I-bonds

[Kevin Slater]

The WSJ reports that based on today's CPI numbers, I-bonds purchased from May through October 2022 will pay 9.6% interest (up from the current already generous 7.12%).  One can purchase up to $10k via TreasuryDirect.gov, plus up to an additional $5k if she chooses to receive a tax refund in the form of a paper I-bond. 

Kevin Slater

[cany10011]

Thanks Kevin. I've never heard about buying it on treasurydirect... seems legit. Appreciate the helpful info. 

[BeamerBikes]

1 hour ago, cany10011 said:

Thanks Kevin. I've never heard about buying it on treasurydirect... seems legit. Appreciate the helpful info. 

TreasuryDirect.gov is the only way to buy I bonds unless you can go the Tax refund route for paper bonds.  For I bonds, they only issue them electronically through TreasuryDirect.gov or paper based through tax returns.  

Important to note that the I bonds are a variable + fixed rate.  The variable rate adjusts every 6 months.  There may come a time in the coming years where it makes sense to cash in the bonds issued this year when the fixed rate exceeds the inflation rate.  There's no penalty after 5 years.  The 1 year to 5 year penalty is forfeiting the last 3 months interest. 

[handiacefailure]

I just my third $10K one today actually thanks to Suze Orman's show Sunday.

I love the woman and money (and men smart enough to listen) Suze Orman and her wife do twice a week  She talked about them last year and I bought a $10K one.   They are secured and a thirty year bond but it's only one year that you can't touch them.   Can't remember if it's years one to five you forfeit three months of interest and after year five can cash them out anytime.   The really nice thing is you don't pay state tax on them and if you use them for education purposes the year you cash them out you don't pay federal tax on the interest so great for parents.

If you are thinking of buying them, listen to Suze's podcast from Sunday.   She did an entire show on them and something I learned was that if you have a living trust you can buy another $10k in the trust name every year even if the trust doesn't have it's own ID.

Thanks to her podcast I was able to buy another $10K bond by setting up my trust with a second account.   I didn't think I could do it since I don't have a separate EIN for my trust.   

 

 

[handiacefailure]

On 4/12/2022 at 6:46 PM, BeamerBikes said:

TreasuryDirect.gov is the only way to buy I bonds unless you can go the Tax refund route for paper bonds.  For I bonds, they only issue them electronically through TreasuryDirect.gov or paper based through tax returns.  

Important to note that the I bonds are a variable + fixed rate.  The variable rate adjusts every 6 months.  There may come a time in the coming years where it makes sense to cash in the bonds issued this year when the fixed rate exceeds the inflation rate.  There's no penalty after 5 years.  The 1 year to 5 year penalty is forfeiting the last 3 months interest. 

And the fixed rate right now is zero.   Suze orman said she has some that have a fixed rate of 7.5 percent from years ago but apparently they can still pay nothing in some years.   

[+ FrankR]

48 minutes ago, handiacefailure said:

And the fixed rate right now is zero.   Suze orman said she has some that have a fixed rate of 7.5 percent from years ago but apparently they can still pay nothing in some years.   

I havent heard much from Suze Orman since she stopped her show on CNBC. Didnt realize she has a podcast… 🤔

[handiacefailure]

46 minutes ago, FrankR said:

I havent heard much from Suze Orman since she stopped her show on CNBC. Didnt realize she has a podcast… 🤔

I loved her "can I afford it segment from that show.   Sometimes she'll be on the Today show for a few minutes and will do a Can I afford it segment with a few callers.   Always love to try to guess if she approves or deny them:)

Her and her wife do a podcast on Thursday and Sunday's.   I love how the two will bicker and joke around.   The one on Ibonds Sunday was very interesting.   Thanks to her podcast I was able to buy another Ibond;)

[Kevin Slater]

1 hour ago, handiacefailure said:

And the fixed rate right now is zero.   Suze orman said she has some that have a fixed rate of 7.5 percent from years ago but apparently they can still pay nothing in some years.   

The inflation rate would have to be -7.5% to wipe out the fixed 7.5% rate.  Highly unlikely.

Kevin Slater

[BeamerBikes]

2 hours ago, handiacefailure said:

And the fixed rate right now is zero.   Suze orman said she has some that have a fixed rate of 7.5 percent from years ago but apparently they can still pay nothing in some years.   

Yeah, the I bonds best fixed rate was around 3.5% from the mid to late 90s.  She may be referring to EE bonds for those high fixed rates.  

With I bonds, As long as the fixed rate is something and inflation doesn't reverse, it should pay something in any given year.  In the future, it may make sense to trade up to a higher fixed rate from zero.  

I'm viewing these as my future booze and stripper money in my 60s.  I will have my retirement acct and savings.  Viewing the bonds as the ultimate oh shit fund. By my 60s, I won't be able to take it with me so might as well put the money to work for my entertainment. 

[BeamerBikes]

24 minutes ago, BeamerBikes said:

I'm viewing these as my future booze and stripper money

Reference The Grand Budapest Hotel - Whatever we don't spend on Whiskey and Whores all shall be yours.  

[MscleLovr]

I’ve always had some money in TIPS (Treasury inflation-protected bonds). And over the years, I found a few quoted equities that had inflation-proof characteristics.
 

I view the money invested this way as my ultimate “rainy day” fund. As my grandfather memorably said to me: “You never want to wake up poor one morning”.

 

[DannyVento]

Hi. It's very useful to me. I have some I-bods.

[+ augustus]

Yes they are a "good" deal right now, but we must remember it only matches the inflation rate (the fixed rate is 0).  Pretty sad commentary on our times that there is no real return, but at least it maintains your purchasing power.  You used to be able to buy 30K a year with savings bonds.

[BeamerBikes]

11 hours ago, augustus said:

Yes they are a "good" deal right now, but we must remember it only matches the inflation rate (the fixed rate is 0).  Pretty sad commentary on our times that there is no real return, but at least it maintains your purchasing power.  You used to be able to buy 30K a year with savings bonds.

I'll take standing still in I-bonds than going backwards without knowing it in a "savings"/CD/money market acct.  I have to remind myself "when in doubt, zoom out" for the S&P.  I'll admit waking up broke scares the bejesus out of me.  The I bonds are replacing the emergency (last resort oh shit) reserves that were previously parked elsewhere. 

[Kevin Slater]

3 hours ago, BeamerBikes said:

I'll take standing still in I-bonds than going backwards without knowing it in a "savings"/CD/money market acct.  I have to remind myself "when in doubt, zoom out" for the S&P.  I'll admit waking up broke scares the bejesus out of me.  The I bonds are replacing the emergency (last resort oh shit) reserves that were previously parked elsewhere. 

Just keep in mind that you absolutely do not have access to those funds for the first year after purchase.

Kevin Slater

[BeamerBikes]

2 hours ago, Kevin Slater said:

Just keep in mind that you absolutely do not have access to those funds for the first year after purchase.

Kevin Slater

Aye. It's not an immediate access option for the youngest assets. That quicker access emergency fund stays in separate savings/money markets.  

 

[handiacefailure]

Living in a state with a high state income rate, I also like these aren't subject to state income tax.

[Kevin Slater]

And it's official.

If you buy by the end of the month, yet are credited as if buying on the 1st.  (Though don't cut it too close, give maybe a week to allow processing.)

Kevin Slater

[OCClient]

Seems like a great idea!

[BeamerBikes]

I know I should also be more aggressive, but I can't pass up a close to 10% return with little risk.  Yes, It's standing still vis a vis inflation, but in the end, you're limited on how much you can buy.  There's definitely worse places to park 10k.  Better places come with more risk. 

[+ augustus]

Don't forget if you have a nearest and dearest, you can buy 10K and put him/her as POD and they can buy 10K and put you as POD.

[Kevin Slater]

An I-bond I bought in Nov ’06 is currently earning 11.09%. 

(That being said, 1k turned into $1744.80, while the QQQ I bought at the same time has gone up 647%.)

Kevin Slater

[+ Lucky]

Today's Washington Post writes up the I Bonds:

https://www.washingtonpost.com/business/2022/05/03/inflation-government-i-savings-bonds/

[BuffaloKyle]

On 5/2/2022 at 10:29 AM, Kevin Slater said:

And it's official.

If you buy by the end of the month, yet are credited as if buying on the 1st.  (Though don't cut it too close, give maybe a week to allow processing.)

Kevin Slater

 

Just got my 10k worth today! And yes it says issued May 1, 2022. Does the current value update monthly or every six months then @Kevin Slater?

[Kevin Slater]

I think it may take a year to see the value update for the first time (because it's not able to be sold in that period), then you see it update monthly.  But that's just a guess as I'm new to buying via TresuryDirect as well.

Kevin Slater