for a max of $15,000 for individuals and $25,000 for couples each year, in case you really want to max things out.

Founding Father
"I do not think myself equal to the Command I am honored with." -George Washington (excerpt from Journals of the Continental Congress, 16 June 1775)
Tamalak
Posts: 1988
Joined: Fri May 06, 2016 2:29 pm

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

Post by Tamalak »

I don't understand this. Is this something I can buy in a vanguard account? 401k, brokerage, roth?
mervinj7
Posts: 2496
Joined: Thu Mar 27, 2014 3:10 pm

Re: 7.12% for bonds issued November 2021 - April 2022

Post by mervinj7 »

FoundingFather wrote: Wed Nov 03, 2021 1:25 pm
expat wrote: Wed Nov 03, 2021 12:43 pm What did I just read? This is an obvious buy, right?

https://www.treasurydirect.gov/indiv/pr ... glance.htm
If you have money to allocate to fixed income, and $10,000 per person per year is a meaningful sum, and you are okay having no access to this money for 1 year, and you don't plan to use the money for rapid rabalancing, then yes, they are a great buy.

Since the above all applies to my wife and I, I bought $20,000 for my wife and I this year, and I plan to buy another $20,000 in January. You can also get up to $5,000 in paper I bonds with federal tax return money per return, for a max of $15,000 for individuals and $25,000 for couples each year, in case you really want to max things out.

Founding Father
Don't forgot another $10k for those with trust accounts. :)
ebeb
Posts: 658
Joined: Sat Dec 23, 2017 1:18 pm

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

Post by ebeb »

Tamalak wrote: Wed Nov 03, 2021 1:26 pm I don't understand this. Is this something I can buy in a vanguard account? 401k, brokerage, roth?
Nope you can only buy from https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
There is no secondary market or avenue to buy.
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
Angst
Posts: 2968
Joined: Sat Jun 09, 2007 11:31 am

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

Post by Angst »

Tamalak wrote: Wed Nov 03, 2021 1:26 pm I don't understand this. Is this something I can buy in a vanguard account? 401k, brokerage, roth?
The forum's Wiki is your friend:
https://www.bogleheads.org/wiki/I_savings_bonds
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

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

Post by Flashes1 »

Does this scenario make sense:

* Buy $10,000 of I-Bonds (yielding approx. 7% in the next months) using the proceeds from my HELOC (costing 3.25%).
* The HELOC balance would be paid off in the next 6 months.

Thanks
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

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

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 3:20 am, edited 1 time in total.
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

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

Post by Flashes1 »

mary1492 wrote: Wed Nov 03, 2021 5:07 pm
Flashes1 wrote: Wed Nov 03, 2021 4:31 pm Does this scenario make sense:

* Buy $10,000 of I-Bonds (yielding approx. 7% in the next months) using the proceeds from my HELOC (costing 3.25%).
* The HELOC balance would be paid off in the next 6 months.

Thanks
Why not simply make the $10,000 contribution over the next 6 months with no HELOC? It will all earn the 7% for the first 6 months no matter when it is contributed during that period.

For example, even if you contributed the entire $10,000 in April, for April through September that $10,000 will be earning the 7% rate for the 6 months.
All excess cash flow (after ~33% of our gross income is automatically invested throughout the month) is used to paydown my mortgage and existing HELOC balance leaving me with less than $1,000 in my checking account at all times. So I don't have $10,000 of cash laying around, but I do have availability on my HELOC.

It seems like a no-brainer decision, but I don't want to overlook anything.
ebeb
Posts: 658
Joined: Sat Dec 23, 2017 1:18 pm

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

Post by ebeb »

Flashes1 wrote: Wed Nov 03, 2021 5:17 pm It seems like a no-brainer decision, but I don't want to overlook anything.
I don't think you can withdraw the i-bond within first year and after 1 year lose 3 months interest if withdraw before 5 years. But I don't know what happens if you try to ask them back the money within 1 year if they just say no and ignore you. :confused
80% VOO | 20% BND+TBILL+CASH | Don't believe Nobody because Nobody knows nothin' - Anon
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

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

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 3:20 am, edited 2 times in total.
ShaftoesSpreadsheet
Posts: 261
Joined: Wed Jan 11, 2017 4:58 pm

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

Post by ShaftoesSpreadsheet »

I am now planning to break some E bonds and use that to buy I Bonds in January.

Given the prospect of ongoing inflation E bonds are losing their luster even with the minimum 3.5% 20 year deal they offer.
User avatar
PolarBearMarket
Posts: 93
Joined: Thu Sep 13, 2018 11:52 am

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

Post by PolarBearMarket »

I know this doesn't apply to most people here, but my wife has student loans outstanding at ~3%. This rate change for I Bonds is a hilarious situation where we get to both receive a greater rate of return and increase our liquidity - because if we used $10,000 to pay off the loan early, we would not have access to that money in 12 months and would have saved less in interest than we'll make from the bond.

Obviously these are not the only two things we can do with the money (and there are taxes that make things more complicated), but thought I'd share our (very moderately) fortunate circumstances.
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

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

Post by Flashes1 »

Is there a financial reason to not want the difference between borrowing at 3.25% and earning ~7.0%? Doesn't it make sense to earn the net 3.75% in the period it would take me to payoff the loan proceeds? The risk seems to be if I lose the ability to repay the HELOC loan AND the interest rate declines below the 3.25% interest I'm paying on it. If I'm comfortable assuming that risk, I feel like I should take that 3.75% gain ASAP but it's so easy I feel I must be missing something?

The I-Bond can't decrease in value and it's guaranteed by the USA to earn ~7% for approx. 6 months.
User avatar
billthecat
Posts: 1052
Joined: Tue Jan 24, 2017 1:50 pm
Location: USA

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

Post by billthecat »

tipswatcher wrote:
It's early and I'm sure we'll revisit it as we approach January but what do you think will happen to the fixed rate in 2022? If it's just going to stay zero all the way through Nov. 1, then I'd buy Jan. 1.
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
fsrph
Posts: 1610
Joined: Sun Jul 26, 2009 7:54 pm
Location: Pa.

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

Post by fsrph »

I was lucky enough to purchase I bonds in the early 2000's. They are all paper bonds. When the time comes to redeem, is it difficult to find a local bank to redeem them or can I mail the paper bonds to the Treasury? I heard that many banks will not redeem them.

Francis
"Success is getting what you want. Happiness is wanting what you get." | Dale Carnegie
colddeadfish
Posts: 250
Joined: Sun Apr 23, 2017 1:30 pm

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

Post by colddeadfish »

Flashes1 wrote: Wed Nov 03, 2021 6:15 pm Is there a financial reason to not want the difference between borrowing at 3.25% and earning ~7.0%? Doesn't it make sense to earn the net 3.75% in the period it would take me to payoff the loan proceeds? The risk seems to be if I lose the ability to repay the HELOC loan AND the interest rate declines below the 3.25% interest I'm paying on it. If I'm comfortable assuming that risk, I feel like I should take that 3.75% gain ASAP but it's so easy I feel I must be missing something?

The I-Bond can't decrease in value and it's guaranteed by the USA to earn ~7% for approx. 6 months.
You might be missing that you are required to pay ordinary federal income tax on the interest when you redeem the I-bond. Depending on your bracket this might make it less attractive.
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

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

Post by calwatch »

fsrph wrote: Wed Nov 03, 2021 6:39 pm I was lucky enough to purchase I bonds in the early 2000's. They are all paper bonds. When the time comes to redeem, is it difficult to find a local bank to redeem them or can I mail the paper bonds to the Treasury? I heard that many banks will not redeem them.

Francis
I redeemed a few old EE bonds for my mom at Chase recently. Most big banks will handle, but you will need to be a customer and may need to call ahead.
printer86
Posts: 416
Joined: Mon Apr 25, 2016 8:45 am

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

Post by printer86 »

Question for the group.

I opened an individual treasury direct account in my name this week, but I'm not sure how to add one my spouse. Is this done by "adding a new registration" of the buy direct page? If so, how do I label the account Sole?, primary?
User avatar
obafgkm
Posts: 713
Joined: Fri Mar 11, 2016 8:12 am
Location: Pennsylvania

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

Post by obafgkm »

fsrph wrote: Wed Nov 03, 2021 6:39 pm I was lucky enough to purchase I bonds in the early 2000's. They are all paper bonds. When the time comes to redeem, is it difficult to find a local bank to redeem them or can I mail the paper bonds to the Treasury? I heard that many banks will not redeem them.
It might depend on where you are. I live in south central Pennsylvania, and Citizens Bank, where I redeemed a couple of found EE bonds in 2018 that were bought by my parents for me years ago (and had long since stopped earning interest), stopped redeeming savings bonds in the last year. I haven’t found any other local banks or credit unions that say they will redeem (on their websites, at least). However, I don’t have an immediate need.

I too have 1.6%-fixed-rate paper I bonds from 2003 (as well as others), and when the time comes I suppose I’ll have to turn them into Treasury Direct. I just opened an account with them, for the time when I might need them.
"I'm investing in stocks... chicken, beef, and vegetable. It's risky, but I know one day it'll pay off & I'll be a bouillonaire. Who knows, I might even open up a Broth IRA."
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

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

Post by Flashes1 »

colddeadfish wrote: Wed Nov 03, 2021 6:42 pm
Flashes1 wrote: Wed Nov 03, 2021 6:15 pm Is there a financial reason to not want the difference between borrowing at 3.25% and earning ~7.0%? Doesn't it make sense to earn the net 3.75% in the period it would take me to payoff the loan proceeds? The risk seems to be if I lose the ability to repay the HELOC loan AND the interest rate declines below the 3.25% interest I'm paying on it. If I'm comfortable assuming that risk, I feel like I should take that 3.75% gain ASAP but it's so easy I feel I must be missing something?

The I-Bond can't decrease in value and it's guaranteed by the USA to earn ~7% for approx. 6 months.
You might be missing that you are required to pay ordinary federal income tax on the interest when you redeem the I-bond. Depending on your bracket this might make it less attractive.
Yes, I didn't take taxes into account so that would decrease my net interest to approx. 2.6% from 3.75% (so $130 of incremental income in the next 6 months). One nice feature I like about I-Bonds is the interest is deferred until redemption them giving you more control over when taxes are due.
SnowBog
Posts: 4699
Joined: Fri Dec 21, 2018 10:21 pm

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

Post by SnowBog »

printer86 wrote: Wed Nov 03, 2021 6:49 pm Question for the group.

I opened an individual treasury direct account in my name this week, but I'm not sure how to add one my spouse. Is this done by "adding a new registration" of the buy direct page? If so, how do I label the account Sole?, primary?
Accounts are only in one person's name. No such thing as a "joint" account at TD.

When you purchase the bonds, you can have a "co-owner" (acts more like beneficiary though). So you could title them for "printer86 & spouse of printer86".

If you are trying to have them purchase an additional $10k, they'll need their own account. And they could title you as well.

If you both have accounts, you can optionally go into the bonds you purchased and grant spouse "transaction rights" - either view only or the ability to sell. Presumably you'd do the same in reverse with their account/bonds. This let's either of you go into your individual accounts and sell your and/or spouse bonds (assuming your granted seek rights). That's the closest you'll get to "joint".

Alternatively, you could "buy as gift" for spouse. They'll eventually need their own account to receive and/or redeem them.
printer86
Posts: 416
Joined: Mon Apr 25, 2016 8:45 am

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

Post by printer86 »

SnowBog wrote: Wed Nov 03, 2021 7:02 pm
printer86 wrote: Wed Nov 03, 2021 6:49 pm Question for the group.

I opened an individual treasury direct account in my name this week, but I'm not sure how to add one my spouse. Is this done by "adding a new registration" of the buy direct page? If so, how do I label the account Sole?, primary?
Accounts are only in one person's name. No such thing as a "joint" account at TD.

When you purchase the bonds, you can have a "co-owner" (acts more like beneficiary though). So you could title them for "printer86 & spouse of printer86".

If you are trying to have them purchase an additional $10k, they'll need their own account. And they could title you as well.

If you both have accounts, you can optionally go into the bonds you purchased and grant spouse "transaction rights" - either view only or the ability to sell. Presumably you'd do the same in reverse with their account/bonds. This let's either of you go into your individual accounts and sell your and/or spouse bonds (assuming your granted seek rights). That's the closest you'll get to "joint".

Alternatively, you could "buy as gift" for spouse. They'll eventually need their own account to receive and/or redeem them.
Ok, So I'll need to open a separate account for "spouse of printer86" and add transaction rights. thanks for the help.
SnowBog
Posts: 4699
Joined: Fri Dec 21, 2018 10:21 pm

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

Post by SnowBog »

printer86 wrote: Wed Nov 03, 2021 7:06 pm
SnowBog wrote: Wed Nov 03, 2021 7:02 pm
printer86 wrote: Wed Nov 03, 2021 6:49 pm Question for the group.

I opened an individual treasury direct account in my name this week, but I'm not sure how to add one my spouse. Is this done by "adding a new registration" of the buy direct page? If so, how do I label the account Sole?, primary?
Accounts are only in one person's name. No such thing as a "joint" account at TD.

When you purchase the bonds, you can have a "co-owner" (acts more like beneficiary though). So you could title them for "printer86 & spouse of printer86".

If you are trying to have them purchase an additional $10k, they'll need their own account. And they could title you as well.

If you both have accounts, you can optionally go into the bonds you purchased and grant spouse "transaction rights" - either view only or the ability to sell. Presumably you'd do the same in reverse with their account/bonds. This let's either of you go into your individual accounts and sell your and/or spouse bonds (assuming your granted seek rights). That's the closest you'll get to "joint".

Alternatively, you could "buy as gift" for spouse. They'll eventually need their own account to receive and/or redeem them.
Ok, So I'll need to open a separate account for "spouse of printer86" and add transaction rights. thanks for the help.
For clarity, the transaction rights are on each bond purchased. You'll need to do it for each bond bought going forward.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

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

Post by anon_investor »

SnowBog wrote: Wed Nov 03, 2021 7:49 pm
printer86 wrote: Wed Nov 03, 2021 7:06 pm
SnowBog wrote: Wed Nov 03, 2021 7:02 pm
printer86 wrote: Wed Nov 03, 2021 6:49 pm Question for the group.

I opened an individual treasury direct account in my name this week, but I'm not sure how to add one my spouse. Is this done by "adding a new registration" of the buy direct page? If so, how do I label the account Sole?, primary?
Accounts are only in one person's name. No such thing as a "joint" account at TD.

When you purchase the bonds, you can have a "co-owner" (acts more like beneficiary though). So you could title them for "printer86 & spouse of printer86".

If you are trying to have them purchase an additional $10k, they'll need their own account. And they could title you as well.

If you both have accounts, you can optionally go into the bonds you purchased and grant spouse "transaction rights" - either view only or the ability to sell. Presumably you'd do the same in reverse with their account/bonds. This let's either of you go into your individual accounts and sell your and/or spouse bonds (assuming your granted seek rights). That's the closest you'll get to "joint".

Alternatively, you could "buy as gift" for spouse. They'll eventually need their own account to receive and/or redeem them.
Ok, So I'll need to open a separate account for "spouse of printer86" and add transaction rights. thanks for the help.
For clarity, the transaction rights are on each bond purchased. You'll need to do it for each bond bought going forward.
Exactly, which is why we just buy $10k of I Bonds at once annually. Set it up once and done for the year.
User avatar
VictoriaF
Posts: 20122
Joined: Tue Feb 27, 2007 6:27 am
Location: Black Swan Lake

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

Post by VictoriaF »

I have missed this thread and the opportunity to buy I bonds in October. But buying in November is still an excellent alternative. I stopped buying I bonds in 2016, forgot some facts and strategies, and would like to clarify a few points:

1. If I buy $10k worth of I bonds in November 2021 and then another $10k in January 2022, I'll have $20k of I bonds that will earn the annual 7% rate for 6 months, or about $700 (20,000 * 7% * 0.5). Right?
2. If I need cash, I can sell old I bonds that I bought with 0% fixed rate in 2011-2012. The new I bonds would replace the old I bonds while I would not have to worry about losing 3 months of interest. Is this a good strategy?
3. Question: When my I bonds will eventually mature, e.g., those I bought with the 3% fixed rate, must I cash them immediately? I may want to keep my taxable income below a certain level. Can I spread collecting interest of matured I bonds over several years?

Thank you,
Victoria
Inventor of the Bogleheads Secret Handshake | Winner of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
SnowBog
Posts: 4699
Joined: Fri Dec 21, 2018 10:21 pm

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

Post by SnowBog »

VictoriaF wrote: Wed Nov 03, 2021 8:30 pm I have missed this thread and the opportunity to buy I bonds in October. But buying in November is still an excellent alternative. I stopped buying I bonds in 2016, forgot some facts and strategies, and would like to clarify a few points:

1. If I buy $10k worth of I bonds in November 2021 and then another $10k in January 2022, I'll have $20k of I bonds that will earn the annual 7% rate for 6 months, or about $700 (20,000 * 7% * 0.5). Right?
2. If I need cash, I can sell old I bonds that I bought with 0% fixed rate in 2011-2012. The new I bonds would replace the old I bonds while I would not have to worry about losing 3 months of interest. Is this a good strategy?
3. Question: When my I bonds will eventually mature, e.g., those I bought with the 3% fixed rate, must I cash them immediately? I may want to keep my taxable income below a certain level. Can I spread collecting interest of matured I bonds over several years?

Thank you,
Victoria
1) correct

2) correct, since they are older than 5 years, no interest penalty. Is that a good idea? That's really up to you. You'll owe taxes on the gains from the prior I Bonds. And if you keep them, they too well be earning 6 months of interest (all I Bonds will get the 7.12% inflation rate at some point). But if you need the money, that's what they are there for.

3) no. taxes are due when you sell or when they reach their 30 year maturity. If you want to spread out the taxes, you'd start selling off some before 30 years. But again, those old I Bonds will also be getting 6 months of the 7.12% rate - or actually 10.12% given the 3% fixed (assuming they are < 30 years old).
User avatar
Ketawa
Posts: 2521
Joined: Mon Aug 22, 2011 1:11 am
Location: DC

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

Post by Ketawa »

billthecat wrote: Wed Oct 27, 2021 12:37 pm Let's assume the fixed rate at some point increases to be higher than some of your current holdings. What would be the math to determine if you should sell (and pay taxes on accrued interest) to buy new I bonds with the higher fixed rate, or just keep what you have? Maybe the answer is 'never' and instead just buy more.
Skimming through the thread, I saw this wasn't answered very thoroughly. Here is an analytical way to approach the question.

The question is, when will TIPS offer 0% real yield as an alternative to 0% fixed rate I Bonds? The optionality of I Bonds (to hedge against real yields falling or deflation) and tax advantages of I Bonds also have value, so you might want ~0.5% extra guaranteed.

Here is the current yield curve along with the (X, Y-X) forward rates expectation. X is on the vertical axis, Y is on the horizontal axis. For example, the upper left entry is the 5 year, 2 year forward real yield rate expected by the market. The market expects that TIPS issued 5 years from now with a 2-year term will earn -0.3% real.

Code: Select all

              Y    5 YR    7 YR   10 YR   20 YR   30 YR
                  -1.66   -1.26   -0.92   -0.48   -0.27
      X
      5   -1.66           -0.3%   -0.2%   -0.1%    0.0%
      7   -1.26                   -0.1%   -0.1%    0.0%
     10   -0.92                            0.0%    0.1%
     20   -0.48                                    0.2%
Current rates are such that TIPS are expected to rise to 0% real in 5 years, and that would be for 25-year TIPS issued at that time. Alternatively, 10-year TIPS issued 10 years from now.

Based on the current yield curve, you may never have a good reason to exchange I Bonds purchased now for another investment with a real yield like TIPS. The highest rate priced in by the market is 0.2%.

Of course, there may be other considerations. I will probably redeem my I Bonds if the rate is unfavorable at some point in the future compared to my 2.5% fixed rate mortgage.
ThisJustIn
Posts: 596
Joined: Sun Mar 11, 2018 10:53 pm
Location: Sunnyvale, CA

I-bonds: questions before purchase

Post by ThisJustIn »

[Thread merged into here --admin LadyGeek]

I have been debating purchasing I-bonds for the past couple of years, and for various reasons, I haven't purchased one before. This time, I do have cash, there are no short-term alternatives, and based on what I read in the forum recently, the I-bond rates are 7+% this year. Now that I'm ready to purchase I-bonds, I have a couple of questions:

1) Is there a way to purchase I-savings bonds, other than buying in treasury direct website?

2) The current rate of 7+% is really good. As far as I know, there are two investing periods for I-bonds, 6 months each. One was on November 1st, other is on May 1st. The rate for November 1st is 7+% right now. The question is when I purchase say 10K (max) this month, will that 10K grow at the current 7+% rate the whole time? (E.g. I'm planning to hold at least 5 years to prevent penalties, and maybe even longer) Or, does the rate change and adapt to the changing rate every 6 months?

3) I can invest 10K per year to I-savings bonds. I read about folks creating living trust, and investing another 10K there. Could you elaborate on how to create a living trust? And will I be able to access this money in the living trust after, let's say, 10 years? Or will that money just be for my heirs?

4) I-bond rates: Last couple of years, I-savings bond rates were around 2-2.5%. Now it is 7+%. I understand there is a correlation between inflation rate and I-bond rates. The rates were also high around 2000. Given this, and given that 7+% returns of I-savings bonds is rare, do you folks still invest in I-savings bonds during every 6-month period, during a time period of, let's say, as long as 20-30 years? Or do folks mainly invest in I-bonds when inflation rate is high, to catch up with inflation rate?
Post Reply