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Question on ibonds buying.
Posted on 9/15/22 at 8:23 am
Posted on 9/15/22 at 8:23 am
So this year my wife and I bought 40k in ibonds.
10k for each of us, then we each bought each other a 10k gift.
Assuming rates stay high (which it appears they will) we plan to purchase more next year.
Can we purchase another 40k total like we did this year? Or only 20k since we have 20k already sitting in gifts?
I know we could also purchase with tax return as well.
Thanks.
10k for each of us, then we each bought each other a 10k gift.
Assuming rates stay high (which it appears they will) we plan to purchase more next year.
Can we purchase another 40k total like we did this year? Or only 20k since we have 20k already sitting in gifts?
I know we could also purchase with tax return as well.
Thanks.
This post was edited on 9/15/22 at 8:35 am
Posted on 9/15/22 at 8:35 am to NATidefan
I wouldn't assume the I Bonds rates will stay high just because of News Headline inflation numbers. It isn't calculated that way.
You can buy unlimited gifts for your spouse (I believe). You can only transfer to her $10,000 in any one year though.
So you could be stuck with a bunch of gifts that you cannot use in an emergency.
This is why I don't do that. I am using I Bonds primarily for a cash savings replacement.
You can buy unlimited gifts for your spouse (I believe). You can only transfer to her $10,000 in any one year though.
So you could be stuck with a bunch of gifts that you cannot use in an emergency.
This is why I don't do that. I am using I Bonds primarily for a cash savings replacement.
Posted on 9/15/22 at 8:39 am to lsu13lsu
Ok, thanks. That's was another question I had about cashing them out, which I had gathered was what you stated.
This post was edited on 9/15/22 at 8:45 am
Posted on 9/15/22 at 8:56 am to NATidefan
quote:
How does Treasury figure the I bond interest rate?
The interest on I bonds is a combination of
fixed rate
inflation rate
Fixed rate
You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.
Treasury announces the fixed rate for I bonds every six months (on the first business day in May and on the first business day in November). The fixed rate then applies to all I bonds issued during the next six months.
The fixed rate is an annual rate.
Inflation rate
The inflation rate can, and usually does, change every six months.
We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.
However, the change is applied to your bond every six months from the bond's issue date. (The dates for these changes might not be May 1 and November 1.) When does my bond change rates?
Combining the two rates
To get the actual rate of interest (sometimes referred to as the composite or earnings rate) we combine the fixed rate and the inflation rate, using the equation in the example below.
The combined rate will never be less than zero. However, the combined rate can be lower than the fixed rate. If the inflation rate is negative (because we have deflation, not inflation), it can offset some of the fixed rate.
If the inflation rate is so negative that it would pull the combined rate below zero, we don't let that happen. We stop at zero.
LINK
They do a really good job of explaining everything you need to know on the treasurydirect website.
Also I believe you can hold gifts for as long as you want (maybe until maturity? not sure about that, but thats 30yrs), but you can only ever take ownership over the limit per year. It's a little ballsy to be buying years into the future. You might be stuck with a bunch of bonds that aren't yielding well anymore depending on what your thesis of inflation is going forward 5 years or so. I'm not doing the gifts, i just dont want to be locked out of money for that long with rate uncertainty but I have maxed 10k for my wife and I last year and this year, but every situation is different so it might work for you and your needs.
This post was edited on 9/15/22 at 9:07 am
Posted on 9/15/22 at 9:55 am to Pendulum
K, thanks
Posted on 9/15/22 at 11:25 am to Pendulum
The gifting makes sense to me, but only a year into the future IMO.
From what I understand, you can buy $10k for you and your wife now, then $10k as a gift. If you gift it to each other next year, you can effectively cash out $40k in 12 months.
Anymore than that in a year means you’re going to be holding for at least 2 years, and that becomes a problem. If the rate is still quite high next year, you can always buy more that year and delay the gift until the following year, but having more than $20k in a gift holding pattern would not be ideal, IMO.
From what I understand, you can buy $10k for you and your wife now, then $10k as a gift. If you gift it to each other next year, you can effectively cash out $40k in 12 months.
Anymore than that in a year means you’re going to be holding for at least 2 years, and that becomes a problem. If the rate is still quite high next year, you can always buy more that year and delay the gift until the following year, but having more than $20k in a gift holding pattern would not be ideal, IMO.
Posted on 9/15/22 at 3:20 pm to NATidefan
quote:
So this year my wife and I bought 40k in ibonds.
10k for each of us, then we each bought each other a 10k gift.
Is this legal?
From TreasuryDirect... Treasury Direct
quote:
How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.
If an individual purchased $10K, can they be gifted another $10K? This seems to suggest no, but it isn't crystal clear.
Posted on 9/15/22 at 4:11 pm to deathvalleytiger10
quote:I didn’t think it was legal either, but I found this nugget on Treasury Direct a few days ago…
If an individual purchased $10K, can they be gifted another $10K? This seems to suggest no, but it isn't crystal clear.
LINK
quote:
Do bonds I've bought as gifts through TreasuryDirect but have not yet delivered to the gift recipient apply against my annual limit?
No. Gift bonds are purchased in the name and SSN of the gift recipient. They do not count against your annual limit even if you have purchased them through your TreasuryDirect account but have not yet delivered them. Gift purchases in TreasuryDirect count toward the annual limit of the recipient in the year they are delivered.
Posted on 9/15/22 at 5:28 pm to NATidefan
I guy on you tube I follow did the calculations with 1 month remaining. I don't remember the exact amount for the next 6 months but it was between 6&7 Percent and another predictor is higher. (I just checked 6.03 and 7.3) The Difference being what each assumed for September. One thing to remember is fuel is down for now but if China demands increases and the SPR runs on empty that could change. Still 6-7 is better than the broken economy and the market is returning.
This post was edited on 9/15/22 at 5:30 pm
Posted on 9/15/22 at 6:27 pm to deathvalleytiger10
quote:
If an individual purchased $10K, can they be gifted another $10K? This seems to suggest no, but it isn't crystal clear.
The answer is yes. Buying gift I bonds have no impact on annual limits until delivered. When they are sitting in the "giftbox" they are basically in limbo but still earning interest.
Here's a real example. I've bought my mom $20k in I bonds gifts this year that are sitting in my Treasury Direct giftbox. I'm unable to deliver to her any of it as she already bought herself $10k this year.
In 2023, I would be able to deliver $10k in gift I bonds to her account and the last $10k in 2024. I've read on Bogleheads where people have bought 6 figures worth of I bonds gifts this year that would take 10+ years to deliver them all.
Also, I bond gifts count toward the annual gift exclusion amount ($16k) in the year purchased not delivered. When I do 2022 taxes, I'll have to file $4k against my lifetime gift exclusion.
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