I Bonds Mega Thread (I Bond Heads Rejoice!)

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

Post by MrJedi »

feehater wrote: Fri Nov 05, 2021 9:38 am
Namashkar wrote: Fri Nov 05, 2021 9:19 am I bought $20,000 ($10,000 for me and $10,000 for my wife) worth of I-Bonds last month i.e. in October, 2021 assuming that when the interest rate changes on November 1, I will start earning the interest at new rate, just like the interest rate change applied to a Bank Savings account. That assumption seems to be incorrect with I-Bond. I will continue to earn interest at 3.54% for Oct thru April and at 7.12% from May 2022 thru Oct 2022. Can somebody please confirm my new assumption? I would have benefited if I would have waited until November to get the higher rate instead.

Thanks,
Your new assumption is the correct one. But you don’t know that your final sentence is true yet. If you’d waited until November you’d have 7.12% for six months, but the second six month period would be at a rate we won’t know until April. If it’s higher than 3.54% you will be sad, but if it is lower, you actually made the better choice. So, you’ll have to wait til then to find out if your unwitting gamble was correct.
I wouldn't say higher than 3.54% on the next announcement would be sad unless your goal is maybe to hold the bond for as short as possible. As long as the I bond rate is higher than other equivalently safe options (like FDIC bank account or other federally backed money), you are probably happy with I bond. 3.54% is good compared to other safe options. If the next rate is higher, I am still happy with I bond. That means I get 3.54% for 6 months, 7.12% for 6 months, and some other high rate for 6 months. That is better than not having the 3.54% at all IMO.
nyone
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by nyone »

I overpaid my 2020 taxes to buy I-bonds for the first time. I had to snail mail my return after my software was unable to efile. The IRS still does not have record of receiving my return (every time I call, I’m told their mail room is way behind). Is there any way to find out if I own paper bonds besides having them in hand?
aklanche
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by aklanche »

nyone wrote: Fri Nov 05, 2021 12:06 pm I overpaid my 2020 taxes to buy I-bonds for the first time. I had to snail mail my return after my software was unable to efile. The IRS still does not have record of receiving my return (every time I call, I’m told their mail room is way behind). Is there any way to find out if I own paper bonds besides having them in hand?
My tax refund wasn’t in my bank account until September (filed in February). Anything that makes that return even more complicated I don’t think I’m into. For me I’ll just do the annual $20k and call it a day.
calwatch
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by calwatch »

nyone wrote: Fri Nov 05, 2021 12:06 pm I overpaid my 2020 taxes to buy I-bonds for the first time. I had to snail mail my return after my software was unable to efile. The IRS still does not have record of receiving my return (every time I call, I’m told their mail room is way behind). Is there any way to find out if I own paper bonds besides having them in hand?
No surprise there, I've seen this happen before. There is one risk that your return could be processed too late that it doesn't send out I Bonds but then pushes cash out instead. I had that happen to me in 2020. I submitted my taxes on October 15, as I always do, but rather than giving me I Bonds and a direct deposit, the IRS gave me a check in the mail in December 2020. We'll see if this is the case in 2021.
Angst
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Angst »

Ketawa wrote: Fri Nov 05, 2021 8:48 am
20Dukes11 wrote: Fri Nov 05, 2021 8:41 am Apologies if this has been mentioned somewhere previous. I believe I'm reading the TreasuryDirect site correctly...do these I bonds add their interest to the principle every 6 months? I.e., if I bought bonds in October 2021, I shouldn't see an update to my balance until end of April/beginning May 2022?
No, it's monthly. However, the last 3 months of interest is always excluded until you reach the 5 year mark. So if you bought I Bonds in October 2021, you would not see any higher balance until after you receive interest for January 2022. The balance will then include October 2021 interest and exclude November 2021 through January 2022.
Yes, but I'd note that #Cruncher's website is probably the easiest way to see the present value of ones I Bond, neglecting the 3-month penalty, or in other words, assuming one's going to wait until later to sell. It's much easier than Treasury Direct, and you don't have to login to anything.

Here's a link:
http://eyebonds.info/ibonds/home10000.html

And, for example, from the above link's page, if you bought $10,000 this past October, you'd find this link:
http://eyebonds.info/ibonds/10000/ib_2021_10.html

But if you bought $10,000 just this month, i.e. November, click this link:
http://eyebonds.info/ibonds/10000/ib_2021_11.html

#Cruncher's website is the place to go. :wink:
Johnny Thinwallet
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Johnny Thinwallet »

HueyLD wrote: Thu Nov 04, 2021 5:45 pm
MrJedi wrote: Thu Nov 04, 2021 5:17 pm The confusing thing is when you redeem, the full amount will be shown on the 1099 even if you have been paying annually, so you basically just ignore what the 1099 says and stay with the annual increase in interest method used in prior years.
Not so because it guarantees that you will get a letter from the IRS.

A 1099-INT cannot be ignored. CANNOT!!

Per IRS Publication 550:

“On Schedule B (Form 1040 or 1040-SR), Part I, line 1, report all the interest shown on your Form 1099-INT. Then follow these steps.

1. Several lines above line 2, enter a subtotal of all interest listed on line 1.

2. Below the subtotal enter “U.S. Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond.

3. Subtract these amounts from the subtotal and enter the result on line 2.”
Thanks MrJedi for the original reply and to Huey for his follow-up.

Thanks to Huey's reference, I pulled up IRS Publication 550 and read through the various items related to this. I think it may ultimately make sense to just defer the taxes and deal with them upon redemption. I really prefer to keep things simple, and deferring the taxes satisfies the simplicity measure for reporting the interest to the IRS. We have such a large batch of tax-deferred space available that I think odds are good we'd have flexible options to stay in the 12% tax bracket during whichever tax year we'd redeem the bonds and show the interest.
Namashkar
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Namashkar »

MrJedi wrote: Fri Nov 05, 2021 11:44 am
feehater wrote: Fri Nov 05, 2021 9:38 am
Namashkar wrote: Fri Nov 05, 2021 9:19 am I bought $20,000 ($10,000 for me and $10,000 for my wife) worth of I-Bonds last month i.e. in October, 2021 assuming that when the interest rate changes on November 1, I will start earning the interest at new rate, just like the interest rate change applied to a Bank Savings account. That assumption seems to be incorrect with I-Bond. I will continue to earn interest at 3.54% for Oct thru April and at 7.12% from May 2022 thru Oct 2022. Can somebody please confirm my new assumption? I would have benefited if I would have waited until November to get the higher rate instead.

Thanks,
Your new assumption is the correct one. But you don’t know that your final sentence is true yet. If you’d waited until November you’d have 7.12% for six months, but the second six month period would be at a rate we won’t know until April. If it’s higher than 3.54% you will be sad, but if it is lower, you actually made the better choice. So, you’ll have to wait til then to find out if your unwitting gamble was correct.
I wouldn't say higher than 3.54% on the next announcement would be sad unless your goal is maybe to hold the bond for as short as possible. As long as the I bond rate is higher than other equivalently safe options (like FDIC bank account or other federally backed money), you are probably happy with I bond. 3.54% is good compared to other safe options. If the next rate is higher, I am still happy with I bond. That means I get 3.54% for 6 months, 7.12% for 6 months, and some other high rate for 6 months. That is better than not having the 3.54% at all IMO.
Thank you all for responding. Yes I am happy with what I did.
schildkrote
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I Bonds - Anyone Buying?

Post by schildkrote »

[Thread merged into here --admin LadyGeek]

I’ve read some discussions on here about buying I Bonds direct from the treasury and how they fit into the portfolio the cons are usually somewhere along the lines of not wanting to complicate portfolios for beneficiaries in the case you die before cashing them.

Considering I am not concerned with a complicated portfolio, is there any other reason not to add I bonds to a portfolio right now? The new composite interest rate for November-April 2022 is over 7%. If I understand correctly this is a risk free investment with great returns currently.

Is anyone buying?
Thesaints
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Re: I Bonds - Anyone Buying?

Post by Thesaints »

Unless one needs the money sooner than 12 months, why would anyone not buy ?
Triple digit golfer
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Re: I Bonds - Anyone Buying?

Post by Triple digit golfer »

Thesaints wrote: Tue Nov 09, 2021 10:40 am Unless one needs the money sooner than 12 months, why would anyone not buy ?
That's a good question. I'd like to know answers. I hold bonds, but not I bonds. Is there a good reason to keep buying regular bonds via Total Bond Index and not buy I bonds?
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anon_investor
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Re: I Bonds - Anyone Buying?

Post by anon_investor »

Triple digit golfer wrote: Tue Nov 09, 2021 10:43 am
Thesaints wrote: Tue Nov 09, 2021 10:40 am Unless one needs the money sooner than 12 months, why would anyone not buy ?
That's a good question. I'd like to know answers. I hold bonds, but not I bonds. Is there a good reason to keep buying regular bonds via Total Bond Index and not buy I bonds?
I have build up I Bonds over the last couple of years, they are pulling double duty as part of my fixed income/EF. This is much better than holding cash at a HYSA earning only 0.5%.
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Re: I Bonds - Anyone Buying?

Post by Gill »

The only negative is that your are limited to $10,000 per year.
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Dennisl
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Re: I Bonds - Anyone Buying?

Post by Dennisl »

Triple digit golfer wrote: Tue Nov 09, 2021 10:43 am
Thesaints wrote: Tue Nov 09, 2021 10:40 am Unless one needs the money sooner than 12 months, why would anyone not buy ?
That's a good question. I'd like to know answers. I hold bonds, but not I bonds. Is there a good reason to keep buying regular bonds via Total Bond Index and not buy I bonds?
Reasons to not buy:
You need a place to keep more conservative allocation. You can only buy $10k/year/social security number. If you have a lot of money in bonds, can't keep them all in I-bonds. If you keep <5 years, you lose 3 months of interest.

Lots of reasons to buy:
avoid state/local taxes
tax deferred
inflation hedge
can use for college
backed by US gov't
statman
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Re: I Bonds - Anyone Buying?

Post by statman »

I bought our annual $20,000 (wife and self) in October. That produces 6 months at 3.54% followed by 6 months at the present 7.12% plus, I suspect, another year or so of excellent yields. By the way, I have $500,000 of the good old Ibonds with fixed rate 3.00% to 3.60%. I wish I had maxed out in 1998 to 2001 - and kept buying rather than spurning the mere 2% fixed rate that followed.

YES, as previous posters said, buy them. You won't get full inflation protection because the interest is taxable when redeemed, but with 30 years to go you can probably wait until you are in a lower tax bracket.
conservativeinvestor
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Re: I Bonds - Anyone Buying?

Post by conservativeinvestor »

Yes I am in the process of transitioning my emergency fund from an online savings account to I bonds.
calwatch
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Re: I Bonds - Anyone Buying?

Post by calwatch »

I bonds defeat portfolio simplification. $10,000 a year in purchases may not be worth the $200-$300 a year delta gained from a total bond fund (assuming an annualized rate of 5% on the I Bonds, as I do not think nor wish for 7.12% inflation to continue for the next six month cycle as well). On the other hand, that's essentially free money you're walking away from. And once inflation falls but to the normal 2% rate, I Bonds will only pay out 2% while a bond fund should pay more. Of course, once those rates go up, the net asset value of the shares will fall which offsets that benefit, while the principal of an I Bond will never drop even if the 7% inflation is followed by 5% deflation.
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bligh
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Re: I Bonds - Anyone Buying?

Post by bligh »

schildkrote wrote: Tue Nov 09, 2021 10:37 am
Is anyone buying?
I have been buying them ever since learning about them on this forum.

If you do not need the money for a year there is simply no reason not to buy. The criticism that $10K doesn't move the needle is true, but over time as you continue to add to your holdings every year, I Bonds can become a significant percentage of your bond holdings. If you are married, you can add $20K/year.. and in 5 short years you could be holding 6 figures in I Bonds. That isn't insignificant and does move the needle in a big way (provided you wanted that much of your portfolio in bonds).

The beauty about I Bonds is that not only do they already provide a better return than TIPS, but if interest rates do shoot up where TIPS offer a much better return, you can switch over to them without incurring a loss in principal. Had you been holding TIPS as the interest rates went up, your principal would have been crushed.

As long as you do not need the money for at least a year, and the money was destined for bonds/fixed income/cash anyway, I Bonds are a no brainer.
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Re: I Bonds - Anyone Buying?

Post by z3r0c00l »

I recommend visiting the giant omnibus I bond thread already active for lots more info. I got my $10,000 early this year and will do so again in January 2022. Approaching the amount I need so at some point I may stop buying unless stocks really go on a rip then I guess I need more cash to balance out : )
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Re: I Bonds - Anyone Buying?

Post by lws »

I buy my annual 10K allotment.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LadyGeek »

I merged schildkrote's thread into the ongoing discussion.
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mary1492
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Re: I Bonds - Anyone Buying?

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 3:19 am, edited 1 time in total.
stoptothink
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Re: I Bonds - Anyone Buying?

Post by stoptothink »

mary1492 wrote: Tue Nov 09, 2021 2:01 pm
conservativeinvestor wrote: Tue Nov 09, 2021 11:42 am Yes I am in the process of transitioning my emergency fund from an online savings account to I bonds.
This is not a good idea.

Are you willing to be unable to touch the money for 12 months? That's what you are doing - if you purchase today, you cannot get it back for a full year no matter what. That is not what you want to do with emergency funds. Maybe you have a different view of what emergency funds are. In my view, emergency funds means it is not going to lose value, and I can have it in my hands as cash within 24 hours.
There is the rub; depends on your definition of "emergency fund". Technically we are doing the same thing (moving our cash EF to I-bonds), but in actuality we have several layers (and 6-figures) of "emergency funds" that could be tapped before we'd ever need to touch this.
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Re: I Bonds - Anyone Buying?

Post by SnowBog »

mary1492 wrote: Tue Nov 09, 2021 2:01 pm
conservativeinvestor wrote: Tue Nov 09, 2021 11:42 am Yes I am in the process of transitioning my emergency fund from an online savings account to I bonds.
This is not a good idea.

Are you willing to be unable to touch the money for 12 months? That's what you are doing - if you purchase today, you cannot get it back for a full year no matter what. That is not what you want to do with emergency funds. Maybe you have a different view of what emergency funds are. In my view, emergency funds means it is not going to lose value, and I can have it in my hands as cash within 24 hours.
While your point about being mindful of the 12 month minimum holding period is very important, and calls out the need for people to plan accordingly, I don't think it lessens the benefits of I Bonds over traditional savings accounts for EF. Not the least of which is an I Bond is much better at "not losing value" whereas a "cash" alternative is losing value to inflation every day.

I think you missed - or maybe misunderstood - the implied context of "transitioning my emergency fund".

More commonly they are tying up $10k (or $20k if married), which is likely only a part of their EF. They'll need to do this for a few years to complete the transition.

Personally, I go one step further and recommend that the first year of I Bonds is in addition to their existing EF. After 12 months, they can start to shrink their "cash" portion of their EF without any loss of liquidity. And after the last year of transition, they'll reinvest any remaining "cash" according to their AA. But some might be comfortable temporarily losing liquidity on 1/3, 1/4, or less of their EF.
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Re: I Bonds - Anyone Buying?

Post by JackoC »

calwatch wrote: Tue Nov 09, 2021 11:52 am I bonds defeat portfolio simplification. $10,000 a year in purchases may not be worth the $200-$300 a year delta gained from a total bond fund (assuming an annualized rate of 5% on the I Bonds, as I do not think nor wish for 7.12% inflation to continue for the next six month cycle as well). On the other hand, that's essentially free money you're walking away from. And once inflation falls but to the normal 2% rate, I Bonds will only pay out 2% while a bond fund should pay more. Of course, once those rates go up, the net asset value of the shares will fall which offsets that benefit, while the principal of an I Bond will never drop even if the 7% inflation is followed by 5% deflation.
The return comparisons there aren't exactly on point. The apples to apples comparison is I-bond v 5 yr TIPS, since you can redeem an I-bond at par with full interest starting in 5 yrs (redemption between 1 and 5 incurs a 3 month interest penalty). The 5 yr TIPS real yield is -1.81%, the I-bond fixed rate 0%. There might be a preference for a longer or shorter bond, or a nominal vs an inflation adjusted bond, or a collection of govt and slightly risky bonds ('total bond market') but in an even generally efficient market we assume the value we get from any bond traded in the same market is comparable. The I-bond doesn't follow that rule because the fixed rate is arbitrarily set for price and redemption at par. Depending where it's set the I-bond can be strictly superior or inferior to bonds priced in the market, right now far superior. It doesn't depend on inflation being high or low. That would relevant to deciding if the 5 yr TIPS or the 5 yr note better fits my needs and expectations, with no more than a slight advantage to one or the other of those being plausible. But the I-bond now is *1.8% pa* superior to the 5 yr TIPS.

There can be debate about whether to buy I-bonds if a) $10k is a truly trivial amount of one's portfolio subjectively judged b) at the other extreme tying up $10k for a year could put the person in a severe liquidity squeeze c) a highly risk seeking person somewhere in the middle wants literally no low risk assets. Otherwise I-bond=no brainer at current relative pricing.
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Re: I Bonds - Anyone Buying?

Post by folkher0 »

mary1492 wrote: Tue Nov 09, 2021 2:01 pm
conservativeinvestor wrote: Tue Nov 09, 2021 11:42 am Yes I am in the process of transitioning my emergency fund from an online savings account to I bonds.
This is not a good idea.

Are you willing to be unable to touch the money for 12 months? That's what you are doing - if you purchase today, you cannot get it back for a full year no matter what. That is not what you want to do with emergency funds. Maybe you have a different view of what emergency funds are. In my view, emergency funds means it is not going to lose value, and I can have it in my hands as cash within 24 hours.
This thinking drives me nuts. $10,000 of I bonds bought today will be your E-fund in 12 months. The $10,000 you bought 12 months ago is your e-fund now. If you don't need the funds, in 12 months you will have $20,000 in your efund with the option to add more. If that's not enough than you can keep the rest in your checking account getting slaughtered by inflation.

I bonds defeat portfolio simplification. $10,000 a year in purchases may not be worth the $200-$300 a year delta gained from a total bond fund (assuming an annualized rate of 5% on the I Bonds, as I do not think nor wish for 7.12% inflation to continue for the next six month cycle as well).
It also makes me crazy when people say "Its only $10,000, its not worth it to me." You could apply that logic to every dollar you invest. Why should I contribute $6000 to my IRA this year? How much difference could it make? The truth is, if you have $100,000 a year to invest at an aggressive 90/10 allocation, you will not find an alternative for $10,000 of fixed income with better risk adjusted returns than Ibonds today.

You should invest in Ibonds (or anything else) as part of a long-term plan. If you have bought I bonds in the past as an alternative to CDs or high-yield savings, you now have a very nice stash of a highly liquid, minimal risk asset earning over 7%.
skor99
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Anybody buying I bonds with 7% rate - treasury direct newbie here

Post by skor99 »

[Thread merged into here --admin LadyGeek]

I have only purchased bond funds and never any individual bonds or anything through Treasury direct. The 7%+ rate looks very lucrative though. As a newbie using Treasury direct what should I be aware of ? Any pitfalls to avoid ?

Also, Can bonds be purchased for children and any tax implications of that ?
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Re: Anybody buying I bonds with 7% rate - treasury direct newbie here

Post by Nate79 »

skor99 wrote: Tue Nov 09, 2021 5:15 pm I have only purchased bond funds and never any individual bonds or anything through Treasury direct. The 7%+ rate looks very lucrative though. As a newbie using Treasury direct what should I be aware of ? Any pitfalls to avoid ?

Also, Can bonds be purchased for children and any tax implications of that ?
Perhaps this 21 page thread can help:

viewtopic.php?f=10&t=346091

Or this one:

viewtopic.php?f=1&t=361680
Trader Joe
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Re: Anybody buying I bonds with 7% rate - treasury direct newbie here

Post by Trader Joe »

"Anybody buying I bonds with 7% rate - treasury direct newbie here"

No I am not.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LadyGeek »

I merged skor99's thread into the ongoing discussion. The combined thread is in the Investing - Theory, News & General forum (general discussion).

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: I Bonds - Anyone Buying?

Post by 2pedals »

folkher0 wrote: Tue Nov 09, 2021 5:15 pm It also makes me crazy when people say "Its only $10,000, its not worth it to me." You could apply that logic to every dollar you invest. Why should I contribute $6000 to my IRA this year? How much difference could it make? The truth is, if you have $100,000 a year to invest at an aggressive 90/10 allocation, you will not find an alternative for $10,000 of fixed income with better risk adjusted returns than Ibonds today.

You should invest in Ibonds (or anything else) as part of a long-term plan. If you have bought I bonds in the past as an alternative to CDs or high-yield savings, you now have a very nice stash of a highly liquid, minimal risk asset earning over 7%.
I am in early retirement now and I don't really have a long-term plan for something like this and my savings bonds are a little more than 1% of my portfolio. Time is running out for us, 10k, 20k, 30k is not really enough when you have a short window to invest. Part of our plan is to sell all of them to avoid complications with extra accounts and the survivors dealing with treasury direct. When I was younger EE-bonds and then also I-bonds were purchased with "extra" money. That "extra" money was savings beyond EF, 401k, and IRA investing. Not much extra money was available when we were younger. At one time you could purchase them with your rewards credit card and I loaded up on them then until they stopped allowing you from doing that. I didn't consider them as primary investment tools only periphery. The CD interest rates and marketable bonds were more attractive. They are very popular now but will they be in the future? The mostly off and sometimes moderately attractive savings bonds didn't result in us having a significant amount of savings bonds.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

samsoes wrote: Tue Nov 09, 2021 7:41 pm I was following the latest thread earlier today and now it is indistinguishable from the mis-mosh in this so-called "mega thread." Now trying to sift through it all gives me a headache and isn't worth trying. How sad.
To be fair, the same questions are coming up repeatedly in all the spin off threads.

So I accept this is a compromise attempting to avoid filing up the forum with largely duplicate posts, with duplicate answers, and often duplicate debates...

Ideally, people looking for information on I Bonds could start here https://www.bogleheads.org/wiki/I_savings_bonds, including "further reading" resources such as "The I Bond Manifesto" viewtopic.php?t=358732.

A quick forum search likely finds the answers to other questions. If not, a new post into this thread (or that gets merged into this thread) will help get answers.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

SnowBog wrote: Tue Nov 09, 2021 7:54 pm
samsoes wrote: Tue Nov 09, 2021 7:41 pm I was following the latest thread earlier today and now it is indistinguishable from the mis-mosh in this so-called "mega thread." Now trying to sift through it all gives me a headache and isn't worth trying. How sad.
To be fair, the same questions are coming up repeatedly in all the spin off threads.

So I accept this is a compromise attempting to avoid filing up the forum with largely duplicate posts, with duplicate answers, and often duplicate debates...

Ideally, people looking for information on I Bonds could start here https://www.bogleheads.org/wiki/I_savings_bonds, including "further reading" resources such as "The I Bond Manifesto" viewtopic.php?t=358732.

A quick forum search likely finds the answers to other questions. If not, a new post into this thread (or that gets merged into this thread) will help get answers.
Yeah on the internet there are different kinds of media (if you want to call it that; curious what Marshall McLuhan would have thought).

Forums are great for shared discussion. People can join and leave threads any time. Threads can be easily searched with common search engines. It's an improvement on email where it is harder to have that fluidity, visibility, etc..

That said for simple Q&A they can be tricky. It can still work for short to the point threads. However if the questions are unclear or if the interaction is more conversational, there may be a lot of discussion before getting close to an answer. It also may require UI improvements to identify relevant info. For example Discourse takes a small step in that direction. Stack Exchange takes a much larger one. Though even those platforms have their own tradeoffs.

Think (as SnowBog pointed out to me offline) we can improve discoverability of common information from the thread by adding it to the OP. There are other threads here that have done a great job by providing an index of useful info at the top. We can try that out and see how that goes. At some point we may want to go further and integrate common content into the wiki.
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MishkaWorries
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by MishkaWorries »

CPI 0.9% :shock:
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vanbogle59
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by vanbogle59 »

I just finished first-time TD purchases for me and DW.

One stupid question that I'm sure has been answered 100 times, but I would like confirmation that I didn't screw up.... :D

I created a second, preferred registration. So now the bonds show as "Me POD DW" or vice versa.
Right?


P.S. This soaring 7% interest just might enable some extravagant behavior. What if DW and I both die when our Space Perspective capsule craters into the desert floor ? How do you best pass these things on to heirs?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by acegolfer »

A few questions.

1. Suppose a married couple already bought $10k each using SSN for a total of $20k. Can they gift each other another $10k in the same year?

2. Can I gift $10k using kid's SSN and then later legally redeem it for buying my (not kid's) car?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

vanbogle59 wrote: Wed Nov 10, 2021 7:56 am P.S. This soaring 7% interest just might enable some extravagant behavior. What if DW and I both die when our Space Perspective capsule craters into the desert floor ? How do you best pass these things on to heirs?
TD doesn't really seem to have a mechanism for more 'inheritance backstops' on individual accounts beyond a single beneficiary, so by their rules the bonds would go into your estate(s), where they would have to be dealt with via the terms of a will.
acegolfer wrote: Wed Nov 10, 2021 7:57 am
A few questions.

1. Suppose a married couple already bought $10k each using SSN for a total of $20k. Can they gift each other another $10k in the same year?

2. Can I gift $10k using kid's SSN and then later legally redeem it for buying my (not kid's) car?
1. No, TD considers gifts received to count toward the receiver's purchase limit for the year, and if you go over TD may send you a warning that they could shut you down if it happens again.

2. No, kids' TD accounts are legally considered custodial accounts and the website will warn you strongly against treating the money as "not kid's" at the time that you withdraw it. The IRS will know about the interest income going to your kid's SSN.
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vanbogle59
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by vanbogle59 »

BrokerageZelda wrote: Wed Nov 10, 2021 8:06 am TD doesn't really seem to have a mechanism for more 'inheritance backstops' on individual accounts beyond a single beneficiary, so by their rules the bonds would go into your estate(s), where they would have to be dealt with via the terms of a will.
That's what I thought. TY.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by acegolfer »

BrokerageZelda wrote: Wed Nov 10, 2021 8:06 am
1. No, TD considers gifts received to count toward the receiver's purchase limit for the year, and if you go over TD may send you a warning that they could shut you down if it happens again.

2. No, kids' TD accounts are legally considered custodial accounts and the website will warn you strongly against treating the money as "not kid's" at the time that you withdraw it. The IRS will know about the interest income going to your kid's SSN.
Thanks. That's what I thought. Glad that there's a system in place to guard against this.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Thesaints »

BrokerageZelda wrote: Wed Nov 10, 2021 8:06 am 1. No, TD considers gifts received to count toward the receiver's purchase limit for the year, and if you go over TD may send you a warning that they could shut you down if it happens again.
Good. It won't happen again. But this year it did and why throw away free money ?
2. No, kids' TD accounts are legally considered custodial accounts and the website will warn you strongly against treating the money as "not kid's" at the time that you withdraw it. The IRS will know about the interest income going to your kid's SSN.
Every person with kids knows that there always are kids related expenses, for which using the bond in the kid's name is entirely appropriate.

Disclaimer: the above is not legal advice.


In the meantime October CPI-U is out. Rather early to say, but we are again on a >10% pace for the next inflation component.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by acegolfer »

Thesaints wrote: Wed Nov 10, 2021 8:12 am In the meantime October CPI-U is out. Rather early to say, but we are again on a >10% pace for the next inflation component.
https://www.bls.gov/news.release/pdf/cpi.pdf

September-October CPI-U % increase = 0.9%. (at this rate, it could be 10% for the next reset)
Year-to-year % increase = 6.2%
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by goodenyou »

acegolfer wrote: Wed Nov 10, 2021 8:44 am
Thesaints wrote: Wed Nov 10, 2021 8:12 am In the meantime October CPI-U is out. Rather early to say, but we are again on a >10% pace for the next inflation component.
https://www.bls.gov/news.release/pdf/cpi.pdf

September-October CPI-U % increase = 0.9%. (at this rate, it could be 10% for the next reset)
Year-to-year % increase = 6.2%
I need to dust off the clothes from the late 1970s/early 80's and completely relive the misery of inflation.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Angst »

tomsense76 wrote: Wed Nov 10, 2021 12:57 am
[Snip...]

Forums are great for shared discussion. People can join and leave threads any time. Threads can be easily searched with common search engines. It's an improvement on email where it is harder to have that fluidity, visibility, etc..

That said for simple Q&A they can be tricky. It can still work for short to the point threads. However if the questions are unclear or if the interaction is more conversational, there may be a lot of discussion before getting close to an answer. It also may require UI improvements to identify relevant info. For example Discourse takes a small step in that direction. Stack Exchange takes a much larger one. Though even those platforms have their own tradeoffs.

Think (as SnowBog pointed out to me offline) we can improve discoverability of common information from the thread by adding it to the OP. There are other threads here that have done a great job by providing an index of useful info at the top. We can try that out and see how that goes. At some point we may want to go further and integrate common content into the wiki.
Thanks for the Wiki links, they were both interesting. You don't happen to know of any finance-oriented sites that use them? If not, any examples you'd like to suggest of these platforms in use?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by schildkrote »

A lot of talk about people using these I-Bonds as EF’s. I was wondering how long the redemption actually takes assuming you needed to cash out after the first year. Is it instantaneous? Or is there a settlement period like brokerage accounts?
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Re: I Bonds - Anyone Buying?

Post by aj76er »

JackoC wrote: Tue Nov 09, 2021 2:40 pm
calwatch wrote: Tue Nov 09, 2021 11:52 am I bonds defeat portfolio simplification. $10,000 a year in purchases may not be worth the $200-$300 a year delta gained from a total bond fund (assuming an annualized rate of 5% on the I Bonds, as I do not think nor wish for 7.12% inflation to continue for the next six month cycle as well). On the other hand, that's essentially free money you're walking away from. And once inflation falls but to the normal 2% rate, I Bonds will only pay out 2% while a bond fund should pay more. Of course, once those rates go up, the net asset value of the shares will fall which offsets that benefit, while the principal of an I Bond will never drop even if the 7% inflation is followed by 5% deflation.
The return comparisons there aren't exactly on point. The apples to apples comparison is I-bond v 5 yr TIPS, since you can redeem an I-bond at par with full interest starting in 5 yrs (redemption between 1 and 5 incurs a 3 month interest penalty). The 5 yr TIPS real yield is -1.81%, the I-bond fixed rate 0%. There might be a preference for a longer or shorter bond, or a nominal vs an inflation adjusted bond, or a collection of govt and slightly risky bonds ('total bond market') but in an even generally efficient market we assume the value we get from any bond traded in the same market is comparable. The I-bond doesn't follow that rule because the fixed rate is arbitrarily set for price and redemption at par. Depending where it's set the I-bond can be strictly superior or inferior to bonds priced in the market, right now far superior. It doesn't depend on inflation being high or low. That would relevant to deciding if the 5 yr TIPS or the 5 yr note better fits my needs and expectations, with no more than a slight advantage to one or the other of those being plausible. But the I-bond now is *1.8% pa* superior to the 5 yr TIPS.

There can be debate about whether to buy I-bonds if a) $10k is a truly trivial amount of one's portfolio subjectively judged b) at the other extreme tying up $10k for a year could put the person in a severe liquidity squeeze c) a highly risk seeking person somewhere in the middle wants literally no low risk assets. Otherwise I-bond=no brainer at current relative pricing.
I completely agree that the proper comparison is to the 5yr TIPS. However, in the current environment, 30yr TIPS yield approximately -0.3% at auction. So with a 30yr maturity, the 0% real returns of IBonds are bearing everything along the yield curve today. Not bad for a zero volatility, cash-like asset!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SmallSaver »

schildkrote wrote: Wed Nov 10, 2021 9:44 am A lot of talk about people using these I-Bonds as EF’s. I was wondering how long the redemption actually takes assuming you needed to cash out after the first year. Is it instantaneous? Or is there a settlement period like brokerage accounts?
I'm one of them, but I'm not really sure. I'd expect things to take a few days, just based on TD generally. That said, it doesn't seem like a problem to me - a scenario where I need tens of thousands of dollars in cash immediately seems pretty unlikely, and I have plenty of credit available if I do have a large, immediate need.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by HueyLD »

SmallSaver wrote: Wed Nov 10, 2021 10:01 am
schildkrote wrote: Wed Nov 10, 2021 9:44 am A lot of talk about people using these I-Bonds as EF’s. I was wondering how long the redemption actually takes assuming you needed to cash out after the first year. Is it instantaneous? Or is there a settlement period like brokerage accounts?
I'm one of them, but I'm not really sure. I'd expect things to take a few days, just based on TD generally. That said, it doesn't seem like a problem to me - a scenario where I need tens of thousands of dollars in cash immediately seems pretty unlikely, and I have plenty of credit available if I do have a large, immediate need.
Last time I redeemed an I bond, the money was in my linked bank account overnight.
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Re: I Bonds - Anyone Buying?

Post by Escapevelocity »

statman wrote: Tue Nov 09, 2021 11:23 am I bought our annual $20,000 (wife and self) in October. That produces 6 months at 3.54% followed by 6 months at the present 7.12% plus, I suspect, another year or so of excellent yields. By the way, I have $500,000 of the good old Ibonds with fixed rate 3.00% to 3.60%. I wish I had maxed out in 1998 to 2001 - and kept buying rather than spurning the mere 2% fixed rate that followed.

YES, as previous posters said, buy them. You won't get full inflation protection because the interest is taxable when redeemed, but with 30 years to go you can probably wait until you are in a lower tax bracket.
I am very envious of this. You made a very wise decision to buy and hold those. Back when my daughter was 4 years old in 2000, I bought 10k of the 3.6 fixed rate I-Bond. When she started college in 2014, I stupidly cashed it in. Should have funded that with separate savings and held the I-Bond for the full 30 years.
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Re: I Bonds - Anyone Buying?

Post by JackoC »

aj76er wrote: Wed Nov 10, 2021 9:58 am
JackoC wrote: Tue Nov 09, 2021 2:40 pm
calwatch wrote: Tue Nov 09, 2021 11:52 am I bonds defeat portfolio simplification. $10,000 a year in purchases may not be worth the $200-$300 a year delta gained from a total bond fund (assuming an annualized rate of 5% on the I Bonds, as I do not think nor wish for 7.12% inflation to continue for the next six month cycle as well). On the other hand, that's essentially free money you're walking away from. And once inflation falls but to the normal 2% rate, I Bonds will only pay out 2% while a bond fund should pay more. Of course, once those rates go up, the net asset value of the shares will fall which offsets that benefit, while the principal of an I Bond will never drop even if the 7% inflation is followed by 5% deflation.
The return comparisons there aren't exactly on point. The apples to apples comparison is I-bond v 5 yr TIPS, since you can redeem an I-bond at par with full interest starting in 5 yrs (redemption between 1 and 5 incurs a 3 month interest penalty). The 5 yr TIPS real yield is -1.81%, the I-bond fixed rate 0%.
I completely agree that the proper comparison is to the 5yr TIPS. However, in the current environment, 30yr TIPS yield approximately -0.3% at auction. So with a 30yr maturity, the 0% real returns of IBonds are bearing everything along the yield curve today. Not bad for a zero volatility, cash-like asset!
True, and what's more the fact that you can cash in the I-bond at par with full accrued interest at 0% real constitutes an option. If in 15 yrs the 15 yr TIPS rate is +1%, cash in the I-bond and lock in 1% for the last 15 yrs. If you'd bought the 30 yr TIPS for -0.3% now, you could also cash it in 15yrs, but the price would be in the low 80'%'s that of the I-bond if the 15 yr TIPS rate was then 1%. There's value in that option to the extent there's any probability the TIPS rate to your original horizon (30 yrs from I-bond purchase) goes above 0% any time in years 6-30. That's *on top* of 1.8% pa advantage over the 5 yr TIPS for the first 5 yrs, and also not including the deferral of tax on the I-bond. It's funny IMO there are so many 'why I-bond' threads which focus a lot on the bond math, when the bond math aspect is such an absolute no-brainer now in favor of I-bonds over other safe bonds. The only caveats are you need to have some money (up to $10k, though you could buy less) you can lock up for at least 1 yr, $10k is not OTOH totally trivial to you, you want any safe assets at all, and the additional valid caveat mentioned after my last post: the slight complexity of a bunch of I-bonds at TD and/or paper, we have both, wrt eventual cognitive decline vs. absolute simplicity.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by ebeb »

I-bonds may be worth for a while.

U.S. Inflation Reached 30-Year High in October as Consumer Prices Jump 6.2%
https://www.wsj.com/articles/us-inflati ... _lead_pos1
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Broken Man 1999 »

goodenyou wrote: Wed Nov 10, 2021 8:48 am
acegolfer wrote: Wed Nov 10, 2021 8:44 am
Thesaints wrote: Wed Nov 10, 2021 8:12 am In the meantime October CPI-U is out. Rather early to say, but we are again on a >10% pace for the next inflation component.
https://www.bls.gov/news.release/pdf/cpi.pdf

September-October CPI-U % increase = 0.9%. (at this rate, it could be 10% for the next reset)
Year-to-year % increase = 6.2%
I need to dust off the clothes from the late 1970s/early 80's and completely relive the misery of inflation.
The clothes I can live without, but I would dearly love to have the head of hair I had back in those decades!

My hair is faded, and my face is growing. :(

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“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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