I Bonds Mega Thread (I Bond Heads Rejoice!)

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

Post by an_asker »

billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
ModifiedDuration
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by ModifiedDuration »

an_asker wrote: Fri Aug 05, 2022 10:59 am
billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made? No, the gifts will just sit in your gift box until you gift them in a future year

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]. Current value (the $10k purchase amount). You buy a $10k gift now and can deliver that in a future year. You don’t have to worry about the accrued interest when delivering the gift

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right? You can buy as much as you want as gifts, but you would be subject to the $10k delivery limit each year. For example, you could buy your wife 15 $10k gifts right now, but it would take you 15 years to deliver them (and you would have no liquidity for these gifts for all those years).
Last edited by ModifiedDuration on Fri Aug 05, 2022 11:14 am, edited 1 time in total.
SnowBog
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SnowBog »

an_asker wrote: Fri Aug 05, 2022 10:59 am
billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
You don't pick the date in advance. But at some point in the future you'll choose to "deliver" a bond as a gift. As a reminder, you can only "purchase" or "receive" (as a gift) $10k in I Bonds.

That $10k is "purchased value". Let's say you buy a $10k bond for spouse today that is worth $11k next year. You can gift the entire $11k bond (which for this limit is treated as a $10k bond - as that was the original purchase price).

Two bonds of the same purchase value bought in the same month will be worth the same amount at all points in the future (until sold).

Each person can purchase (or receive as gift) their own $10k I Bond per year, for a family of 4, that's up to $40k/year.

You can also get up to $5k from tax refund.

And if you have trusts (like living trusts) and/or businesses, those could have their own accounts and each purchase up to $10k more.

As for the "gifts", that's only an option between people (can't be done in trust or business accounts). There's technically no limit to how much you can purchase in gifts. But remember, you can only deliver one $10k bond a year (and only if they don't purchase one that year). So if you bought 4 - $10k bonds as a gift for your spouse (and she did same), assuming you don't buy any others, you could deliver the first "gift" in 2023 (assuming you already bought your own bonds for 2022), the next in 2024, and the last not until 2026. So in essence, you are just "front loading" purchases that you might have otherwise made in the future. But you've locked up those funds in advance, potentially for multiple years (but earning interest and running out the 1- and 5- year clocks from the purchase date).

Back to buying for the kids, recommend reading this which talks about the "should you" side of things: https://thefinancebuff.com/buy-i-bonds-kids-name.html
an_asker
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Re: Clarification on iBond Interest Rates

Post by an_asker »

samsoes wrote: Sat Jul 02, 2022 5:12 pm
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
Correct on all counts.
To be precise, the interest collected would be 4.81% (9.62% annualized), no? When they say annualized in this situation, do they mean compounded every six months - in other words, would the six-months interest be less than 4.81%?
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samsoes
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Re: Clarification on iBond Interest Rates

Post by samsoes »

an_asker wrote: Fri Aug 05, 2022 3:22 pm
samsoes wrote: Sat Jul 02, 2022 5:12 pm
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
Correct on all counts.
To be precise, the interest collected would be 4.81% (9.62% annualized), no? When they say annualized in this situation, do they mean compounded every six months - in other words, would the six-months interest be less than 4.81%?
Interest accrues at 9.62% for the first six months. Please check out https://eyebonds.info/ibonds/10000/ib_2022_08.html for precise amounts. (Please note that this site does not take into account the three month interest lag during the first five years of the life of the bond.)
(https://eyebonds.info/ibonds/home10000.html for historical rates and values.)
Last edited by samsoes on Fri Aug 05, 2022 3:29 pm, edited 2 times in total.
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an_asker
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Series I savngs bond (aka ibond) question

Post by an_asker »

[Thread merged into here --admin LadyGeek]

Let's assume I have 10k saved up right now sitting in the best money market account (let's say that is Vanguard at approx 2.00% maybe). Today of course, at 9.6% annualized, the iBond beats Vanguard money market hands down.

My hypothetical question: if I don't need this money for the near future (let's say five years), is it guaranteed - the way they are set up - that the iBond return will beat the best money market account each month of the future? Or is it possible that some months they could yield less than Vanguard money market (for example)?
LookinAround
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Re: Clarification on iBond Interest Rates

Post by LookinAround »

an_asker wrote: Fri Aug 05, 2022 3:22 pm
samsoes wrote: Sat Jul 02, 2022 5:12 pm
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
Correct on all counts.
To be precise, the interest collected would be 4.81% (9.62% annualized), no? When they say annualized in this situation, do they mean compounded every six months - in other words, would the six-months interest be less than 4.81%?
> Yes, TD publishes the annualized rate
> Yes, ibonds are compounded every 6 months

"The interest is compounded semiannually. Every six months from the bond's issue date, interest the bond earned in the six previous months is added to the bond's principal value, creating a new principal value. Interest is then earned on the new principal."
toddthebod
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Re: Series I savngs bond (aka ibond) question

Post by toddthebod »

The I bond you buy today could theoretically earn 0% starting 6 months from now. More realistically, since you'll get 9.62% for six months and a decent return for the six months after that, after a year you could realistically be earning less than a money market account if inflation returns to historical levels, interest rates remain about where they are, and Treasury doesn't start adding a fixed rate onto the inflation-adjusted rate for the I bond. But you can just redeem your I bonds at that point and move the cash in an afternoon.
an_asker
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Re: Clarification on iBond Interest Rates

Post by an_asker »

samsoes wrote: Fri Aug 05, 2022 3:27 pm
an_asker wrote: Fri Aug 05, 2022 3:22 pm
samsoes wrote: Sat Jul 02, 2022 5:12 pm
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
Correct on all counts.
To be precise, the interest collected would be 4.81% (9.62% annualized), no? When they say annualized in this situation, do they mean compounded every six months - in other words, would the six-months interest be less than 4.81%?
Interest accrues at 9.62% for the first six months. Please check out https://eyebonds.info/ibonds/10000/ib_2022_08.html for precise amounts. (Please note that this site does not take into account the three month interest lag during the first five years of the life of the bond.)
(https://eyebonds.info/ibonds/home10000.html for historical rates and values.)
Thanks for the links. Those explains it perfectly!
an_asker
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Re: Clarification on iBond Interest Rates

Post by an_asker »

LookinAround wrote: Fri Aug 05, 2022 3:28 pm [...]
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
[...]
> Yes, TD publishes the annualized rate
> Yes, ibonds are compounded every 6 months

"The interest is compounded semiannually. Every six months from the bond's issue date, interest the bond earned in the six previous months is added to the bond's principal value, creating a new principal value. Interest is then earned on the new principal."
Thanks!

I just wanted to make sure you understood how it worked, because I interpreted what you wrote to mean that (you thought) a $100 investment in an iBond would become $109.62 in six months!
collects 9.62% interest for the first six months
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Ice-9
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Re: Series I savngs bond (aka ibond) question

Post by Ice-9 »

Assuming you have a Treasury Direct account already set up, purchasing an I-Bond today (8/5/22) would:

1. earn the current 9.62% (0% fixed rate plugged into the formula with inflation) for the first six months
2. earn at a new rate for the following six months (same 0% plugged into the same formula with new inflation numbers), my guess is this will also be quite high compared to a savings account, but theoretically it could be as low as 0%
3. You would be able to withdraw the invested money as of the one-year mark on Aug 1, 2023 (all bonds purchased in August get that date) with a penalty of the most recent three months' interest. Your actual earned rate after penalty would increase closer to the official rate the longer you hold it
4. As of Aug 1, 2027, you would reach the five-year mark, and there would be no penalty for withdrawal

My personal experience is usually I-Bonds have at least a slight rate advantage over online savings accounts. But when that doesn't happen, the most current I-Bonds will likely have a better fixed rate, so hopefully at that time you will be able to redeem your lesser fixed rate I-bonds and reinvest up to the $10k annual max. Your mileage may vary.
Last edited by Ice-9 on Fri Aug 05, 2022 3:40 pm, edited 1 time in total.
dboeger1
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Re: Series I savngs bond (aka ibond) question

Post by dboeger1 »

toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
toddthebod
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Re: Series I savngs bond (aka ibond) question

Post by toddthebod »

dboeger1 wrote: Fri Aug 05, 2022 3:39 pm
toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
The absolute worst-case returns for $10,000 in I bonds bought today is on 8/1/2023 you redeem them for $10,481, and you pay Federal taxes on the $481 in interest which would bring your investment return down to somewhere in the 3-4% range which is still better than any high-yield savings account, Treasury bill, or CD out there.
LookinAround
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Re: Clarification on iBond Interest Rates

Post by LookinAround »

an_asker wrote: Fri Aug 05, 2022 3:34 pm I just wanted to make sure you understood how it worked, because I interpreted what you wrote to mean that (you thought) a $100 investment in an iBond would become $109.62 in six months!
collects 9.62% interest for the first six months
Thanks for taking the time double check :sharebeer
dbr
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Re: Clarification on iBond Interest Rates

Post by dbr »

an_asker wrote: Fri Aug 05, 2022 3:34 pm
LookinAround wrote: Fri Aug 05, 2022 3:28 pm [...]
LookinAround wrote: Sat Jul 02, 2022 5:10 pm iBonds are paying 9.62% through October 22. I do understand this correctly?

If I were to buy an iBond on Sept 15, 2022 am i correct
  1. That iBond collects interest as though it was purchased Sept 1, 2022
  2. The iBond bought in Sept collects 9.62% interest for the first six months (i.e. all of Sep 2022 to Feb 2023) even though there was a rate change in November 2022
  3. Come Mar 2023, the iBond interest rate changes to the rate set back in November 2022. And that rate continues for the next 6 months again? etc
[...]
> Yes, TD publishes the annualized rate
> Yes, ibonds are compounded every 6 months

"The interest is compounded semiannually. Every six months from the bond's issue date, interest the bond earned in the six previous months is added to the bond's principal value, creating a new principal value. Interest is then earned on the new principal."
Thanks!

I just wanted to make sure you understood how it worked, because I interpreted what you wrote to mean that (you thought) a $100 investment in an iBond would become $109.62 in six months!
collects 9.62% interest for the first six months
Sometimes it is helpful for investors to remember that interest is a rate (aka a fraction) relative to the principal on which it is earned and also a rate in time. 9.62% is 9.62% gained on the principal if gained over a year, so it should be expressed as dollars/dollar/year. In fact the deal is to pay at a rate of 9.62%/year for half a year resulting in $ 104.81and then compound that for another half a year at whatever the new rate is.

The one situation I can think of where returns are not rated over time is in year to date return which is simply the gain relative to the amount at year beginning. All other returns are often rated to time units of one year. The other issue is what compounding model to use. I bonds are compounded semi-annually. The usual quotes for returns are compounded annually as in Compound ANNUAL Growth Rate. Saving accounts might be compounded daily. It is possible to compound continuously: https://www.carboncollective.co/sustain ... tems...%20
vtMaps
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Re: Clarification on iBond Interest Rates

Post by vtMaps »

mary1492 wrote: Mon Jul 04, 2022 9:29 am If you wait until mid-October to buy, then you will not be allowed to get any funds back until mid-October 2023.
That's not exactly correct. If you buy anytime in October 2022, you may cash out on October 1, 2023. --vtMaps
"Truly, whoever can make you believe absurdities can make you commit atrocities" --Voltaire, as translated by Norman Lewis Torrey
exodusNH
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Re: Clarification on iBond Interest Rates

Post by exodusNH »

vtMaps wrote: Fri Aug 05, 2022 3:50 pm
mary1492 wrote: Mon Jul 04, 2022 9:29 am If you wait until mid-October to buy, then you will not be allowed to get any funds back until mid-October 2023.
That's not exactly correct. If you buy anytime in October 2022, you may cash out on October 1, 2023. --vtMaps
Correct. The Treasury back-dates all transactions to the first of the month.
dbr
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Re: Series I savngs bond (aka ibond) question

Post by dbr »

dboeger1 wrote: Fri Aug 05, 2022 3:39 pm
toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
You are right. There is a lot of confusion between I bonds being currently a short term windfall and what the advantages of I bonds would be for the long term. The issue is exacerbated by the purchase limits. The bonds are actually meant to be long term holdings rather than short term gimmicks, but times are extreme right now. That is consistent with the purchase limits, the 3 monthy interest penalty, the one year holding requirement, and the 30 year tax deferral. The best strategy if one had seen it coming for cashing in on the windfall would have been a couple of decades of accumulating I bonds. The opportunity to form trusts and to fill gift boxes is an odd provision, but this is the Federal Government here.

One description that might be offered is that I bonds are the cash of real return assets, meaning the real return is zero, but the value is stable after inflation. If you can get a percent or two on the fixed rate that is like finding a 30 year CD that pays a percent or so in interest. There are real asset bonds, which are TIPS. The real rate for TIPS can be positive and it can be negative and as with any marketable bond there is term risk. It would be reasonable to expect the real rate to average positive but it can also not be for some times.
er999
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Re: Series I savngs bond (aka ibond) question

Post by er999 »

After 1 year you could always cash out your I bonds and change to a saving account if they end up paying better than.
mary1492
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Re: Clarification on iBond Interest Rates

Post by mary1492 »

.....
Last edited by mary1492 on Thu Sep 29, 2022 11:36 am, edited 1 time in total.
exodusNH
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Re: Clarification on iBond Interest Rates

Post by exodusNH »

mary1492 wrote: Fri Aug 05, 2022 5:40 pm
exodusNH wrote: Fri Aug 05, 2022 3:55 pm
vtMaps wrote: Fri Aug 05, 2022 3:50 pm
mary1492 wrote: Mon Jul 04, 2022 9:29 am If you wait until mid-October to buy, then you will not be allowed to get any funds back until mid-October 2023.
That's not exactly correct. If you buy anytime in October 2022, you may cash out on October 1, 2023. --vtMaps
Correct. The Treasury back-dates all transactions to the first of the month.
Point taken. However, I believe the bigger point was purchasing now (when post was made) versus waiting several months until just before the next rate reset.
Counterpoint taken! I don't see a real downside to buying now and enjoying the extra interest as long as the 12 month hold is not inconvenient.

From what I've read around here, the November rate will be lower than 9.62%, but still very high.
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Re: Clarification on iBond Interest Rates

Post by ModifiedDuration »

Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
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Re: Clarification on iBond Interest Rates

Post by anon_investor »

ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The better question is whether Nov I Bonds will have a fixed rate above 0%!
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Re: Clarification on iBond Interest Rates

Post by squirrel1963 »

anon_investor wrote: Fri Aug 05, 2022 6:51 pm
ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The better question is whether Nov I Bonds will have a fixed rate above 0%!
Who knows, but if they do I'll be very upset because I front loaded 50k for DW in the gift box and she did the same for me.
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anon_investor
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Re: Clarification on iBond Interest Rates

Post by anon_investor »

squirrel1963 wrote: Fri Aug 05, 2022 7:00 pm
anon_investor wrote: Fri Aug 05, 2022 6:51 pm
ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The better question is whether Nov I Bonds will have a fixed rate above 0%!
Who knows, but if they do I'll be very upset because I front loaded 50k for DW in the gift box and she did the same for me.
:shock: what will you do when if the variable rate drops to 0%?
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Re: Clarification on iBond Interest Rates

Post by squirrel1963 »

anon_investor wrote: Fri Aug 05, 2022 7:04 pm
squirrel1963 wrote: Fri Aug 05, 2022 7:00 pm
anon_investor wrote: Fri Aug 05, 2022 6:51 pm
ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The better question is whether Nov I Bonds will have a fixed rate above 0%!
Who knows, but if they do I'll be very upset because I front loaded 50k for DW in the gift box and she did the same for me.
:shock: what will you do when if the variable rate drops to 0%?
I'll still be happy because we would have bought 50k each worth of I-bonds in the next 5 years. I think front loading only really works if that's the intent.
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Re: Clarification on iBond Interest Rates

Post by exodusNH »

anon_investor wrote: Fri Aug 05, 2022 6:51 pm
ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The better question is whether Nov I Bonds will have a fixed rate above 0%!
There is no chance of that. Demand is too high.
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Re: Clarification on iBond Interest Rates

Post by spencer99 »

makingmistakes wrote: Mon Jul 04, 2022 5:34 pm
Silk McCue wrote: Mon Jul 04, 2022 5:30 pm
makingmistakes wrote: Mon Jul 04, 2022 5:17 pm
There was no indication from the OP why he might wait. You assumed he could buy now. My reply was to indicate that the OP, or others, could be like me and have to wait.

So I was trying to convey that the information provided by others as to what happens when wait was welcome, at least to me.
I understand. However the OP covered that in their response to me Sunday morning.

viewtopic.php?p=6757472#p6757472

Cheers
Ok, sorry for butting in then!!
Makingmistakes,

I understood perfectly that your comment was intended for the general discussion and not a specific response to a specific post. Thank you for making this point - it helped my understanding and isn't that why we are all here?

S
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Treasury direct I bonds and interest

Post by Xrayman69 »

[Thread merged into here --admin LadyGeek]

I purchased some I bonds in December 2021, January 2022 and April 2022. Wondering how and when is interest paid and the value of the interest included in the total value of the account or where is it visible in the website.

Thanks
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Re: Treasury direct I bonds and interest

Post by Yoshida26 »

Hello (edited)

From the front page, click on the blue link that says Saving Bonds on the bottom of the page, then click on the radial button on the bottom of the page that says I bonds and submit. That will show you the interest on each bond.

The interest is added at the beginning of each month once the bond turns 4 months old. The most recent 3-months is considered "forfeited" until the bond turns 5 years old.

My April bonds got their first interest added 1 Aug. My May bonds will get their first interest 1 Sep.
Last edited by Yoshida26 on Sat Aug 06, 2022 8:58 am, edited 1 time in total.
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Re: Clarification on iBond Interest Rates

Post by MikeG62 »

ModifiedDuration wrote: Fri Aug 05, 2022 6:12 pm Depending on what inflation is in July, August, and September, the next reset rate could be higher than 9.62%. The first 3 months of the next period (April, May, and June) were running at a 12% rate.

Next Wednesday we will have a better picture, as then we will have July’s number and be 4 months into the 6 month period.
The next rate reset will not depend on what the inflation rate is in July or August. It will depend on the CPI-U for the "month of" September 2022 compared to the CPI-U for the "month of" March 2022. That is it. Just two data points.

If we look at the June 2022 CPI-U (296.311) compared to the March 2022 CPI-U (287.504) and IF we assume that prices remained flat from June through Sept, the next I Bond reset would be 6.13%. Some (probably most) would argue that is the floor rate for the Nov reset. However, because the rate will depend on the CPI-U in the month of Sept, there is really no way to know. Keep in mind many commodities have rolled over in the last 30 days. That rolling over has not made its way into the reported CPI-U figures yet (but it will). Odds are the reset will be higher than 6.13% (I am personally guessing mid-7% area), but we don't know. If there is some sort of anomaly in Sept, that could skew the results (one way or the other).

I don't like the way it's done. I'd rather they used the average CPI-U for the six months ended Sept 2022 vs. the six months ended Sept 2021 (to smooth out any one-off items), but they don't.
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Re: Series I savngs bond (aka ibond) question

Post by MikeG62 »

er999 wrote: Fri Aug 05, 2022 4:33 pm After 1 year you could always cash out your I bonds and change to a saving account if they end up paying better than.
I would modify that to say after 15 months since the interest in the first 12 months (and even the second 6 months) is very likely to be much higher than anything you can get in any other guaranteed fixed income investment. If the rate drops below other guaranteed fixed income options in the 13th month, hold the bonds to the first day of the 16th month and cash them out. You would then only lose 3 months at that lower/less attractive interest rate.
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Re: Treasury direct I bonds and interest

Post by z06ray »

Yoshida26 wrote: Sat Aug 06, 2022 8:32 am Hello

From the front page, click on the blue link that says Saving Bonds on the bottom of the page, then click on the radial button on the bottom of the page that says I bonds and submit. That will show you the interest on each bond.

The interest is added at the beginning of each month once the bond turns 4 months old. The first 3-months is considered "forfeited" until the bond turns 5 years old.

My April bonds got their first interest added 1 Aug. My May bonds will get their first interest 1 Sep.
Thanks for this, I've been curious. Is it the first 3 months that's forfeited or the most recent 3 months?
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Need help with Treasury Direct and ibond

Post by gavinsiu »

[Thread merged into here --admin LadyGeek]

So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?
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Re: Need help with Treasury Direct and ibond

Post by dbr »

I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off. I agree that the alarms about dealing with Treasury Direct are excessive, but I bonds are really meant to be a long term accumulation of what amounts to real return cash, meaning to be compensated for inflation at no risk to the principal but also at essentially zero real return. That can be a valuable asset to hold in a portfolio or to hold for an emergency fund. If this is to be all you do at TD, I am not sure it is worth it. If you use the account to build a holding of I bonds or to hold individual TIPS and Treasuries it makes sense.
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Re: Treasury direct I bonds and interest

Post by Yoshida26 »

z06ray wrote: Sat Aug 06, 2022 8:43 am
Yoshida26 wrote: Sat Aug 06, 2022 8:32 am Hello

From the front page, click on the blue link that says Saving Bonds on the bottom of the page, then click on the radial button on the bottom of the page that says I bonds and submit. That will show you the interest on each bond.

The interest is added at the beginning of each month once the bond turns 4 months old. The first 3-months is considered "forfeited" until the bond turns 5 years old.

My April bonds got their first interest added 1 Aug. My May bonds will get their first interest 1 Sep.
Thanks for this, I've been curious. Is it the first 3 months that's forfeited or the most recent 3 months?
Yes, you are correct, it is the three months of most recent interest. So right now would not be a good time to cash in.
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Factors that determine the fixed interest rate on an I-Bond

Post by WarAdmiral »

The current fixed interest on an I-bond is 0%.
What factors determine this interest rate ? Is there a official number that the government follows or is it based on auction (supply/demand) system?
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Re: Factors that determine the fixed interest rate on an I-Bond

Post by Rob5TCP »

This has been discussed before. Apparently, the Gov decides what the base rate is
going to be. For quite awhile, it has been zero. I guess, if they want to sell more,
they will raise the rate. If they don't they won't. It seems to be that simple.
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Re: Need help with Treasury Direct and ibond

Post by Gaston »

dbr wrote: Sat Aug 06, 2022 8:53 am I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off ... I bonds are really meant to be a long term accumulation of what amounts to real return cash.
Thank you for saying this. I bonds are great if you're accumulating year after year and building up a sizable holding. But as you say, doing a one-off is more nuisance than value.
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Re: Factors that determine the fixed interest rate on an I-Bond

Post by WarAdmiral »

I see - so with inflation this high i don't see the need for the govt to raise this rate.
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Re: Factors that determine the fixed interest rate on an I-Bond

Post by retired@50 »

WarAdmiral wrote: Sat Aug 06, 2022 8:58 am The current fixed interest on an I-bond is 0%.
What factors determine this interest rate ? Is there a official number that the government follows or is it based on auction (supply/demand) system?
It sounds more like the latter (supply/demand) but here is what the Treasury Direct website states...
Treasury Direct wrote: Fixed rate

You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.

Treasury announces the fixed rate for I bonds every six months (on the first business day in May and on the first business day in November). The fixed rate then applies to all I bonds issued during the next six months.

The fixed rate is an annual rate.
Source: https://www.treasurydirect.gov/indiv/re ... dterms.htm

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Re: Need help with Treasury Direct and ibond

Post by gavinsiu »

dbr wrote: Sat Aug 06, 2022 8:53 am I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off. I agree that the alarms about dealing with Treasury Direct are excessive, but I bonds are really meant to be a long term accumulation of what amounts to real return cash, meaning to be compensated for inflation at no risk to the principal but also at essentially zero real return. That can be a valuable asset to hold in a portfolio or to hold for an emergency fund. If this is to be all you do at TD, I am not sure it is worth it. If you use the account to build a holding of I bonds or to hold individual TIPS and Treasuries it makes sense.
Actually 1/2 of my bond portion is already in TIPS mutual fund, it's currently about 15% of my portfolio. I acquire this position a few years back before the inflation spike.

I received some extra cash recently. I have earmarked some for my kids 529, and planned to put the rest toward my mortgage. However, I was thinking of holding on to a bit more cash for now in case the recession puts me out of work for a bit, so I am looking into some short term cash positions. I was thinking I could just put some of that money into ibonds for now. In the long term, it can evolved into more of my bond position and I can readjust my portfolio accordingly or I could redeem it and use it toward mortgage. Currently, the mortgage appears to be around 2.6% fixed.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Flyer24 »

Topics have been merged.
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Re: Need help with Treasury Direct and ibond

Post by ModifiedDuration »

gavinsiu wrote: Sat Aug 06, 2022 8:49 am So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?

The ability to gift I Bonds to a spouse might be considered relevant.

One can buy $10k now for themselves and have their spouse buy two $10k gifts for them, to be delivered in January 2023 and in January 2024.

Now, between you and your spouse, you would have a total of $60k invested at the current rate of 9.62% for 6 months and what looks like will be a pretty rich rate for the next 6 months.

You could even consider gifting another $20k for delivery in January 2025.

The drawback in gifting I Bonds is the loss of liquidity.

This explains gifting of I Bonds:

https://thefinancebuff.com/buy-i-bonds- ... x-form-709

By the way, any I Bonds purchased in August will be dated as of August 1 and will begin earning interest as of that date.
Last edited by ModifiedDuration on Sat Aug 06, 2022 9:52 am, edited 2 times in total.
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Re: Need help with Treasury Direct and ibond

Post by dbr »

Gifting and organizing trusts is a way to pile a lot of money into I bonds at one time. It is very odd that such an end run is actually available, but it is true. Again, if a person really wants a stash of I bonds you can do the gifting.

The drawback is that the bonds can't actually be delivered into the recipient accounts except year by year for several years. That means you are locked into nominal returns that equal inflation, which could fall a lot. You want to be clear why you want assets in I bonds.
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Re: Need help with Treasury Direct and ibond

Post by samsoes »

gavinsiu wrote: Sat Aug 06, 2022 8:49 am So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?
You can buy I-bonds right now. It will be processed on Monday, and will be dated August 1.

Yes, $10k limit per person via Treasury Direct in separate TD accounts (can use the same joint checking account to purchase and redeem bonds), and a flat $5k per tax return even if you are filing jointly.

Please don't pay much attention to the folks who say the low I-bond limit per couple ($25k) is too much of a hassle and not worth the effort. Some of these same folks will engage in amazing gymnastics to execute backdoor Roth conversions to capture Roth's $6k per person limit.
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Re: Need help with Treasury Direct and ibond

Post by OhioGozaimas »

The $5k (maximum) of tax refund is per tax return.

The $5k goes go on Line 4 of Form 8888.

Instructions for Line 4: Enter the portion of your refund you want to use to buy bonds for yourself (and your spouse, if filing jointly). These bonds will be registered in the name(s) shown on your return.

https://www.irs.gov/pub/irs-pdf/f8888.pdf
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Re: Need help with Treasury Direct and ibond

Post by LadyGeek »

I merged gavinsiu's thread into the ongoing discussion.
gavinsiu wrote: Sat Aug 06, 2022 8:49 am So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?
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Re: Need help with Treasury Direct and ibond

Post by evelynmanley »

gavinsiu wrote: Sat Aug 06, 2022 8:49 am [Thread merged into here --admin LadyGeek]

So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?
Harry Sit's articles are a great way to learn about I-Bonds:

https://thefinancebuff.com/how-to-buy-i-bonds.html

about gifting:

https://thefinancebuff.com/buy-i-bonds-as-gift.html

about $5k by overpaying taxes:

https://thefinancebuff.com/overpay-taxe ... -tips.html

All of the articles:

https://thefinancebuff.com/tag/i-bonds
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Re: Series I savngs bond (aka ibond) question

Post by Flobes »

an_asker wrote: Fri Aug 05, 2022 3:27 pm ...is it guaranteed - the way they are set up - that the iBond return will beat the best money market account each month of the future?
Guaranteed: No. Probable: Yes.
an_asker wrote: Fri Aug 05, 2022 3:27 pm Or is it possible that some months they could yield less than Vanguard money market (for example)?
Possible: Yes, but unlikely.
an_asker wrote: Fri Aug 05, 2022 3:27 pm Today... the iBond beats Vanguard money market hands down.
Remember that that federal taxes on IBonds interest can be delayed for up to 30 years; you choose which year you want to pay the taxes. And IBond interest is free from state taxes. Meanwhile, taxes on dividends from money market are due year that are issued.
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