I-bonds

[Lotus-eater]

7 hours ago, GlenDale said:

Thank you for the response. I don’t think I ever saw those high interest rates applied so I’ll go back and check the history of each bond to verify.

There’s this comment from an early thread that confuses me also:

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. 

 

The total interest rate of an I-bond=inflation rate + fixed (real) rate. The inflation rate resets every 6 months to reflect current inflation (which has declined a lot since 2022 and therefore so has the total interest rate). When you buy the bond, the fixed (real) rate, which is usually very low (it has varied between 0% and 1.3% over the past 5 years), is what you get for 30 years. So you're buying inflation protection plus that small fixed rate, which is your real return.

If you cash in the bond before 5 years have elapsed, you give up the last 3 months interest. For example, if you cashed in a bond bought in 2022 one year later, you'd would have received about 7.2% in interest instead of 9.6%. If you cash it in now, you'd get about 2.25% instead of 3%. So cashing it in now and investing in something else that pays more won't cost you very much.

The interest you received depends on exactly when you purchased the bonds. If you missed that window and bought in November of 2022 instead of May-Oct., the interest rate fell to 6.89% (and lasted only 6 months until the next reset).

Edited Wednesday at 06:30 AM by Lotus-eater

[GlenDale]

19 hours ago, Lotus-eater said:

The total interest rate of an I-bond=inflation rate + fixed (real) rate. The inflation rate resets every 6 months to reflect current inflation (which has declined a lot since 2022 and therefore so has the total interest rate). When you buy the bond, the fixed (real) rate, which is usually very low (it has varied between 0% and 1.3% over the past 5 years), is what you get for 30 years. So you're buying inflation protection plus that small fixed rate, which is your real return.

If you cash in the bond before 5 years have elapsed, you give up the last 3 months interest. For example, if you cashed in a bond bought in 2022 one year later, you'd would have received about 7.2% in interest instead of 9.6%. If you cash it in now, you'd get about 2.25% instead of 3%. So cashing it in now and investing in something else that pays more won't cost you very much.

The interest you received depends on exactly when you purchased the bonds. If you missed that window and bought in November of 2022 instead of May-Oct., the interest rate fell to 6.89% (and lasted only 6 months until the next reset).

Thanks for that. I’m aware of the rules about cashing in before 5 years; I’m not planning to do that.

the first bond I bought was on 7/1/22, the second bond, 2/1/23

if I understand you correctly, the bond I purchased on 7/1/22 should or should’ve earned that much higher interest rate. Yet as I look at my TD page, it indicates the IR=3.12%

Edited Wednesday at 09:08 PM by GlenDale

[BuffaloKyle]

1 hour ago, GlenDale said:

the bond I purchased on 7/1/22 should or should’ve earned that much higher interest rate. Yet as I look at my TD page, it indicates the IR=3.12%

So the i bond you bought at that time had a 0.0% fixed rate so all you earn for the entire life time of that i bond is the current inflation rate which is 3.12%. When you look at your holdings page it shows the current interest rate you are earning.

Take a look at this page, might help you:

I bonds interest rates — TreasuryDirect

Also your total i bond value including interest shown does not include the most recent 3 months of interest due to that being the penalty if you close your i bond before 5 years. Once you would hit 5 years you would see those 3 months added in.

Edited Wednesday at 10:26 PM by BuffaloKyle

[Lotus-eater]

2 hours ago, GlenDale said:

Thanks for that. I’m aware of the rules about cashing in before 5 years; I’m not planning to do that.

the first bond I bought was on 7/1/22, the second bond, 2/1/23

if I understand you correctly, the bond I purchased on 7/1/22 should or should’ve earned that much higher interest rate. Yet as I look at my TD page, it indicates the IR=3.12%

On the bond you bought in 7/22, you earned 9.6% for 6 months, then 6.89% for the next 6 months, and a lower interest rate each time it reset every 6 months thereafter (as inflation declined)...until today when you are earning 3.12%, which is the interest rate that is displayed on your dashboard when you log in now. The higher interest rates you received during those earlier periods is reflected in the total current value of the bond.

Edited Wednesday at 11:02 PM by Lotus-eater

[GlenDale]

20 hours ago, BuffaloKyle said:

So the i bond you bought at that time had a 0.0% fixed rate so all you earn for the entire life time of that i bond is the current inflation rate which is 3.12%. When you look at your holdings page it shows the current interest rate you are earning.

Take a look at this page, might help you:

I bonds interest rates — TreasuryDirect

Also your total i bond value including interest shown does not include the most recent 3 months of interest due to that being the penalty if you close your i bond before 5 years. Once you would hit 5 years you would see those 3 months added in.

I initially asked for clarity on the first post in this thread. Here’s what Kevin had to say back in April ‘22

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

 

your post doesn’t seem to jive with Kevin’s. This is what I’m trying to clarify

[GlenDale]

19 hours ago, Lotus-eater said:

On the bond you bought in 7/22, you earned 9.6% for 6 months, then 6.89% for the next 6 months, and a lower interest rate each time it reset every 6 months thereafter (as inflation declined)...until today when you are earning 3.12%, which is the interest rate that is displayed on your dashboard when you log in now. The higher interest rates you received during those earlier periods is reflected in the total current value of the bond.

Ok. That’s sort of what I was thinking (hoping) happened. I’ll have to do some maths work to figure out if that’s what actually happened.  Thank you

[BuffaloKyle]

36 minutes ago, GlenDale said:

I initially asked for clarity on the first post in this thread. Here’s what Kevin had to say back in April ‘22

 

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

 

your post doesn’t seem to jive with Kevin’s. This is what I’m trying to clarify

So the i bond you bought in July 2022 paid you 9.6% interest for 6 months then the rate changed after that. Here's a screenshot of my personal i bond purchases from my treasury account. The rate that is shown that you are currently earning is the combined inflation and fixed rate. So for my i bonds purchased after that 2022 one on my page I have various fixed rates so that's why I'm earning more on my post 2022 purchases. Also again the current value that is shown is going to be missing the most recent 3 months of interest as you are shown the current cash out value until you have held the i bond for 5 years.

Edited Thursday at 07:11 PM by BuffaloKyle

[GlenDale]

1 hour ago, BuffaloKyle said:

So the i bond you bought in July 2022 paid you 9.6% interest for 6 months then the rate changed after that. Here's a screenshot of my personal i bond purchases from my treasury account. The rate that is shown that you are currently earning is the combined inflation and fixed rate. So for my i bonds purchased after that 2022 one on my page I have various fixed rates so that's why I'm earning more on my post 2022 purchases. Also again the current value that is shown is going to be missing the most recent 3 months of interest as you are shown the current cash out value until you have held the i bond for 5 years.

Thank you

[+ JamesB]

5 hours ago, BuffaloKyle said:

So the i bond you bought in July 2022 paid you 9.6% interest for 6 months then the rate changed after that. Here's a screenshot of my personal i bond purchases from my treasury account. The rate that is shown that you are currently earning is the combined inflation and fixed rate. So for my i bonds purchased after that 2022 one on my page I have various fixed rates so that's why I'm earning more on my post 2022 purchases. Also again the current value that is shown is going to be missing the most recent 3 months of interest as you are shown the current cash out value until you have held the i bond for 5 years.

 

May I suggest that next time you post something like this in a public forum, you black out the amounts.

[BuffaloKyle]

1 hour ago, JamesB said:

 

May I suggest that next time you post something like this in a public forum, you black out the amounts.

Well I wanted him to see my total value to compare to his for the 2022 i bond. It's not super sensitive information as there is none of my personal data being shown and I have posted on this thread for instance stating every time I've bought my 10k yearly allotment. I understand where you are coming from though. 👍