I-bonds

[BuffaloKyle]

Here's a news article on paper i bonds no longer being available. It states too that the limit to buy online will remain $10k per person. They really should bump it up to $15k to make up for the loss of the tax refund option.

I Bonds: You soon won't be able to get paper bonds with your tax refund

WWW.FREEP.COM

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TreasuryDirect issued a new FAQ that unveiled the end of a tax refund program involving I Bonds that began in 2010.

 

[handiacefailure]

Interesting about the tax option.   They probably don't want to issue paper bonds anymore but could still do online.   I hate giving the government use of my money anyway and always arrange it so that I withhold and pay in what my last years liability is to avoid a penalty if I do owe.

 

I am surprised they don't raise the limit though.

If you want to buy $20K a year, a good work around is to set up a second account with treasury direct with your trust if you have one .   Your trust doesn't need a Fed ID and I just used my social security number and did that back when they were a great investment.    I think anyone that hast enough money to invest should have a trust anyway.   

[BuffaloKyle]

The new i bond rate will be coming November 1. The inflation rate will be going down, I'm hoping the fixed rate stays the same or goes up. I have three i bonds, one with a 0% fixed rate, one with a 0.4%, and one with a 1.30%. I'm going to sell the first two soon. I'd love to get another one with a good fixed rate though to keep long term.

Edited October 2, 2024 by BuffaloKyle

[BuffaloKyle]

This article is predicting the next i bond inflation rate will be 1.90% not including a fixed rate.

Breaking News on I Bonds: Your Next 6-Month Rate Is Falling. Here's How Much and When

WWW.INVESTOPEDIA.COM

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I bond interest rates adjust every six months, and with the latest inflation reading now released, we can calculate what your next rate will be on existing bonds.

 

[Jim_n_NYC]

DoC (Doctor of Credit) is predicting a total I-bond rate of 3.1% which would include a 1.2% fixed rate (but he then says the number could be lower)...so this rate is a complete wag.

IF that is what it is, then I'll be doing much better on the I-bonds I sold in January and switched to 3 and 6 month treasuries...some are still locked in at rates over 5%.  Current offers on Fidelity are 4.65% for 3-month and 4.44% for 6-month treasuries.

Edited October 16, 2024 by Jim_n_NYC

[BuffaloKyle]

Another article predicting as well a 1.9% inflation rate and 1.3% fixed rate for a total rate of 3.2%

MSN

WWW.MSN.COM

I hope the fixed rate is indeed 1.3% so I can buy my $10k worth in January. I'd like to have two i bonds then with a nice fixed rate so when inflation gets hot again someday they'll really pay out good.

[Jim_n_NYC]

According to DoC, 3.11% including the 1.2% fixed. 

New I-Bonds Estimated Rate: 3.11% APY (Variable + Fixed) - Doctor Of Credit

WWW.DOCTOROFCREDIT.COM

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(Update 10/31/24: Confirmed 3.11%  rate with 1.20% fixed and the rest variable; this is for November 2024 through April 2025.) We’ve been reporting on the

My last treasury buy was at 4.45% for 6 months, so the new I-bond rate is currently not competitive.  Though, if rates drop another 1%, they might be.

[BuffaloKyle]

Yup 3.11% including a 1.20% fixed rate. Boo, I was hoping it'd stay at 1.30%

I bonds — TreasuryDirect

TREASURYDIRECT.GOV

 

[+ PhileasFogg]

WSJ Article on Friday Afternoon:

The millions of people who bought I bonds when inflation peaked have a decision to make: Hold them, or redeem them and buy new ones.

In most cases, the right move is to exchange. 

Inflation-linked government savings bonds were a hit with investors when they offered a guaranteed return of 9.6% in 2022, stoking so much demand that it took down the website where they are sold.

That rate was short-lived. I bond rates reset based on inflation every six months. Any purchased back at that peak now have a more modest 1.9% rate.

New I bonds issued as of Friday come with a yield of 3.11%, a drop from the prior rate of 4.28%. 

But the current yield on new I bonds is only part of how to determine whether to hold or trade in an I bond. The return of your I bonds is calculated based on a fixed rate determined on the purchase date and a moving rate based on the current level of inflation. Since inflation peaked in 2022, the moving rate went down but the offered fixed rate went up. 

This difference between the fixed rate when you bought and the current fixed rate is the most important factor to determine your next move. And today, the fixed rate is more than a percentage point higher than two years ago.

Financial advisers say this gap means investors who bought and held during the heyday would be wise to trade now, even though there is a penalty for redeeming I bonds within five years of buying.

Much like refinancing a mortgage, you pay something upfront to make the exchange. You forfeit three months of interest when you redeem I bonds. But you earn it back over time, and in this case it won’t take long. I bonds purchased now will outperform the ones issued at peak inflation within seven months, even after accounting for compounding interest.

If the bonds you hold are from many years ago and the difference in the fixed rate is closer, advisers say it still often makes sense to redeem, though it will take longer to break even.

The big caveat here is if you want to hold a lot of money in I bonds. You can buy up to $10,000 in electronic I bonds for yourself each year. If you redeem bonds to purchase new ones, it will count toward your cap and limit your ability to buy more. You may not be able to reinvest all the interest on old bonds if it exceeds the cap.

 

In addition to trading an old I bond for a new one, you can redeem the bond completely for another investment. The current I bond rate is the lowest it has been since 2021 and many other investments offer higher interest right now. The benchmark 10-year Treasury currently offers a fixed yield of 4.3%.

Old vs. new

Investors are required to hold I bonds for 12 months before redeeming. Interest is exempt from state and local taxes. 

You pay taxes on the gain when you redeem I bonds. Investors can avoid paying taxes if the proceeds are used for qualified higher-education expenses and their income falls below certain thresholds. 

The Treasury Department resets both the fixed and moving portion of the rate of return on I bonds twice a year, in May and November. 

Investors who bought bonds between May 2020 and October 2022 and still hold them are stuck with a fixed rate of 0%. Their interest rates are decided solely by the inflation rate.

The Treasury Department has since boosted the fixed portion. New I bonds currently have a fixed rate of 1.2%. 

A high fixed rate creates a buffer between your interest rate and inflation’s ups and downs.

When the inflation rate goes down, it drags down the inflation-linked interest the same for both old and new bonds. But if your fixed rate is 1.2%, you are earning that much more interest for the life of the bond.

 

For example, a $10,000 I bond purchased between May and November 2022, earned a little less than $400 in interest over the past year, including compounding. The same amount purchased one year later earned about $450 because of the higher fixed rate.

Before exchanging old for new, consider how long you plan to hold the new I bonds. If you take an interest penalty for selling the old ones, then buy new ones and sell after only a year, you will be hit with two interest penalties in quick succession. 

[sutherland]

On 11/3/2023 at 7:27 PM, GlenDale said:

if the best I’ll earn on these two bonds are less than 4% it was a bad investment choice considering the current state of CD rates.  Today I opened a 25k cd at Forbright yielding 5.75% 

I agree. Why buy a bond with a lower interest rate than a CD?

[BuffaloKyle]

2 hours ago, sutherland said:

I agree. Why buy a bond with a lower interest rate than a CD?

That's why I'm gonna sell two of my i bonds, one with no fixed rate and one with a very low fixed rate. No reason to hold onto them now that you can get a much better rate of return through other options. The i bonds that were just offered that had a 1.30% fixed rate though and the one currently offered with a 1.20% fixed rate will pay very well when we eventually hit a rough inflation period. You actually should buy one now if you're looking to have some money in a long term investment option.

[discretefun]

On 4/21/2022 at 9:40 PM, handiacefailure said:

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.   

 

 

 

[discretefun]

U said 10k I bond ?  Do you know What the  denominations r ? 

[+ FrankR]

47 minutes ago, discretefun said:

U said 10k I bond ?  Do you know What the  denominations r ? 

Electronic I bonds: $25 minimum or any amount above that to the penny. For example, you could buy an I bond for $36.73. 

Paper I bonds: $50, $100, $200, $500, or $1,000

[handiacefailure]

2 hours ago, discretefun said:

U said 10k I bond ?  Do you know What the  denominations r ? 

$25 to $10K    $10k is the max per year.  But there are ways around it, I.e. I have a living trust so I can set up an account for my trust and buy another $10K that way.   You can also buy paper bonds with a tax refund but I think they are eliminating that.  

 

[Kevin Slater]

Yeah, paper I-bonds go away January 1.

Kevin Slater

[BeamerBikes]

Anyone considering another run of iBonds in 2025 as a hedge if inflation flares back up? 
 

At the very least, I’ll be holding my existing bonds all with the higher fixed rates.  

[discretefun]

On 11/16/2024 at 9:49 PM, Kevin Slater said:

Yeah, paper I-bonds go away January 1.

Kevin Slater

So what is the advantage to hold paper bonds vs treasury direct account ? What will happen with paper ? Required turn over ?

[Kevin Slater]

29 minutes ago, discretefun said:

So what is the advantage to hold paper bonds vs treasury direct account ? What will happen with paper ? Required turn over ?

There have been some articles about how hard it is to redeem paper bonds.  I can't imagine it getting any easier over time, so maybe start the process now?  (That being said, I'm still holding a shit ton of paper bonds.)

Kevin Slater

[+ augustus]

8 hours ago, Kevin Slater said:

There have been some articles about how hard it is to redeem paper bonds.  I can't imagine it getting any easier over time, so maybe start the process now?  (That being said, I'm still holding a shit ton of paper bonds.)

Kevin Slater

Some banks won't redeem them anymore.  Some will but only up to a certain amount.   You can redeem them by mailing them to an address in Minneapolis with a filled-out form, available on Treasury Direct I believe.  When you redeem via Minneapolis it takes about a month and will be wired to the bank account you listed.  There used to be a Savings Bond office on Gold Street in Lower Manhattan but is closed years ago.

[BeamerBikes]

On 12/16/2024 at 8:46 AM, Kevin Slater said:

 I can't imagine it getting any easier over time, so maybe start the process now?  (That being said, I'm still holding a shit ton of paper bonds.)

You can convert your paper bonds into a treasury direct conversion account.  I’d recommend doing that either soon OR wait for a long while.  Why?  That conversion activity is based out of West Virginia and the office is getting the DOGE treatment.  Who knows what paper bond servicing is going to be like a year from now?  
I likewise have some very recent paper bonds I need to convert.  Debating holding onto them for the long haul to admire them as a semi collectible until I need the money and/or normalcy returns. 

[Kevin Slater]

40 minutes ago, BeamerBikes said:

You can convert your paper bonds into a treasury direct conversion account.  I’d recommend doing that either soon OR wait for a long while.  Why?  That conversion activity is based out of West Virginia and the office is getting the DOGE treatment.  Who knows what paper bond servicing is going to be like a year from now?  
I likewise have some very recent paper bonds I need to convert.  Debating holding onto them for the long haul to admire them as a semi collectible until I need the money and/or normalcy returns. 

I just converted mine.  Took less than four weeks, and now they're all held in my Treasury Direct account.

Kevin Slater

[BeamerBikes]

4 minutes ago, Kevin Slater said:

I just converted mine.  Took less than four weeks, and now they're all held in my Treasury Direct account

Yeah, I may just hang on to my paper ones. I’m a novice coin and currency collector so there’s a little charm there.  I luckily don’t have a pile of the EEs anymore.  My dad used to get them with every paycheck, a throw back when steel companies partnered with the treasury during WWII for war bonds. 

[BuffaloKyle]

I subscribe to this guy's YouTube channel and he does a very good i-bond projection video every month. Just updated it with today's inflation report numbers. He is projecting starting in May the next rate will be a 3.44% inflation rate and a 1.20% fixed rate for a total interest rate of 4.64%. I'll be buying my 10k worth for sure at the end of May.

https://www.youtube.com/watch?v=E0ixbL_xUrQ

 

[+ Lucky]

I cashed in my bond...my I-bond