I Bonds, anyone?

[countrygirl2]

I don't even remember what it was last time, do you?

[Happy prose]

Can someone briefly explain ibonds to me? Such as how long do I hold, how do you cash out, any tax benefits? Sounds almost too good to be true from what I've read. And you can't lose money? Thank you!

[minnesotapaintlady]

Oct 13, 2022 17:54:47 GMT -5 countrygirl2 said:

I don't even remember what it was last time, do you?

9.62%.

[countrygirl2]

Why in the world did it go down? I have to go back and reread all that stuff, I haven't for a long time and forget what period of time it's based on. I will.

[minnesotapaintlady]

Oct 13, 2022 20:20:44 GMT -5 countrygirl2 said:

Why in the world did it go down? I have to go back and reread all that stuff, I haven't for a long time and forget what period of time it's based on. I will.

It's based on the 6 month CPI-U index and inflation.  Lower rate, but means inflation is cooling off too.

[countrygirl2]

Inflation is cooling off in whose world? Not mine. I bought DD and I pancakes only this morning, 2 servings $7.18, that's up. Added a med coffee and med smoothie almost $13, that was at McD's. Breakfast will happen at home from now on.

But then I suppose it is, I looked at Pennys for drapes and they had a ton of them on clearance, way more than normal, so in that instance sales must have slowed down. I had an extra coupon or wouldn't have bought them either.

Thanks for pulling up the charts.

[azucena]

Oct 13, 2022 18:57:31 GMT -5 Happy prose said:

Can someone briefly explain ibonds to me? Such as how long do I hold, how do you cash out, any tax benefits? Sounds almost too good to be true from what I've read. And you can't lose money? Thank you!

Can buy up to $10,000/yr in cash.  More if you use your tax refunds to purchase directly.

Have to hold for at least a year.  If you cash out between yrs 2-5, you lose the last 3 months of interest.

Guaranteed by US gov't so about as risk free as you can get.  If the gov't can't payout, we're all screwed.

I've put in $60k since Nov last year.  This was money earning way less than 1% in our savings account - myself, DH last year; us again this yr plus DD10 and DD14 college savings.  Quite pleased with the interest we've earned.  Was okay with tying up this money for at least 12 months.

[azucena]

www.treasurydirect.gov/savings-bonds/i-bonds/

eyebonds.info/ibonds/home10000.html

[Tiny]

Oct 14, 2022 7:41:15 GMT -5 azucena said:

Oct 13, 2022 18:57:31 GMT -5 Happy prose said:

Can someone briefly explain ibonds to me? Such as how long do I hold, how do you cash out, any tax benefits? Sounds almost too good to be true from what I've read. And you can't lose money? Thank you!

Can buy up to $10,000/yr in cash.  More if you use your tax refunds to purchase directly.

Have to hold for at least a year.  If you cash out between yrs 2-5, you lose the last 3 months of interest.

Guaranteed by US gov't so about as risk free as you can get.  If the gov't can't payout, we're all screwed.

I've put in $60k since Nov last year.  This was money earning way less than 1% in our savings account - myself, DH last year; us again this yr plus DD10 and DD14 college savings.  Quite pleased with the interest we've earned.  Was okay with tying up this money for at least 12 months.

Some additonal info for Happy Prose: 

And one more REALLY important part - I-Bonds have 2 interest rates - a fixed interest rate that the bond carries for it's life time and a Variable Rate that changes every 6 months (May and November). Right now I-Bonds have a 0% fixed interest rate - odds are good that this rate will not change going forward. The Variable Rate - that is good for bonds bought thru 10/31 is 9.62% (if you buy now you will get 6 months with the 9.62% rate). If you buy Nov 1st or after your bond will start with 6 months of the new rate (6.5% ish...) the "6 months" clock starts ticking on the day you purchase the Bond.

And just in case it's not clear - for the I Bond you buy between now and 10/31 - you will get 9.62% for 6 months and then you will get 6 months of November 2022 rate (6.5% ish) and if you hold it longer you'll get 6 months of the May 2023 rate... and so on and so on and so on.

I think people are piling into I-Bonds not to use as a long term investment - but rather as a short term one ( maybe hold for 15 months and then redeem them ).
This is what I did starting back in May, June, July of 2021 when the Variable interest rate started rising... I started moving my EF money to I-Bonds as the CDs the money was in came due.  I've got 22K in I-bonds (some that go back to 2008)  hat will all eventually get 6 months of that 9.62% rate.   

[Tiny]

Well, dang - that 6.5ish% prediction means I probably will buy 10K come January 2023... I already hit the 10K limit for 2022.    I could tie up 10K for 12 months in 2023... 

(and I'm gonna grump about being single again.... I can't buy myself a "gift" bond   so married couples get yet another financial perk.     ) 

Although the FED will probably raise interest rates .75  again - which will give T-Bills and T-Notes nice interest rate for short term investments.... so many choices. 

[minnesotapaintlady]

A fixed rate this time!  6.89% composite rate with a 0.4% fixed portion.

[Rukh O'Rorke]

Nov 1, 2022 9:23:16 GMT -5 minnesotapaintlady said:

A fixed rate this time!  6.89% composite rate with a 0.4% fixed portion.

is that only for new purchases?

[Rukh O'Rorke]

nearly $150 in interest this month.

woohoo, that is starting to feel like real money, lol!

although - will be less next time, have about 8k rolling into the lower rate.

[minnesotapaintlady]

Nov 1, 2022 10:40:35 GMT -5 Rukh O'Rorke said:

Nov 1, 2022 9:23:16 GMT -5 minnesotapaintlady said:

A fixed rate this time!  6.89% composite rate with a 0.4% fixed portion.

is that only for new purchases?

Yes. The fixed is tied to the bond purchase date. Variable is the only one that changes.

[minnesotapaintlady]

Nov 1, 2022 10:42:47 GMT -5 Rukh O'Rorke said:

nearly $150 in interest this month.

woohoo, that is starting to feel like real money, lol!

although - will be less next time, have about 8k rolling into the lower rate.

$234 here.  October was the first month all my bonds paid 9.62.  Next month 10K drops off.

[Tiny]

First: I wonder what the statistics were from TD for the amount of I-Bonds purchased in October.


Second, that .4% fixed rate - certainly makes purchasing more I-Bonds in 2023 more attractive.

I'm using the high variable interest rate I-Bonds as a more or less "short term" place to hold "cash" - but my longer term plans could handle holding 10K (or more) for at least 5 years (from 2023).

My 2021 and 2022 I-bonds will most likely get redeemed in 12 or 18 months (depending on the variable rate).

I can envision holding 10K with a fixed interest rate (maybe another 10K if fixed stays above 0% in 2024) for 5 or more years. That would correspond with "retirement" for me 65 and then FRA at 67.


So far, I'm happy with my I-Bonds. They are doing a good job holding some of my EF and so is the "I-Bond gift" I bought for a relative.

[justme]

I need a raise so I can be OK putting 10k tied up for a year lol.

[schildi]

Now you guys make me think about buying i-bonds again ... :-)
The idea is to get them at the end of the month, if I remember correctly, right?

[azucena]

Tiny - why does the 0.4% fixed rate make them better?

[minnesotapaintlady]

Nov 1, 2022 19:55:21 GMT -5 schildi said:

The idea is to get them at the end of the month, if I remember correctly, right?

I'm not sure it matters a whole lot in the grand scheme of things.  I mean, you get the entire month's interest whether you buy on the 1st or the last day, so if you have it sitting in something like a high yield savings account might as well let it sit there most of the month and then get the I bond interest too, but there are a lot of people kicking themselves last month for waiting until the last week because the site was overwhelmed and they couldn't get their purchases in.  Last month was kind of an anomaly though. 

[schildi]

Nov 2, 2022 6:37:15 GMT -5 azucena said:

Tiny - why does the 0.4% fixed rate make them better?

The fixed rate stays there forever for a given batch of I-bonds, and is added to the inflation rate (not a straight addition, but close), so the higher the fixed rate, the better the return.

[schildi]

Nov 2, 2022 7:22:28 GMT -5 minnesotapaintlady said:

Nov 1, 2022 19:55:21 GMT -5 schildi said:

The idea is to get them at the end of the month, if I remember correctly, right?

I'm not sure it matters a whole lot in the grand scheme of things.  I mean, you get the entire month's interest whether you buy on the 1st or the last day, so if you have it sitting in something like a high yield savings account might as well let it sit there most of the month and then get the I bond interest too, but there are a lot of people kicking themselves last month for waiting until the last week because the site was overwhelmed and they couldn't get their purchases in.  Last month was kind of an anomaly though. 

Thanks Minnesota! Would never have thought of that situation, but makes sense!

[justme]

Nov 2, 2022 6:37:15 GMT -5 azucena said:

Tiny - why does the 0.4% fixed rate make them better?

Because if inflation was 0% the bond would still pay 0.4%.

And say the next rate is 5%. Everyone who bought bonds at the 9% would only get 5%, but everyone who buys in the current 6 months would get 5.4%.

[minnesotapaintlady]

Nov 2, 2022 11:10:38 GMT -5 justme said:

Nov 2, 2022 6:37:15 GMT -5 azucena said:

Tiny - why does the 0.4% fixed rate make them better?

Because if inflation was 0% the bond would still pay 0.4%.

And say the next rate is 5%. Everyone who bought bonds at the 9% would only get 5%, but everyone who buys in the current 6 months would get 5.4%.

Of course the break even point between the 9.62% and the 6.49% with 0.4% fixed tacked on is at least several years out and you're only locked in for a year.  Nothing to stop you from jumping to greener pastures after that or even selling your 0% fixed and buying 0.4% before next May (assuming you've owned them long enough).

[azucena]

Ok, I thought maybe I was missing something.  Like MPL said, I'm open to jumping ship after the 12 month lock.

[Rukh O'Rorke]

Ibond rates go in the toilet ?!?!

sound like a prepackaged vacation.....amiright?

[azucena]

I'm looking at mine as a precursor to college cash flow. We've been front loading retirement so didn't have actual college savings until 2021. This is a nice safe place to put it and have it actually earn something. Put in $20k for DH and me in 2021. And $40k this yr by adding both DDs. This gives DD14 $30k earmarked for college and our savings rate is about $30k/yr. Interest earned is a nice bonus.

[seriousthistime]

Aug 2, 2022 9:02:00 GMT -5 seriousthistime said:

I measure the interest earned in airline tickets. 

Each $400 in interest is another airline ticket. 

My interest earned now exceeds 2 airline tickets.  This doesn't include the interest on my paper bonds. 

[CCL]

So how long do you have to hold them, 12 months? And what do they do with the interest, reinvest or pay it out to you?

[azucena]

hold them at least 12 months.

can cash out after 12 months with 3 months interest penalty.  I consider this a wash bc my ibond money was sitting in a savings account earning 0.05%, so if I eat 3 months so be it.

interest reinvested.