I-bonds

[BuffaloKyle]

Good little article for people still a bit confused on the interest portion of the i bonds:

https://www.lehighvalleylive.com/news/2022/08/im-confused-about-i-bond-interest-how-does-it-work.html

They should have included in the article too after six months when the rate resets you'll earn interest then not on $10k but on your total bond worth which will be just under $10,500 at that point. 

Edited August 17, 2022 by BuffaloKyle

[handiacefailure]

Suze orman talked about them again in this mornings podcast.

 

Something interesting she mentioned is you earn interest for the entire month you own it when you buy or sell so if you buy on 4/28 you'll get paid interest for 4/1 to 4/30 for the month of April and if you sell on 4/1 you get interest for the entire month of april.

Another way to maximize your income off them.

[Jim_n_NYC]

Hey guys...I just saw this thread and wanted to put my 2 cents in.  Seems like there are a few posts where it's not 100% clear on how these bonds work.

The rate on your bond does not change at the same time as the purchase interest rate that is set unless you buy exactly the same month that the interest rate changes.  (That's clear, right?)  What I mean is, the current 9.62% rate is good for bonds purchased until the end of Oct '22, but once you buy the bond, you still get that rate for 6 months.  So even if you buy the bond in Oct (the last month to BUY the bond at a 9.62% rate) you'll still get that rate for 6 months.  The 6 months on your actual bond may not run at the same time as when the gov changes the rate.

I think someone said the rate is set for the first year.  Incorrect.  It is on a 6 month schedule just like the rate changes.  I bought some bonds in Jan '22 at the 7.XX% rate and got that thru Jun '22 and then they reset to the current 9.62% rate (for 6 months).  The first year only means you can not sell the bond for the first year...it's locked.

If you have a tax refund, you can use that to buy paper i bonds each year up to $5K...so for a total of $15k each year.  The paper can ONLY be purchased with tax refund.

You can gift I bonds.  I've done this to get an extra year of Ibonds for the wife and me and you can do this for as many years as you like, though you'll be locking in that money for an unknown future rate.  Here's what I mean...I bought us each the $10K I bonds in January. In April, while the rate was still at the 7%ish rate, I gifted a $10K bond from each of us to the other.  That I bond sits in each of our gift account until next year (so Jan '23) at which time we can then send them to each other.  While the bond is in the gift account, it IS accruing the interest that it was bought at (so for Apr '22, 7.XX% for 6 months and then the 9.XX% rate.)  The time spent in these gift accounts also counts toward the 1 year prohibition of selling the bond (so the bonds we bought in April '22 will be sell-able in Apr '23).  If you are gifted an ibond, that does count toward the $10K limit for the year.  I only did it since rates are so high, I figured I could lock in another $20K at those rates.

[BuffaloKyle]

For anyone who bought an i bond in May now that it's September the bond finally shows some interest. My $10k i bond now says it's value is $10,080.00! Remember that the value shown is if you cashed it out today minus three months of interest, which you can't even do for a year, so your bond is really $10,320.00. I also been searching for news on what they think the next rate will be and I saw an article awhile back that predicted anything from 7% to 12% but this article just out from Forbes gives a more solid prediction:

Next six month interest rate should be around 6%

I bond’s interest rate is reset every six months based on the Consumer Price Index. The next six-month cycle uses April’s to September’s CPI calculations and so far four months of the six have been announced. If inflation remains 0% month-to-month for the next two months the new I bond interest rate will be 6.1%.

https://www.forbes.com/sites/chuckjones/2022/08/31/buy-us-treasury-i-bonds-even-though-inflation-was-0-in-july/?sh=283be12054be

[Jim_n_NYC]

33 minutes ago, BuffaloKyle said:

For anyone who bought an i bond in May now that it's September the bond finally shows some interest. My $10k i bond now says it's value is $10,080.00! Remember that the value shown is if you cashed it out today minus three months of interest, which you can't even do for a year, so your bond is really $10,320.00. I also been searching for news on what they think the next rate will be and I saw an article awhile back that predicted anything from 7% to 12% but this article just out from Forbes gives a more solid prediction:

Next six month interest rate should be around 6%

I bond’s interest rate is reset every six months based on the Consumer Price Index. The next six-month cycle uses April’s to September’s CPI calculations and so far four months of the six have been announced. If inflation remains 0% month-to-month for the next two months the new I bond interest rate will be 6.1%.

https://www.forbes.com/sites/chuckjones/2022/08/31/buy-us-treasury-i-bonds-even-though-inflation-was-0-in-july/?sh=283be12054be

I've already bought my 2023 bonds last April (actually, SO and I bought them as gifts for each other) so got the 7.xx% rate and it will switch to the current 9.62% Oct 1.  We'll send them to our respective accounts in January.

When I see what the new rate is announced (should be in October), I'm thinking we'll do the same thing and buy the gift ones that we can deliver in 2024...that way we'll get the 9.62% plus whatever the new (assuming) high rate is on those, too.

Edited September 1, 2022 by Jim_n_NYC

[Kevin Slater]

31 minutes ago, Jim_n_NYC said:

I've already bought my 2023 bonds last April (actually, SO and I bought them as gifts for each other) so got the 7.xx% rate and it will switch to the current 9.62% Oct 1.  We'll send them to our respective accounts in January.

When I see what the new rate is announced (should be in October), I'm thinking we'll do the same thing and buy the gift ones that we can deliver in 2024...that way we'll get the 9.62% plus whatever the new (assuming) high rate is on those, too.

There's a lot here that may confuse folk.  I think all this stuff about buying next year's ahead of time and delayed transferring them into accounts just applies to the fact that they're gifting them to each other. 

There's a 10k per calendar year limit on I-bonds purchases (plus another 5k if done via a federal tax refund).  You get the rate that's current as of the day of purchase.

Kevin Slater

[Jim_n_NYC]

2 hours ago, Kevin Slater said:

There's a lot here that may confuse folk.  I think all this stuff about buying next year's ahead of time and delayed transferring them into accounts just applies to the fact that they're gifting them to each other. 

There's a 10k per calendar year limit on I-bonds purchases (plus another 5k if done via a federal tax refund).  You get the rate that's current as of the day of purchase.

Kevin Slater

Yes, I know, that's why I said we gifted them to each other.  But it's a great way to lock in more money at these high rates and the 1 year term for being able to cash them in also runs while they are being held in the gift account.

[BuffaloKyle]

Two senators introduced a bill on Tuesday that would allow individuals to purchase $30,000 in i bonds per year when inflation tops 3.5%

https://www.thinkadvisor.com/2022/09/28/new-bill-would-raise-i-bond-purchase-cap/

[handiacefailure]

Be great if they raised the limit   That would mean people with a trust could invest $60K a year.

[Kevin Slater]

2 hours ago, handiacefailure said:

Be great if they raised the limit   That would mean people with a trust could invest $60K a year.

From the linked article: The new, raised purchase limit would apply only to families and individuals, not businesses and trusts.

Kevin Slater

[handiacefailure]

2 hours ago, Kevin Slater said:

From the linked article: The new, raised purchase limit would apply only to families and individuals, not businesses and trusts.

Kevin Slater

Thanks    Should have read the article.   Even if I can buy $30K individually and $10 with my trust that would be great seeing how shitty the market is doing right now.   At least interest rates on savings accounts are going up

[BuffaloKyle]

Just saw this on the treasury direct home page:

Great news! Very soon, we will be launching a redesigned TreasuryDirect.gov informational website that features a modernized look and feel, mobile-friendly design, improved navigation, and plain language, making it easier to find and understand the information you need.

Can't wait to see it!

[jawjateck]

When next week's CPI-U is released, we will be able to calculate the inflation adjusted interest rate for the six months beginning in November, but we won't know until then if the Treasury is raising the fixed interest rate component of the bond. Demand is high, so they could keep it at zero, but past Fed actions like we've experienced this year would indicate the fixed component of the bond will finally rise above 0.00%. Yay!

[+ augustus]

I-Bonds issued in November, 2022 are estimated to pay 6% for the following 6 months, based on the last 5 months CPI numbers.  

[+ augustus]

32 minutes ago, jawjateck said:

When next week's CPI-U is released, we will be able to calculate the inflation adjusted interest rate for the six months beginning in November, but we won't know until then if the Treasury is raising the fixed interest rate component of the bond. Demand is high, so they could keep it at zero, but past Fed actions like we've experienced this year would indicate the fixed component of the bond will finally rise above 0.00%. Yay!

The fixed component will stay at 0%.  With inflation running so high, the I Bond beats out the EE Bonds and every other Treasury Bond going out to 30 years.  It has been at 0% for many years now (the fixed component that is).

Edited October 3, 2022 by augustus

[BonVivant]

Get your I-Bonds, get em while the 9.62% lasts. Last month to do it. 

[Jim_n_NYC]

20 hours ago, BonVivant said:

Get your I-Bonds, get em while the 9.62% lasts. Last month to do it. 

I already bought some this year (in April to get the then 7.? rate and then the now current 9.6 rate) for our gift accounts (mine and the SO).  Once I see they confirm it will reset high again in Nov (which I don't see any way it would NOT be high), I plan on buying another $10K for our gift accounts that we can send over in Jan of 2024.

[Rockey]

On 7/1/2022 at 2:01 AM, augustus said:

Exactly.  You can't get it.  The article mentioned people using an internet based bank and they can't get a Medallion stamp.  You have to have an account at a bricks and mortar bank.  Even then, some people are having trouble getting the stamp.  I forget right now why.  Some banks won't do it.  Many people opening an account at TreasuryDirect are having problems because their identification cannot be verified by the Treasury's own databases, hence the need for the Form 5444.

My bank (Wells Fargo) won't provide the Medallion stamp. So, my treasury account remains locked until I provide the Form 5444. Any advice on what steps I should take to get a Medallion stamped 5444? Thanks, and BTW you guys are providing terrific info here. Much appreciated!

Edited October 12, 2022 by Rockey

[+ augustus]

11 minutes ago, Rockey said:

My bank (Wells Fargo) won't provide the Medallion stamp. So, my treasury account remains locked until I provide the Form 5444. Any advice on what steps I should take to get a Medallion stamped 5444? Thanks, and BTW you guys are provided terrific info here. Much appreciated!

Brokerages houses provide it assuming you have an account there.  I'm surprised Wells Fargo doesn't.  I know that Chase does.  So does M&T Bank and Bank of America.  Other than that, I don't know how to get it.  I know a notary does not.

[jawjateck]

CPI-U report is out. Hotter than expected. Looks like the inflation adjustment on the I-bond for the 6 months beginning in November will be 6.47%. Maybe they'll add some basis points on the fixed income component too. 

[jawjateck]

If you top up to 10k by the end of October, you will return 8.045% over the next 12 months.

[Jim_n_NYC]

I've already bought my bonds for this year so now that this rate is confirmed, I'm going to buy some in our gift accounts that we can distribute next year.

[Beancounter]

Something to follow:
 

https://www.thinkadvisor.com/2022/09/28/new-bill-would-raise-i-bond-purchase-cap/

Possibility of raising purchase limits of iBonds

 

[+ keroscenefire]

I'm having such difficulty with the web site. I keep getting kicked out. I guess this has been too popular.

[Mercury]

If my account is thru a credit union but there are no branches where I live, does that mean I won’t be able to participate in I-bond purchases assuming they require a medallion stamp? 
 

would I be able to purchase from my Schwab account that I have cash in, but only have a brokerage account? It’s easier to find a Schwab brick and mortar branch if necessary?