I Bonds Mega Thread (I Bond Heads Rejoice!)
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
I merged willyd123's question into the ongoing discussion. The post is on the previous page:
Re: iBonds
So you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Is there any issue buying 10k each for 2 kids for the next 5-10 years and then dumping the proceeds into their own 529/tuition?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Cash Out I Bonds Tax Free For College Expenses Or 529 Plan
June 16, 2022 by Harry Sit
https://thefinancebuff.com/cash-out-i-b ... -plan.html
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Re: iBonds
This might answer your question:fred2017 wrote: ↑Wed Jun 22, 2022 12:12 amSo you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
Buy I Bonds as a Gift: What Works and What Doesn’t
December 27, 2021 by Harry Sit
https://thefinancebuff.com/buy-i-bonds-as-gift.html
Re: iBonds
Yes, but remember that "buying for your child" means one of two things: using their account to buy the bond directly, or you buying a bond as a gift to them. When you buy a bond as a gift, it sits in your "gift box", waiting, in limbo. No limits have been affected at this point. It can wait there a long time if needed, even more than one year. They earn interest while waiting.fred2017 wrote: ↑Wed Jun 22, 2022 12:12 amSo you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
You could buy $100K in gifts at once if you wanted to. It's the delivery part where you have to be concerned about the $10K limit for whoever is getting the gift and the year they are getting it. Theroretically, you could buy five $10K bonds as gifts for your child right now. You deliver one in 2022, one in 2023, and so on for five years. When you purchase a gift, it can't be sold for a year after the purchase date (the purchase date - not the date you eventually deliver it. If you deliver a gift a year after purchase, the recipient can sell it right away.)
And, once the accounts are set up, one account owner can give another account owner transaction privileges (i.e. you can log onto your account and sell the bond owned by your spouse or child.) Also, all the accounts can use the same bank account as the funding source.
Re: iBonds
When you make a gift of an ibond to a child it becomes their money. If you want to sell the child's ibonds in the future and put it in their savings account for their use in the future then ok. To just sell and put it in your own account was a sham transaction and in effect was theft.fred2017 wrote: ↑Wed Jun 22, 2022 12:12 amSo you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
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Re: iBonds
Exactly. While one may get away with it don't do it. It is also a poor example to your kids. See this gift of yours I am taking it back because I need it. If you give a savings bond to a kid it should be something they can be excited about to be saving money like mom and dad and put towards future goals.Nate79 wrote: ↑Wed Jun 22, 2022 7:48 amWhen you make a gift of an ibond to a child it becomes their money. If you want to sell the child's ibonds in the future and put it in their savings account for their use in the future then ok. To just sell and put it in your own account was a sham transaction and in effect was theft.fred2017 wrote: ↑Wed Jun 22, 2022 12:12 amSo you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse B
$10k bond - gift for spouse B
$10k bond - gift for spouse B
$10k bond - gift for spouse B
Spouse B has the same five bonds (four of which are gifts for Spouse A).
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k Jan 2024 ($20k more)
$80k Jan 2025 ($20k more)
$100k Jan 2026 ($20k more)
If you wait until June 2027 or later then whatever remains of the $100k could be redeemed without penalty.
Last edited by Statistical on Wed Jun 22, 2022 12:15 pm, edited 2 times in total.
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Yes, I agree with this! I'm not gifting the bonds to my kids in order to use them myself some day. It's an investment for them. I might manage it for them for the time being, but it's their money. I'm happy to help get them started.
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
For the record, discussions of dishonest behavior or bypassing the law are totally unacceptable. The intent is to understand how to do this within the existing legal framework; in which case this discussion can continue.
As noted in:
As noted in:
The question has been answered.Nate79 wrote: ↑Wed Jun 22, 2022 7:48 amWhen you make a gift of an ibond to a child it becomes their money. If you want to sell the child's ibonds in the future and put it in their savings account for their use in the future then ok. To just sell and put it in your own account was a sham transaction and in effect was theft.fred2017 wrote: ↑Wed Jun 22, 2022 12:12 amSo you, as parent, can buy $10,000 iBond for each child, which does not count towards your own limit of $10,000.
Can you also sell them later if needed to use that money (even it is child's money, but as long as child is ok with this)?
I have some cash on hand and try to figure out if I can buy some iBond by utlizing my child's limit (as my limit has been reached already), but plan to sell/withdraw in few years.
Thanks!
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Re: iBonds
I think you meant that the gifts are from Spouse A to Spouse B above.Statistical wrote: ↑Wed Jun 22, 2022 8:02 am
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
The same is true for Spouse A
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k June 2024 ($20k more)
$80k June 2025 ($20k more)
$100k June 2026 ($20k more)
If you wait until June 2027 then all $100k could be redeemed without penalty
Also, the gifts for 2024, 2025, and 2026 can be gifted and redeemed in January of each of those years, you don’t have to wait until June.
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Re: iBonds
Correct on both accounts. Let me fix that.ModifiedDuration wrote: ↑Wed Jun 22, 2022 11:40 amI think you meant that the gifts are from Spouse A to Spouse B above.Statistical wrote: ↑Wed Jun 22, 2022 8:02 am
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
The same is true for Spouse A
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k June 2024 ($20k more)
$80k June 2025 ($20k more)
$100k June 2026 ($20k more)
If you wait until June 2027 then all $100k could be redeemed without penalty
Also, the gifts for 2024, 2025, and 2026 can be gifted and redeemed in January of each of those years, you don’t have to wait until June.
Re: iBonds
I don't think the last part is true. The bond has to be held for 12 months. Buying a gift in June 2022, delivering it in January 2023 is fine. Delivering and redeeming in January 2023 won't work, I don't think. The recipient would still need to wait until June 2023 to sell.ModifiedDuration wrote: ↑Wed Jun 22, 2022 11:40 amI think you meant that the gifts are from Spouse A to Spouse B above.Statistical wrote: ↑Wed Jun 22, 2022 8:02 am
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
The same is true for Spouse A
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k June 2024 ($20k more)
$80k June 2025 ($20k more)
$100k June 2026 ($20k more)
If you wait until June 2027 then all $100k could be redeemed without penalty
Also, the gifts for 2024, 2025, and 2026 can be gifted and redeemed in January of each of those years, you don’t have to wait until June.
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Re: iBonds
I just wrote above that the 2024, 2025, and 2026 gifts could be redeemed in January of each year.Tom_T wrote: ↑Wed Jun 22, 2022 12:03 pmI don't think the last part is true. The bond has to be held for 12 months. Buying a gift in June 2022, delivering it in January 2023 is fine. Delivering and redeeming in January 2023 won't work, I don't think.ModifiedDuration wrote: ↑Wed Jun 22, 2022 11:40 amI think you meant that the gifts are from Spouse A to Spouse B above.Statistical wrote: ↑Wed Jun 22, 2022 8:02 am
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
The same is true for Spouse A
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k June 2024 ($20k more)
$80k June 2025 ($20k more)
$100k June 2026 ($20k more)
If you wait until June 2027 then all $100k could be redeemed without penalty
Also, the gifts for 2024, 2025, and 2026 can be gifted and redeemed in January of each of those years, you don’t have to wait until June.
I didn’t write that the 2023 gift could be redeemed in January 2023, since I do agree with your statement that it can be gifted in January 2023 but has to be held until June 2023 to be redeemed.
Re: iBonds
Ah, yes, my mistake, apologies for not reading more closely.ModifiedDuration wrote: ↑Wed Jun 22, 2022 12:12 pmI just wrote above that the 2024, 2025, and 2026 gifts could be redeemed in January of each year.Tom_T wrote: ↑Wed Jun 22, 2022 12:03 pmI don't think the last part is true. The bond has to be held for 12 months. Buying a gift in June 2022, delivering it in January 2023 is fine. Delivering and redeeming in January 2023 won't work, I don't think.ModifiedDuration wrote: ↑Wed Jun 22, 2022 11:40 amI think you meant that the gifts are from Spouse A to Spouse B above.Statistical wrote: ↑Wed Jun 22, 2022 8:02 am
If you want to front load bonds and are married just gift them to your spouse and have your spouse gift them to you. Hypothetically say a married couple really wanted $100k worth of ibonds today. Each open a TD account. Each buys $10k for themselves. They then buy another 4 $10k bonds for each other which remain in the "gift box".
So Spouse A
$10k bond - self
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
$10k bond - gift for spouse A
The same is true for Spouse A
Each Jan 1 each spouse delivers one of the bonds to their spouses account.
So earliest redemption (w/ 3 month penalty) is
$40k June 2023
$60k June 2024 ($20k more)
$80k June 2025 ($20k more)
$100k June 2026 ($20k more)
If you wait until June 2027 then all $100k could be redeemed without penalty
Also, the gifts for 2024, 2025, and 2026 can be gifted and redeemed in January of each of those years, you don’t have to wait until June.
I didn’t write that the 2023 gift could be redeemed in January 2023, since I do agree with your statement that it can be gifted in January 2023 but has to be held until June 2023 to be redeemed.
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Is it legal to create like 20 LLCs and give each a capital contribution of $10000 and register them all with EINs and then buy 20x $10000 worth of I bonds?
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Thanks.evelynmanley wrote: ↑Wed Jun 22, 2022 12:36 amCash Out I Bonds Tax Free For College Expenses Or 529 Plan
June 16, 2022 by Harry Sit
https://thefinancebuff.com/cash-out-i-b ... -plan.html
For everyone else... No. The kids have to be over 24 when purchased to get the tax free benefit for school.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
https://thefinancebuff.com/buy-i-bonds- ... r-llc.html
>>An S-Corp or a C-Corp has a separate tax ID (“EIN”). An LLC or a sole proprietorship can have an EIN or it can use the owner’s Social Security Number as its tax ID. Which tax ID a business uses and how the business is taxed don’t change the fact the business is still a separate entity from the owner as a person.<<
https://www.upcounsel.com/how-many-llcs ... erson-have
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
LLCs can cost you a lot of fees and the fee amounts depend on the state of residence. Google LLC fees before you decide to register any LLC in your state.
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Hi All,
I am pretty sure I know the answer to this one, but wanted to run it past the folks here who have already held I Bonds through a tax year.
If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
Thanks a lot for all the great info on this thread!
I am pretty sure I know the answer to this one, but wanted to run it past the folks here who have already held I Bonds through a tax year.
If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
Thanks a lot for all the great info on this thread!
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
For clarity, you can't choose to take interest or not...dang1 wrote: ↑Thu Jun 23, 2022 9:46 pm Hi All,
I am pretty sure I know the answer to this one, but wanted to run it past the folks here who have already held I Bonds through a tax year.
If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
Thanks a lot for all the great info on this thread!
But the default (do nothing) action is to only recognize the interest when you sell (or they reach their 30 year maturity).
You can choose to recognize the interest annually, including it in your taxes...
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
And it should be noted that Treasury Direct will issue their 1099 based on their default. There is no way for them to issue a 1099 the other way. Therefore, there will be a discrepancy when you cash out or at 30 years when TD will issue a possibly giant 1099 and the interest that you report that year will be much less. It will certainly flag the IRS computer and if the discrepancy is large enough a letter will be sent questioning what happened. All of this is perfectly legal, of course, but one additional hoop.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
I Bonds Tax Treatment During Your Lifetime and After You Diedang1 wrote: ↑Thu Jun 23, 2022 9:46 pm Hi All,
I am pretty sure I know the answer to this one, but wanted to run it past the folks here who have already held I Bonds through a tax year.
If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
Thanks a lot for all the great info on this thread!
January 17, 2022 by Harry Sit
https://thefinancebuff.com/i-bonds-taxe ... fault.html
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Let me rephrase your question and see if I've understood it correctly. It seems like you're essentially asking what route for reporting interest on your tax return (annually or at maturity/redemption) involves less paperwork and tracking on your part (e.g., the "easier" route). If that is correct, then waiting to report until maturity/redemption involves less tracking on your part and is the "easier" route. You do not have to report anything annually on your taxes if you wait until maturity/redemption and the Treasury generates the appropriate 1099 paperwork for that route. The article posted above by the other responder gives a deeper explanation if you want to know more.dang1 wrote: ↑Thu Jun 23, 2022 9:46 pm If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
And I'll just add that tax-deferred until redemption or maturity is the default, so you don't have to do anything unless you want to report the interest on your taxes on an annual basis for some reason (low tax bracket, for example). If you do decide to report your interest on an annual basis on your taxes, you'll need to keep careful records, since you may get a 1099 for the entire amount of the bond's interest when you redeem it.Mudpuppy wrote: ↑Sat Jun 25, 2022 12:51 pmLet me rephrase your question and see if I've understood it correctly. It seems like you're essentially asking what route for reporting interest on your tax return (annually or at maturity/redemption) involves less paperwork and tracking on your part (e.g., the "easier" route). If that is correct, then waiting to report until maturity/redemption involves less tracking on your part and is the "easier" route. You do not have to report anything annually on your taxes if you wait until maturity/redemption and the Treasury generates the appropriate 1099 paperwork for that route. The article posted above by the other responder gives a deeper explanation if you want to know more.dang1 wrote: ↑Thu Jun 23, 2022 9:46 pm If I choose to NOT take the interest each year and instead defer it to maturity or sometime in the distant future, will I receive any type of tax form each year that I must include or notate on my 1040 tax return? Or will I basically be able to ignore the accruing interest each year without having to keep annual records of it to report to the IRS? I'm hoping it's the latter .. will make it very easy to add these to my portfolio!
Best Regards - Mel |
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Thank you very much to everyone for the great answers to my question! As always on Bogleheads, I learn more than I could imagine from the best people out there!
I-bonds - ready to take the plunge
[Thread merged into here --admin LadyGeek]
I have been researching I-bonds and I am finally ready to take the plunge. They seem great since I am keeping some money in cash, that I will need over the next couple of years. Could you please comment on the following questions?
1. Do I need to create an account thru Treasury Direct to purchase I bonds?
2. How can I pay for them? Credit Card, or by linking to my current account?
3. Is there a penalty if I cash them before 30 years?
4. What are the tax implications? Do I pay tax on interest annually, or when the bonds are cashed?
5. I understand that I can buy I bonds for my minor children. Do I need to open individual accounts for them, or can I do so through my account? If interest on the I-bonds are taxed annually (as opposed to when they ae cashed – see Q4), does this mean that my minors have to file individual tax returns?
6. Is there anything else I should be aware of?
Thank you in advance, and I greatly appreciate the collective wisdom of BHs.
I have been researching I-bonds and I am finally ready to take the plunge. They seem great since I am keeping some money in cash, that I will need over the next couple of years. Could you please comment on the following questions?
1. Do I need to create an account thru Treasury Direct to purchase I bonds?
2. How can I pay for them? Credit Card, or by linking to my current account?
3. Is there a penalty if I cash them before 30 years?
4. What are the tax implications? Do I pay tax on interest annually, or when the bonds are cashed?
5. I understand that I can buy I bonds for my minor children. Do I need to open individual accounts for them, or can I do so through my account? If interest on the I-bonds are taxed annually (as opposed to when they ae cashed – see Q4), does this mean that my minors have to file individual tax returns?
6. Is there anything else I should be aware of?
Thank you in advance, and I greatly appreciate the collective wisdom of BHs.
Re: I-bonds - ready to take the plunge
Rather than re-hashing the several I Bond threads, just go to https://thefinancebuff.com/how-to-buy-i-bonds.html
Re: I-bonds - ready to take the plunge
I would recommend starting here and coming back to us when you have any specific unanswered questions.
https://www.treasurydirect.gov/indiv/re ... ibonds.htm
https://www.treasurydirect.gov/indiv/re ... ibonds.htm
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Re: I-bonds - ready to take the plunge
and the megathread:
viewtopic.php?t=346091
viewtopic.php?t=346091
Re: I-bonds - ready to take the plunge
There is a pretty good video on YouTube:
Buying I Bonds Step by Step on Treasury Direct
https://www.youtube.com/watch?v=j6mKVVtdCCQ
Buying I Bonds Step by Step on Treasury Direct
https://www.youtube.com/watch?v=j6mKVVtdCCQ
Slow and steady wins the race.
Re: I-bonds - ready to take the plunge
1. Yessunset wrote: ↑Mon Jun 27, 2022 2:46 pm I have been researching I-bonds and I am finally ready to take the plunge. They seem great since I am keeping some money in cash, that I will need over the next couple of years. Could you please comment on the following questions?
1. Do I need to create an account thru Treasury Direct to purchase I bonds?
2. How can I pay for them? Credit Card, or by linking to my current account?
3. Is there a penalty if I cash them before 30 years?
4. What are the tax implications? Do I pay tax on interest annually, or when the bonds are cashed?
5. I understand that I can buy I bonds for my minor children. Do I need to open individual accounts for them, or can I do so through my account? If interest on the I-bonds are taxed annually (as opposed to when they ae cashed – see Q4), does this mean that my minors have to file individual tax returns?
6. Is there anything else I should be aware of?
Thank you in advance, and I greatly appreciate the collective wisdom of BHs.
2. eft (linked account)
3. No but several months of interest is forfeited if redeemed earlier than 5 years.
4. Google this or read treasurydirect
5. Explained on treasurydirect
6. Read treasurydirect and the threads on this site
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
sunset - I merged your thread into the ongoing discussion. The thread is in the Investing - Theory, News & General forum (general discussion).
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Re: I-bonds - ready to take the plunge
Others have mentioned Harry Sit's guide to purchasing I-Bonds. Here are the archives of all his excellent articles about I-Bonds, including addressing your questions about purchasing for your children and tax implications.sunset wrote: ↑Mon Jun 27, 2022 2:46 pm [Thread merged into here --admin LadyGeek]
I have been researching I-bonds and I am finally ready to take the plunge. They seem great since I am keeping some money in cash, that I will need over the next couple of years. Could you please comment on the following questions?
1. Do I need to create an account thru Treasury Direct to purchase I bonds?
2. How can I pay for them? Credit Card, or by linking to my current account?
3. Is there a penalty if I cash them before 30 years?
4. What are the tax implications? Do I pay tax on interest annually, or when the bonds are cashed?
5. I understand that I can buy I bonds for my minor children. Do I need to open individual accounts for them, or can I do so through my account? If interest on the I-bonds are taxed annually (as opposed to when they ae cashed – see Q4), does this mean that my minors have to file individual tax returns?
6. Is there anything else I should be aware of?
Thank you in advance, and I greatly appreciate the collective wisdom of BHs.
https://thefinancebuff.com/tag/i-bonds
Another thing to note is that you can't redeem the I-bonds for one year after purchase.
Re: How is Series I Bonds fixed rate determined?
Buy in late Oct. You'll get the 9.62% for the first full six months (Oct 2022 through Mar 2023) and beginning April 1 2023 you will get the Nov 1 rate reset for the next six months (April - Sept 2023).pasadena wrote: ↑Tue Jun 14, 2022 11:19 pmBuying in November means losing 6 months at 9.62%, not 4-5. I-Bonds bought today would only get the November rate in January 2023, for 6 months again.FoundingFather wrote: ↑Tue Jun 14, 2022 10:19 pmThe treasury has never released any formal rules by which I Bond fixed rates are set. On the contrary, they appear able to set the rate on a whim in order to achieve a desired effect. Mel Lindaur, one of the key figures in the boglehead community and a moderator here, has interacted with the treasury at various points regarding I Bonds and has not been able to determine much more than the above.coleperkins12 wrote: ↑Tue Jun 14, 2022 8:05 pm Along with many other investors, Series I Bonds have piqued my interest over the last few months. In November, I´m planning to allocate quite a bit of money for myself, my family members, and my businesses into I bonds - assuming, with rising interest rates, the Treasury decides to substantially raise the fixed rate on I bonds.
Does anyone have any insight into how closely the I bonds fixed rate is likely to move with the federal funds rate?
Therefore, given how great the current composite rate is on I Bonds, despite the fixed rate of 0%, now is a great time to buy I Bonds. It is unlikely that the treasury is going to raise fixed rates enough to offset losing 4-5 months at a 9% annual rate.
Founding Father
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Re: How is Series I Bonds fixed rate determined?
How is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.MikeG62 wrote: ↑Tue Jun 28, 2022 9:09 amBuy in late Oct. You'll get the 9.62% for the first full six months (Oct 2022 through Mar 2023) and beginning April 1 2023 you will get the Nov 1 rate reset for the next six months (April - Sept 2023).pasadena wrote: ↑Tue Jun 14, 2022 11:19 pmBuying in November means losing 6 months at 9.62%, not 4-5. I-Bonds bought today would only get the November rate in January 2023, for 6 months again.FoundingFather wrote: ↑Tue Jun 14, 2022 10:19 pmThe treasury has never released any formal rules by which I Bond fixed rates are set. On the contrary, they appear able to set the rate on a whim in order to achieve a desired effect. Mel Lindaur, one of the key figures in the boglehead community and a moderator here, has interacted with the treasury at various points regarding I Bonds and has not been able to determine much more than the above.coleperkins12 wrote: ↑Tue Jun 14, 2022 8:05 pm Along with many other investors, Series I Bonds have piqued my interest over the last few months. In November, I´m planning to allocate quite a bit of money for myself, my family members, and my businesses into I bonds - assuming, with rising interest rates, the Treasury decides to substantially raise the fixed rate on I bonds.
Does anyone have any insight into how closely the I bonds fixed rate is likely to move with the federal funds rate?
Therefore, given how great the current composite rate is on I Bonds, despite the fixed rate of 0%, now is a great time to buy I Bonds. It is unlikely that the treasury is going to raise fixed rates enough to offset losing 4-5 months at a 9% annual rate.
Founding Father
Re: How is Series I Bonds fixed rate determined?
Buying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 amHow is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.MikeG62 wrote: ↑Tue Jun 28, 2022 9:09 amBuy in late Oct. You'll get the 9.62% for the first full six months (Oct 2022 through Mar 2023) and beginning April 1 2023 you will get the Nov 1 rate reset for the next six months (April - Sept 2023).pasadena wrote: ↑Tue Jun 14, 2022 11:19 pmBuying in November means losing 6 months at 9.62%, not 4-5. I-Bonds bought today would only get the November rate in January 2023, for 6 months again.FoundingFather wrote: ↑Tue Jun 14, 2022 10:19 pmThe treasury has never released any formal rules by which I Bond fixed rates are set. On the contrary, they appear able to set the rate on a whim in order to achieve a desired effect. Mel Lindaur, one of the key figures in the boglehead community and a moderator here, has interacted with the treasury at various points regarding I Bonds and has not been able to determine much more than the above.coleperkins12 wrote: ↑Tue Jun 14, 2022 8:05 pm Along with many other investors, Series I Bonds have piqued my interest over the last few months. In November, I´m planning to allocate quite a bit of money for myself, my family members, and my businesses into I bonds - assuming, with rising interest rates, the Treasury decides to substantially raise the fixed rate on I bonds.
Does anyone have any insight into how closely the I bonds fixed rate is likely to move with the federal funds rate?
Therefore, given how great the current composite rate is on I Bonds, despite the fixed rate of 0%, now is a great time to buy I Bonds. It is unlikely that the treasury is going to raise fixed rates enough to offset losing 4-5 months at a 9% annual rate.
Founding Father
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Re: How is Series I Bonds fixed rate determined?
That makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 amHow is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.MikeG62 wrote: ↑Tue Jun 28, 2022 9:09 amBuy in late Oct. You'll get the 9.62% for the first full six months (Oct 2022 through Mar 2023) and beginning April 1 2023 you will get the Nov 1 rate reset for the next six months (April - Sept 2023).pasadena wrote: ↑Tue Jun 14, 2022 11:19 pmBuying in November means losing 6 months at 9.62%, not 4-5. I-Bonds bought today would only get the November rate in January 2023, for 6 months again.FoundingFather wrote: ↑Tue Jun 14, 2022 10:19 pm
The treasury has never released any formal rules by which I Bond fixed rates are set. On the contrary, they appear able to set the rate on a whim in order to achieve a desired effect. Mel Lindaur, one of the key figures in the boglehead community and a moderator here, has interacted with the treasury at various points regarding I Bonds and has not been able to determine much more than the above.
Therefore, given how great the current composite rate is on I Bonds, despite the fixed rate of 0%, now is a great time to buy I Bonds. It is unlikely that the treasury is going to raise fixed rates enough to offset losing 4-5 months at a 9% annual rate.
Founding Father
Re: How is Series I Bonds fixed rate determined?
I agree that the Nov 1 reset is very likely to be appealing/compelling.Statistical wrote: ↑Tue Jun 28, 2022 9:30 amThat makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 amHow is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.
Can you explain to me how you come out ahead by buying now vs. in Oct. I must be missing something.
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Re: How is Series I Bonds fixed rate determined?
How would you not?MikeG62 wrote: ↑Tue Jun 28, 2022 9:47 amI agree that the Nov 1 reset is very likely to be appealing/compelling.Statistical wrote: ↑Tue Jun 28, 2022 9:30 amThat makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 amHow is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.
Can you explain to me how you come out ahead by buying now vs. in Oct. I must be missing something.
In both situations you get 6 months at the current rate and then six months at whatever the Nov rate is.
So unless the Nov rate is lower than the 1.75% you are earning now then by waiting you are just making less yield after 12 months from today. If you want to compared 12 months of ibond ownership the buying now comes out ahead if the next rate change after that is >1.75% you are getting now which also seems very likely.
The only reason I could see waiting is if you aren't sure about buying an ibond at all. That in Nov if rates are below 5% you will VTI instead of an ibond. Buying now locks you in and removes the choice. Waiting till Oct lets you see the forward 12 months and decide to buy or not.
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Re: How is Series I Bonds fixed rate determined?
I think there is more to the story, beyond whatever the November rate is. Another factor is what all the rates will be for the entire time (1 year, 5 years, 30 years, whatever) you plan to hold the bond. If you think is is likely that one or more rates will be below 9.62% for some interval(s) during your holding period, then you are missing out on the higher 9.62% rate for some period by waiting. For long-term holders, say 5-30 years, I don't think inflation is going to be that high for the entire period. Just my opinion.Statistical wrote: ↑Tue Jun 28, 2022 9:54 amHow would you not?MikeG62 wrote: ↑Tue Jun 28, 2022 9:47 amI agree that the Nov 1 reset is very likely to be appealing/compelling.Statistical wrote: ↑Tue Jun 28, 2022 9:30 amThat makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 am
How is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.
Can you explain to me how you come out ahead by buying now vs. in Oct. I must be missing something.
In both situations you get 6 months at the current rate and then six months at whatever the Nov rate is.
So unless the Nov rate is lower than the 1.75% you are earning now then by waiting you are just making less yield after 12 months from today. If you want to compared 12 months of ibond ownership the buying now comes out ahead if the next rate change after that is >1.75% you are getting now which also seems very likely.
The only reason I could see waiting is if you aren't sure about buying an ibond at all. That in Nov if rates are below 5% you will VTI instead of an ibond. Buying now locks you in and removes the choice. Waiting till Oct lets you see the forward 12 months and decide to buy or not.
"Well, she was just seventeen, You Know What I Mean, and the way she looked... was way beyond compare."
Re: How is Series I Bonds fixed rate determined?
I don’t think the compare is what I would earn over the next 12 months. One has to compare the rate one would earn from being in I Bonds for the same length of time. Buying now (assuming one intends to sell their I Bonds when other fixed income alternatives are more attractive) allows you to get out four months earlier than buying in Oct. So, the compare to is what rate you’d get the first four months once you’ve redeployed the I Bond proceeds if you bought now vs. the rate you’d get over the next four months waiting till Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:54 amHow would you not?MikeG62 wrote: ↑Tue Jun 28, 2022 9:47 amI agree that the Nov 1 reset is very likely to be appealing/compelling.Statistical wrote: ↑Tue Jun 28, 2022 9:30 amThat makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 am
How is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.
Can you explain to me how you come out ahead by buying now vs. in Oct. I must be missing something.
In both situations you get 6 months at the current rate and then six months at whatever the Nov rate is.
So unless the Nov rate is lower than the 1.75% you are earning now then by waiting you are just making less yield after 12 months from today. If you want to compared 12 months of ibond ownership the buying now comes out ahead if the next rate change after that is >1.75% you are getting now which also seems very likely.
The only reason I could see waiting is if you aren't sure about buying an ibond at all. That in Nov if rates are below 5% you will VTI instead of an ibond. Buying now locks you in and removes the choice. Waiting till Oct lets you see the forward 12 months and decide to buy or not.
Is it likely to be higher than the current rates? Probably. Is it going to be so much higher that it is worth losing the optionality I retain by waiting till Oct? Not sure.
Let me give you an example, what if the Fed actions and dialog between now and Oct cause rates to spike materially. Let’s say the 10-year bond yield climbs to 5.0%. Would I want to tie up additional money in I Bonds in Oct or lock it up for 10 years at 5.0%? I’ll take the 10 year Treasury.
My plan with I Bonds is to hold them, of corse at least 12 months, until the rate reset is unappealing (as compared to other alternatives) and then wait three months and liquidate them.
My wife and I bought $10,000 each in mid April. Then it late April we each bought $20,000 into our gift boxes with the intent of delivering those to each other in Jan of 2023 and Jan of 2024. Once I see the Nov reset, I’ll decide whether we will do another set of gift box purchases for 2025 delivery.
Last edited by MikeG62 on Tue Jun 28, 2022 12:54 pm, edited 1 time in total.
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Re: How is Series I Bonds fixed rate determined?
I think there's a non zero chance the fixed rate is raised. The long term benefit of that would outweigh the lost benefit of a reduced interest rate until November.Statistical wrote: ↑Tue Jun 28, 2022 9:54 amHow would you not?MikeG62 wrote: ↑Tue Jun 28, 2022 9:47 amI agree that the Nov 1 reset is very likely to be appealing/compelling.Statistical wrote: ↑Tue Jun 28, 2022 9:30 amThat makes sense although I would say the reset whatever it is will almost certainly be higher than 1.75% so while the exact rate is unknown and buying now does have uncertainty it is very likely to come out ahead.MikeG62 wrote: ↑Tue Jun 28, 2022 9:24 amBuying today vs. in Oct does not change the fact that in either case you will get 6 months at 9.62% and then 6 months at whatever the Nov 1 rate reset is. By waiting till Oct, you will know what the Nov 1 rate reset will be (can be calculated in mid-Oct) and you can make a decision as to whether that investment makes sense or not. By buying now, you are locked in no matter what happens on Nov 1. I'd rather make the decision seeing more cards than less since there is no downside to waiting. In the meantime I can earn ~1.75% in a short-term treasury on the funds I would invest come late Oct.Statistical wrote: ↑Tue Jun 28, 2022 9:13 am
How is that better than just buying today and getting the first full six months at current rate (unless the fixed rate goes up)? You always get the first full six months at the current rate no matter when you buy. The current rate just changes on Nov 1st to some new currently unknown although very likely lower rate. Given the unprecedented 9.62% I do agree if you had or wanted to wait buying in Oct is a lot better than buying in Nov.
Can you explain to me how you come out ahead by buying now vs. in Oct. I must be missing something.
In both situations you get 6 months at the current rate and then six months at whatever the Nov rate is.
So unless the Nov rate is lower than the 1.75% you are earning now then by waiting you are just making less yield after 12 months from today. If you want to compared 12 months of ibond ownership the buying now comes out ahead if the next rate change after that is >1.75% you are getting now which also seems very likely.
The only reason I could see waiting is if you aren't sure about buying an ibond at all. That in Nov if rates are below 5% you will VTI instead of an ibond. Buying now locks you in and removes the choice. Waiting till Oct lets you see the forward 12 months and decide to buy or not.
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I Bonds via Tax Refund - are they actual physical paper?
[Merged into the ongoing "I Bonds Mega Thread" discussion by moderator oldcomputerguy]
Perhaps stupid question - if I elect to have $5,000 of my tax refund paid via I-Bonds, do I get an actual stack of paper bonds mailed to me? Just seems very antiquated.
Perhaps stupid question - if I elect to have $5,000 of my tax refund paid via I-Bonds, do I get an actual stack of paper bonds mailed to me? Just seems very antiquated.
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Re: I Bonds via Tax Refund - are they actual physical paper?
Yes. In prior years, it was several paper bonds. Some posts this year reported receiving one paper $5k bond.
Some people prefer paper bonds. If you don’t, you can mail them to TD to be converted into electronic bonds heldin your TD account. Check the I-bond mega thread or TD website for more info.
Some people prefer paper bonds. If you don’t, you can mail them to TD to be converted into electronic bonds heldin your TD account. Check the I-bond mega thread or TD website for more info.
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Re: I Bonds via Tax Refund - are they actual physical paper?
It is not antiquated at all. The option to allow a taxpayer to purchase series I Savings Bonds was part of an effort by the federal government to promote savings. If you force people (including paid or volunteer tax preparers) to go through the process of setting up TreasuryDirect accounts for small amounts, the effort would not be effective.DarkHelmetII wrote: ↑Thu Jun 30, 2022 4:16 am Perhaps stupid question - if I elect to have $5,000 of my tax refund paid via I-Bonds, do I get an actual stack of paper bonds mailed to me? Just seems very antiquated.
Re: I Bonds Mega Thread (I Bond Heads Rejoice!)
Humorous article in today's WSJ.
If Inflation Hasn’t Made You Crazy, Try Buying an I Bond
Investors give up vacation and drive hours to navigate bureaucracy; ‘cruel and unusual punishment’
https://www.wsj.com/articles/i-bonds-in ... _permalink
If Inflation Hasn’t Made You Crazy, Try Buying an I Bond
Investors give up vacation and drive hours to navigate bureaucracy; ‘cruel and unusual punishment’
https://www.wsj.com/articles/i-bonds-in ... _permalink
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Re: I Bonds via Tax Refund - are they actual physical paper?
good info here:DarkHelmetII wrote: ↑Thu Jun 30, 2022 4:16 am Perhaps stupid question - if I elect to have $5,000 of my tax refund paid via I-Bonds, do I get an actual stack of paper bonds mailed to me? Just seems very antiquated.
>>Overpay Your Taxes to Buy $5,000 in I Bonds
January 11, 2022 by Harry Sit
https://thefinancebuff.com/overpay-taxe ... -tips.html
>>How To Deposit Paper I Bonds to TreasuryDirect Online Account
September 29, 2021 by Harry Sit
https://thefinancebuff.com/how-to-depos ... count.html
Archives: https://thefinancebuff.com/tag/i-bonds
Re: I Bonds via Tax Refund - are they actual physical paper?
Yes. I received two $1000 paper bonds from my return. Mailed them to TD and they were converted within a couple of weeks. One of the few things that has been pretty easy with TD. Much easier than a 2hr47min phone hold just to have an account unlocked.
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T-Bonds “I”
[Thread merged into here --admin LadyGeek]
Hello all.
Is now the time to purchase treasury bonds-I Bonds? Opinions please.
Hello all.
Is now the time to purchase treasury bonds-I Bonds? Opinions please.