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Started By
Message
I bonds jump to 7.12%
Posted on 10/15/21 at 2:01 am
Posted on 10/15/21 at 2:01 am
Anyone else holding I bonds? Their interest rate will jump from 3.54% to 7.12% on November 1. This is great if you have them but also bad as it reflects how costs have risen.
I started moving my emergency fund to I bonds a couple years ago. As long as you can wait a year, they are a no brainer compared to cash which is getting killed by inflation.
If anyone is interested in them, buy before November and you'll get the 3.54% for 6 months then 7.12% for the next 6 months.
I started moving my emergency fund to I bonds a couple years ago. As long as you can wait a year, they are a no brainer compared to cash which is getting killed by inflation.
If anyone is interested in them, buy before November and you'll get the 3.54% for 6 months then 7.12% for the next 6 months.
13
Posted on 10/15/21 at 5:23 am to gpburdell
Would it be better to wait util november since they sell at face value. Why waste 6 months at 3.54%.
Posted on 10/15/21 at 7:56 am to gpburdell
I have the same question as Lchama. Would it not be appropriate to purchase on or after November 1st?
Posted on 10/15/21 at 8:14 am to gpburdell
Shiiiiiiii
Posted on 10/15/21 at 8:36 am to LChama
quote:
Would it be better to wait util november since they sell at face value. Why waste 6 months at 3.54%.
If you buy now, you can make 3.54% in a zero risk investment that is exempt from state income taxes during the interim. The rate will bump up in November, because all of the rate is currently based on the variable component. If that is not appealing to you, then wait.
One reason to perhaps wait: I bonds have a fixed rate (stays with it for 30 years) plus a variable rate (based on CPI), and combined they produce the composite rate.
The fixed rate has been zero for a while. Some think treasury may increase the fixed rate in November 2021, but a guy who watches such things says there is very little chance it will happen.
Any chance the Treasury will raise the I Bond’s fixed rate in November?
The ding on I bonds is the purchase limit. Maximum purchases per year and per social security number is $10,000 at TreasuryDirect and $5,000 in paper bonds purchased with IRS tax refunds.
This post was edited on 10/15/21 at 8:39 am
Posted on 10/15/21 at 8:42 am to Twenty 49
Thank you.
Posted on 10/15/21 at 9:31 am to gpburdell
If you buy I-bonds what is the length of time you have to hold the bond? Is it set or are there defined periods?
I'm trying to understand what the downside is for putting 10K in an I-bond. Is it the rate could drop making it less attractive? Or opportunity cost for potential higher returns in equities?
I'm trying to understand what the downside is for putting 10K in an I-bond. Is it the rate could drop making it less attractive? Or opportunity cost for potential higher returns in equities?
Posted on 10/15/21 at 9:32 am to LChama
quote:
Would it be better to wait util november since they sell at face value. Why waste 6 months at 3.54%.
Because come May 1, the interest rate may be lower than 3.54%. I Bond variable rates reset every 6 months (May & Nov).
If you buy before Nov 1, you'll get 3.54% for 6 months, then you'll get 7.12% for 6 months. Then you'll get whatever rate is set in May for 6 months etc.
There is no other risk free investment (CDs, money market, high yield savings) that offers anything close to 3.54%. So it's not wasting anything.
As 20 49 mentioned, the only thing you might miss out on is if they increase the fixed rate which is currently at 0%. It's possible but very unlikely. No big deal, come Jan 1 you can buy another 10k and get that if it happens. If fixed rates remain above 0% a year later; you can sell your older I bonds and buy new ones with the higher fixed rate.
Posted on 10/15/21 at 9:46 am to gpburdell
Where can an I bond be purchased?
Posted on 10/15/21 at 9:56 am to tigersint
quote:
Where can an I bond be purchased?
You have to set up an account at Treasury Direct. It's simple; takes 5 minutes. Link it to a bank account to make purchases.
The bonds are electronic only (unless you purchase via tax refund).
Each spouse can set up an account. That way you can buy $10,000 each per year.
This post was edited on 10/15/21 at 9:58 am
Posted on 10/15/21 at 9:59 am to skewbs
quote:
If you buy I-bonds what is the length of time you have to hold the bond?
When can I cash my I bonds?
After they are 12 months old.
If you cash an I bond before it is five years old, you will lose the last three months of interest.
I bonds earn interest for 30 years if you don't cash the bonds before they mature.
Treasury I bond info
Posted on 10/15/21 at 10:04 am to Twenty 49
quote:
The fixed rate has been zero for a while.
Yeah I'm jealous of those who bought 20 years ago when the fixed rate was 3%. Those I bonds will be getting 10%+.
quote:
The ding on I bonds is the purchase limit. Maximum purchases per year and per social security number is $10,000 at TreasuryDirect and $5,000 in paper bonds purchased with IRS tax refunds.
When they first introduced I bonds, I think the limit was 30k/year. There are ways to get more than 10k/year per person:
1) Over pay federal taxes and you can use up to 5k of your refund to buy I bonds
2) Trusts can buy 10k/year even if the tax id is your SSN
Posted on 10/15/21 at 10:37 am to gpburdell
Can you buy them in a Roth?
Posted on 10/15/21 at 12:07 pm to RedMustang
LINK
website says trusts, estate,corporations partnership and other entities. Could that other ENTITY be a ROTH IRA? or do you have a ROTH 401k? check with them and see.
my solo401k plan is in a trust with its own EIN so they should sell to that. I am the trustee and plan administrator.
still with these low annual amounts it is peanuts to me. i can get those return amounts(see below) monthly from dividend paying stocks i trade/strip.
350 to 700 a year each 10k invested? meh. so if i could do my personal SS# and my solo401k EIN that is 20k. if they would also allow my corporation to buy using that EIN that is another 10k giving me 30k total to start. i sure am not letting them hold a 5k refund to put in a paper i bond.
some may like that adding 30k a year to i bonds and let it add up. not for me though.
website says trusts, estate,corporations partnership and other entities. Could that other ENTITY be a ROTH IRA? or do you have a ROTH 401k? check with them and see.
my solo401k plan is in a trust with its own EIN so they should sell to that. I am the trustee and plan administrator.
still with these low annual amounts it is peanuts to me. i can get those return amounts(see below) monthly from dividend paying stocks i trade/strip.
350 to 700 a year each 10k invested? meh. so if i could do my personal SS# and my solo401k EIN that is 20k. if they would also allow my corporation to buy using that EIN that is another 10k giving me 30k total to start. i sure am not letting them hold a 5k refund to put in a paper i bond.
some may like that adding 30k a year to i bonds and let it add up. not for me though.
This post was edited on 10/15/21 at 12:19 pm
Posted on 10/15/21 at 7:41 pm to gpburdell
How have I never heard of these before?
Posted on 10/15/21 at 9:00 pm to willeaux
From what i'm reading, if I buy now, I'm stuck with 3.54% for the first six months.
If I wait till Nov 1st, I get 7.12% till may. The website says my interest rate will change in October 1 and april 1 if bought in october.
I might move some of my emergency funds into it on both of our names.
Any drawbacks? I have enough saved up to not use them for the next 2 years.
If I wait till Nov 1st, I get 7.12% till may. The website says my interest rate will change in October 1 and april 1 if bought in october.
I might move some of my emergency funds into it on both of our names.
Any drawbacks? I have enough saved up to not use them for the next 2 years.
This post was edited on 10/15/21 at 9:03 pm
Posted on 10/15/21 at 9:26 pm to gpburdell
How do the supply/demand dynamics work on I Bonds? Is the Fed manipulating these securities like TIPS?
Posted on 10/15/21 at 10:43 pm to RedMustang
quote:
Can you buy them in a Roth?
No. I bonds are non marketable securities that can only be bought from the US Treasury via treasurydirect.gov or through your tax return.
quote:
How have I never heard of these before?
They've been around for almost 30 years. I bet most people have never heard of EE bonds either. If this forum (or reddit) is your main exposure for money topics, then I'm not surprised. My main forum for investing/financial news, strategies etc is Bogleheads.
quote:Is this a problem? If this was a checking/savings account, most would be foaming at the mouth for a 3% interest rate. This coming May, the interest rate could drop to 2%. Then you've missed 6 months of a higher interest rate.
From what i'm reading, if I buy now, I'm stuck with 3.54% for the first six months
Posted on 10/16/21 at 3:01 am to gpburdell
quote:
Anyone else holding I bonds?
Yep, and have some individual TIPS that have almost doubled. EE bonds used to be the shite, but my last bunch of 20 EE bonds mature June 2022 and will f up my tax situation, at least they are state tax free. It's challenging to look at what someone could get with guaranteed rates 30 years ago compared to current levels. Probably buy another 20k of I bonds in January.
Posted on 10/18/21 at 8:08 am to gpburdell
So I Bonds are backed by the treasury?
What kind of back door QE is this at 7.12% yield?! That’s insanely high, even relative to junk bonds. Hmm…
What kind of back door QE is this at 7.12% yield?! That’s insanely high, even relative to junk bonds. Hmm…
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