I Bonds - now or later in the year?

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ZiziPB
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I Bonds - now or later in the year?

Post by ZiziPB » Thu Feb 15, 2018 5:12 pm

I'm planning to buy $10K of I Bonds this year. Should I do it soon or wait until May 1 when the new rate is set?

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KlingKlang
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Re: I Bonds - now or later in the year?

Post by KlingKlang » Thu Feb 15, 2018 6:00 pm

Even if you buy the I Bonds toward the end of this month you will still get the new May 2018 inflation adjusted portion of the rate starting in August 2018. The only permanent rate change is the fixed portion of the rate which is currently at 0.1%. For bonds purchased May 1 or later it could go down to 0%, stay at 0.1%, or go up - probably to not much more than 0.2%. Not really a huge deal. If you want you can buy half now and half at the end of May.

anoop
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Re: I Bonds - now or later in the year?

Post by anoop » Thu Feb 15, 2018 6:12 pm


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KlingKlang
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Re: I Bonds - now or later in the year?

Post by KlingKlang » Thu Feb 15, 2018 7:41 pm

anoop wrote:
Thu Feb 15, 2018 6:12 pm
follow this
https://tipswatch.com/2018/01/09/i-bond ... -for-2018/
While the Seeking Alpha articles are interesting, I still think that they are basically much ado about nothing. He doesn't emphasize that you are going to eventually (in less than 6 months) pick up the next variable rate on your I Bonds. Unless you have intercepted a confidential memo from the Treasury Department that the fixed I Bond rate is going to be increased to 3%, all that you are going to do by waiting two more months is to lose two months interest.

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DaftInvestor
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Re: I Bonds - now or later in the year?

Post by DaftInvestor » Fri Feb 16, 2018 11:54 am

The variable rate will be whatever it is whether you buy now or later.
With the fixed rate - who knows - they could drop it back to 0% or perhaps they double to 0.2% - on $10,000 you will lose or gain $10 yearly with such a change so nothing much to go crazy over. They could do something more drastic but I would doubt it.

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Ice-9
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Re: I Bonds - now or later in the year?

Post by Ice-9 » Fri Feb 16, 2018 12:51 pm

Depends on the reason for purchasing I-Bonds:

If...

(a) purchasing to hold indefinitely, possibly entire 30 years to maturity, then likely doesn't matter much. The only difference may be the fixed rate, and as others have said, you could split the difference. Perhaps buy 1/4 of your 2018 total before May 1, 1/2 between May 1 and Nov 1, and the final 1/4 after Nov 1.

(b) purchasing as a substitute for a CD, in which you're likely to redeem after much less of a wait, you may want to follow the TIPSWATCH advice and wait for the two week period in late April in which we know enough information to directly compare the I-Bond including early withdrawal penalty to a 1-yr CD.

(If I were a betting man, I'd say the fixed rate is going to increase slightly simply because rates in general do seem to be increasing now, but I'm not recommending anyone act on that prediction with their I-bond purchases.)

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welderwannabe
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Re: I Bonds - now or later in the year?

Post by welderwannabe » Fri Feb 16, 2018 1:36 pm

Ice-9 wrote:
Fri Feb 16, 2018 12:51 pm
(If I were a betting man, I'd say the fixed rate is going to increase slightly simply because rates in general do seem to be increasing now, but I'm not recommending anyone act on that prediction with their I-bond purchases.)
Im holding off on my purchase too for this reason. I think the fixed rate is more likely to go up versus down.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

AlwaysaQ
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Re: I Bonds - now or later in the year?

Post by AlwaysaQ » Fri Feb 16, 2018 1:45 pm

I bought half of my planned purchase already and will buy the remainder after May. As DaftInvestor wrote it's not likely to make much difference.

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CardinalRule
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Re: I Bonds - now or later in the year?

Post by CardinalRule » Sat Apr 21, 2018 12:45 am

The latest Tipswatch piece on Seeking Alpha points to waiting until May 1 (if not November) if the fixed rate is most important to you.

I'll likely buy $5000 after the May reset and $5,000 after the November reset, but the writer points out that the impact is small either way - "an increase of 0.1% in the fixed rate brings $10 more a year in interest on a $10,000 investment..."

https://seekingalpha.com/article/416271 ... iable-rate
Last edited by CardinalRule on Sat Apr 21, 2018 8:19 am, edited 2 times in total.

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whodidntante
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Re: I Bonds - now or later in the year?

Post by whodidntante » Sat Apr 21, 2018 1:32 am

I wouldn't overthink it. Odds are you will lose money after tax anyway.

aristotelian
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Re: I Bonds - now or later in the year?

Post by aristotelian » Sat Apr 21, 2018 7:02 am

whodidntante wrote:
Sat Apr 21, 2018 1:32 am
I wouldn't overthink it. Odds are you will lose money after tax anyway.
It is possible to pay zero tax in retirement.

What investment offers a guaranteed after tax return that is either better than I Bonds or in excess of inflation? You probably have to go out 5 years to get a better rate than I Bonds, and even then you will probably lose to future interest rates and inflation.

To answer OP's question, I bought $5k in January and plan to hold off until May or November for the rest.

HAWK23
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Re: I Bonds - now or later in the year?

Post by HAWK23 » Sat Apr 21, 2018 11:47 am

I signed up for a Treasurydirect account today. I plan on buying some I Bonds for the first time in May. This sounds like a great way to up my bond allocation percentage while saving some space in my Roth IRA for more total stock market etf. Rather than start a new thread I wanted to pose 2 quick questions for those of you familiar with I Bonds:

#1: Is it acceptable to count I Bonds in your portfolio bond allocation percentage?

#2: Would TreasuryDirect Bonds, such as I Bonds, be considered being held as Tax-Advantaged or Taxable OR is it some type of "mixed beast" because it is tax advantaged to a certain extent?

Thanks for anyone able to give some guidance so I have a better understanding.

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KlingKlang
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Re: I Bonds - now or later in the year?

Post by KlingKlang » Sat Apr 21, 2018 12:30 pm

HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
I signed up for a Treasurydirect account today. I plan on buying some I Bonds for the first time in May. This sounds like a great way to up my bond allocation percentage while saving some space in my Roth IRA for more total stock market etf. Rather than start a new thread I wanted to pose 2 quick questions for those of you familiar with I Bonds:

#1: Is it acceptable to count I Bonds in your portfolio bond allocation percentage?

#2: Would TreasuryDirect Bonds, such as I Bonds, be considered being held as Tax-Advantaged or Taxable OR is it some type of "mixed beast" because it is tax advantaged to a certain extent?

Thanks for anyone able to give some guidance so I have a better understanding.
#1. Go right ahead, I do because it makes my bond allocation look better. Strictly speaking I think they are closer to cash because their value can never go down.

#2. I Bonds are not a traditional tax-advantaged holding because you don't have to follow the rules for withdrawals by age. "Mixed beast" is probably as good a description as any. US Treasury Bills, Notes, Bonds, or TIPS purchased through Treasury Direct are definitely in the taxable category.

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Clever_Username
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Re: I Bonds - now or later in the year?

Post by Clever_Username » Sat Apr 21, 2018 12:39 pm

HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
I signed up for a Treasurydirect account today. I plan on buying some I Bonds for the first time in May. This sounds like a great way to up my bond allocation percentage while saving some space in my Roth IRA for more total stock market etf. Rather than start a new thread I wanted to pose 2 quick questions for those of you familiar with I Bonds:
At the risk of derailing, consider a total stock market index mutual fund so you don't have unused cash leftover in the Roth IRA.
HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
#1: Is it acceptable to count I Bonds in your portfolio bond allocation percentage?
I think so, and I do this. I don't so much have "stocks and bonds" and "stocks and conservative investments." Yes, I can't really re-balance into or out of I-Bonds, but I do buy the maximum each year from income and have other bonds I can use for re-balancing (such as my workplace plan with a mix of total bond and stock funds).
HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
#2: Would TreasuryDirect Bonds, such as I Bonds, be considered being held as Tax-Advantaged or Taxable OR is it some type of "mixed beast" because it is tax advantaged to a certain extent?

Thanks for anyone able to give some guidance so I have a better understanding.
Series I Bonds provide a weak tax break. They aren't the same category as pre-tax plans, like a traditional 401(k), as you purchase them with after-tax money. They aren't Roth money, because you pay taxes on redemption (with some exceptions), but at least you don't get taxed on the growth.

I think of them as inflation-indexed cash, which fits into the "bonds and other conservative instruments" portion of my portfolio.

I can provide other threads that discuss these issues if you'd like.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

HAWK23
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Re: I Bonds - now or later in the year?

Post by HAWK23 » Sat Apr 21, 2018 12:48 pm

Clever_Username wrote:
Sat Apr 21, 2018 12:39 pm
HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
I signed up for a Treasurydirect account today. I plan on buying some I Bonds for the first time in May. This sounds like a great way to up my bond allocation percentage while saving some space in my Roth IRA for more total stock market etf. Rather than start a new thread I wanted to pose 2 quick questions for those of you familiar with I Bonds:
At the risk of derailing, consider a total stock market index mutual fund so you don't have unused cash leftover in the Roth IRA.
HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
#1: Is it acceptable to count I Bonds in your portfolio bond allocation percentage?
I think so, and I do this. I don't so much have "stocks and bonds" and "stocks and conservative investments." Yes, I can't really re-balance into or out of I-Bonds, but I do buy the maximum each year from income and have other bonds I can use for re-balancing (such as my workplace plan with a mix of total bond and stock funds).
HAWK23 wrote:
Sat Apr 21, 2018 11:47 am
#2: Would TreasuryDirect Bonds, such as I Bonds, be considered being held as Tax-Advantaged or Taxable OR is it some type of "mixed beast" because it is tax advantaged to a certain extent?

Thanks for anyone able to give some guidance so I have a better understanding.
Series I Bonds provide a weak tax break. They aren't the same category as pre-tax plans, like a traditional 401(k), as you purchase them with after-tax money. They aren't Roth money, because you pay taxes on redemption (with some exceptions), but at least you don't get taxed on the growth.

I think of them as inflation-indexed cash, which fits into the "bonds and other conservative instruments" portion of my portfolio.

I can provide other threads that discuss these issues if you'd like.
Thank you for your responses Klang and Clever:

Clever - I did mistype. I actually own the Investor shares mutual fund of Vanguard Total Stock in my Roth. Part of why I'm looking to use I-Bonds to fulfill some of my Bond Allocation is so that I can move up to VTSAX (the admiral version) quicker than having to worry about allocating bonds in my Roth.

Sure - if you have other threads please link them or send them to me. I may have even read some of them already as I recognize your football helmet avatar when I was searching about I-bonds earlier in the month. It also looks like there is another I-Bond topic trending on the first page of the forum with 40+ replies I will read too.

Thank you again for your responses.

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Clever_Username
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Re: I Bonds - now or later in the year?

Post by Clever_Username » Sat Apr 21, 2018 1:14 pm

HAWK23 wrote:
Sat Apr 21, 2018 12:48 pm
Sure - if you have other threads please link them or send them to me. I may have even read some of them already as I recognize your football helmet avatar when I was searching about I-bonds earlier in the month. It also looks like there is another I-Bond topic trending on the first page of the forum with 40+ replies I will read too.

Thank you again for your responses.
The threads I had in mind (other than the one you're referencing) are these:

viewtopic.php?f=10&t=241806

viewtopic.php?f=10&t=228196

and viewtopic.php?f=10&t=217262
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

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John151
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Re: I Bonds - now or later in the year?

Post by John151 » Sat Apr 21, 2018 1:47 pm

On a $10,000 investment, changes in the fixed rate and the inflation rate are pretty negligible, so I buy the legal limit in January and then forget about it.

HAWK23
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Re: I Bonds - now or later in the year?

Post by HAWK23 » Sat Apr 21, 2018 1:49 pm

Clever_Username wrote:
Sat Apr 21, 2018 1:14 pm
HAWK23 wrote:
Sat Apr 21, 2018 12:48 pm
Sure - if you have other threads please link them or send them to me. I may have even read some of them already as I recognize your football helmet avatar when I was searching about I-bonds earlier in the month. It also looks like there is another I-Bond topic trending on the first page of the forum with 40+ replies I will read too.

Thank you again for your responses.
The threads I had in mind (other than the one you're referencing) are these:

viewtopic.php?f=10&t=241806

viewtopic.php?f=10&t=228196

and viewtopic.php?f=10&t=217262
Great links - read through them all. Have a great understanding now as to how I plan to incorporate I-Bonds into my portfolio. I'm going to account them for portion of my bond allocation while continuing to add some Total Bond Market in my tax advantaged accounts. After 1 year I-Bonds wI'll serve as my "first to sell off" if I need more than what I have in my emergency fund.

I don't make enough money to buy $10K per year but $2,500-$5000 is a good personal goal for the time being.

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