Series I Bonds in April/May 2018

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
ImmigrantSaver
Posts: 293
Joined: Tue Nov 22, 2016 6:24 pm

Re: Series I Bonds in April/May 2018

Post by ImmigrantSaver » Tue May 01, 2018 10:09 am

TdF fan wrote:
Tue May 01, 2018 9:03 am
Fixed rated 0.3%
Ahh. Bought mine in January :oops: Oh well

User avatar
Ice-9
Posts: 1454
Joined: Wed Oct 15, 2008 12:40 pm
Location: Rockville, MD

Re: Series I Bonds in April/May 2018

Post by Ice-9 » Tue May 01, 2018 10:12 am

"Back up the truck" on this forum means "buy a lot" of something. Many of us backed up the truck for TIPS purchases in early 2009 when real yields were around 2% on the 10 yr issues.

Backing up the truck with I-Bonds could mean, as Johan851 noted, going to the extreme of redeeming some older bonds to replace with newer bonds. The worst I-bonds in anybody's savings bond portfolio are only earning 30 basis points less than the new fixed rate. I don't think I'm backing up the truck yet, but I am buying more than I did in the previous six-month period.

User avatar
Topic Author
Clever_Username
Posts: 1410
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Series I Bonds in April/May 2018

Post by Clever_Username » Tue May 01, 2018 10:58 am

ImmigrantSaver wrote:
Tue May 01, 2018 10:09 am
TdF fan wrote:
Tue May 01, 2018 9:03 am
Fixed rated 0.3%
Ahh. Bought mine in January :oops: Oh well
I split 50/50; I bought $5000 worth yesterday and will be buying $5000 worth in the new period. Oh well, but I was agonizing over something that wasn't going to make a huge difference even over a 30 year holding period.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

ImmigrantSaver
Posts: 293
Joined: Tue Nov 22, 2016 6:24 pm

Re: Series I Bonds in April/May 2018

Post by ImmigrantSaver » Tue May 01, 2018 11:04 am

Clever_Username wrote:
Tue May 01, 2018 10:58 am
ImmigrantSaver wrote:
Tue May 01, 2018 10:09 am
TdF fan wrote:
Tue May 01, 2018 9:03 am
Fixed rated 0.3%
Ahh. Bought mine in January :oops: Oh well
I split 50/50; I bought $5000 worth yesterday and will be buying $5000 worth in the new period. Oh well, but I was agonizing over something that wasn't going to make a huge difference even over a 30 year holding period.
Yeah, I just decided to buy at the end of January out of my savings account (housing downpayment money, which might be used up by next year) and then replenished it with March bonus. Would have been better to wait till bonus money and buy now. So maybe I'll do that next year.

User avatar
cruzbay
Posts: 53
Joined: Thu Jan 25, 2018 5:47 pm

Re: Series I Bonds in April/May 2018

Post by cruzbay » Tue May 01, 2018 11:16 am

So if I want to buy 10K of I bonds, is it best to do this as part of a taxable account or to use some cash sitting in a SEP IRA or a rollover IRA? (I know that we have some work to do on this and shouldn't have cash sitting in these accounts.) My husband should also buy and has only a traditional IRA (which we will convert to Roth when tax situation is more advantageous) and the TSP. We won't need the money as part of an emergency fund so will hold long term. Taxable due to savings on state income tax??

Second question, does it have to be your own child's college or could it be that of a niece/nephew?

Thanks in advance for your insight on these questions!

User avatar
Topic Author
Clever_Username
Posts: 1410
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Series I Bonds in April/May 2018

Post by Clever_Username » Tue May 01, 2018 11:17 am

cruzbay wrote:
Tue May 01, 2018 11:16 am
So if I want to buy 10K of I bonds, is it best to do this as part of a taxable account or to use some cash sitting in a SEP IRA or a rollover IRA? (I know that we have some work to do on this and shouldn't have cash sitting in these accounts.) My husband should also buy and has only a traditional IRA (which we will convert to Roth when tax situation is more advantageous) and the TSP. We won't need the money as part of an emergency fund so will hold long term. Taxable due to savings on state income tax??
To the best of my knowledge, I Bonds cannot be bought as part of an IRA. However, they provide a weak tax break of their own, in the form that the growth isn't taxable until redeemed.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

Chuck
Posts: 2086
Joined: Thu May 21, 2009 12:19 pm

Re: Series I Bonds in April/May 2018

Post by Chuck » Tue May 01, 2018 11:22 am

Using a long-term inflation projection of 2%, and a theoretical for-argument's-sake tax rate of 25%, you'd want a 0.5% fixed rate just to maintain purchasing power.

In that sense, 0.3% is way better than last month's 0.1%. But still not... "good." If it is the same or higher in 2019, I will consider "refinancing" some of my 0.0% issues. I'm not like... excited or anything.

User avatar
cruzbay
Posts: 53
Joined: Thu Jan 25, 2018 5:47 pm

Re: Series I Bonds in April/May 2018

Post by cruzbay » Tue May 01, 2018 11:29 am

Clever_Username wrote:
Tue May 01, 2018 11:17 am
cruzbay wrote:
Tue May 01, 2018 11:16 am
So if I want to buy 10K of I bonds, is it best to do this as part of a taxable account or to use some cash sitting in a SEP IRA or a rollover IRA? (I know that we have some work to do on this and shouldn't have cash sitting in these accounts.) My husband should also buy and has only a traditional IRA (which we will convert to Roth when tax situation is more advantageous) and the TSP. We won't need the money as part of an emergency fund so will hold long term. Taxable due to savings on state income tax??
To the best of my knowledge, I Bonds cannot be bought as part of an IRA. However, they provide a weak tax break of their own, in the form that the growth isn't taxable until redeemed.
Thanks so much! Much to learn here! I plan to post the portfolio for review but still working on the proper format/complete info.

User avatar
Mel Lindauer
Moderator
Posts: 30048
Joined: Mon Feb 19, 2007 8:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: Series I Bonds in April/May 2018

Post by Mel Lindauer » Tue May 01, 2018 2:59 pm

cruzbay wrote:
Tue May 01, 2018 11:16 am


Second question, does it have to be your own child's college or could it be that of a niece/nephew?

Thanks in advance for your insight on these questions!
Has to be your own dependent.
Best Regards - Mel | | Semper Fi

User avatar
cruzbay
Posts: 53
Joined: Thu Jan 25, 2018 5:47 pm

Re: Series I Bonds in April/May 2018

Post by cruzbay » Fri May 04, 2018 3:56 pm

Mel Lindauer wrote:
Tue May 01, 2018 2:59 pm
cruzbay wrote:
Tue May 01, 2018 11:16 am


Second question, does it have to be your own child's college or could it be that of a niece/nephew?

Thanks in advance for your insight on these questions!
Has to be your own dependent.
Thank you! An honor to have you answer my question!

TravelGeek
Posts: 3184
Joined: Sat Oct 25, 2014 3:23 pm

Re: Series I Bonds in April/May 2018

Post by TravelGeek » Fri May 04, 2018 4:16 pm

Ice-9 wrote:
Tue May 01, 2018 10:12 am
"Back up the truck" on this forum means "buy a lot" of something. Many of us backed up the truck for TIPS purchases in early 2009 when real yields were around 2% on the 10 yr issues.

Backing up the truck with I-Bonds could mean, as Johan851 noted, going to the extreme of redeeming some older bonds to replace with newer bonds. The worst I-bonds in anybody's savings bond portfolio are only earning 30 basis points less than the new fixed rate. I don't think I'm backing up the truck yet, but I am buying more than I did in the previous six-month period.
As I understand from previous threads, the term was coined by Mel Lindauer, who encouraged people during the “good old days” (loosely defined as: long before I became a member) that iBonds were a great, especially when bought with reward-earning credit cards.

aristotelian
Posts: 6663
Joined: Wed Jan 11, 2017 8:05 pm

Re: Series I Bonds in April/May 2018

Post by aristotelian » Fri May 04, 2018 5:01 pm

Chuck wrote:
Tue May 01, 2018 11:22 am
Using a long-term inflation projection of 2%, and a theoretical for-argument's-sake tax rate of 25%, you'd want a 0.5% fixed rate just to maintain purchasing power.
I have seen this argument before but I don't get it. There is no better risk free asset. As long as I have been following them, I Bonds have always yielded more than 1 year CDs. I don't know of any investment that is guaranteed to beat inflation after tax. For inflation protection I think they serve their purpose just fine.

Also, I expect my effective tax rate in retirement to be more like 5%.

Charon
Posts: 137
Joined: Thu May 03, 2018 12:08 pm

Re: Series I Bonds in April/May 2018

Post by Charon » Fri May 04, 2018 5:48 pm

aristotelian wrote:
Fri May 04, 2018 5:01 pm
There is no better risk free asset. As long as I have been following them, I Bonds have always yielded more than 1 year CDs.
Comparing to 1-year CDs isn't fair, as there's a penalty on I-bond redemption prior to 5 years. But I-bonds rates are currently competitive with good 5-year CDs, and they do seem like a good low-risk investment right now.

Chuck
Posts: 2086
Joined: Thu May 21, 2009 12:19 pm

Re: Series I Bonds in April/May 2018

Post by Chuck » Fri May 04, 2018 11:44 pm

aristotelian wrote:
Fri May 04, 2018 5:01 pm
I have seen this argument before but I don't get it.
A financial instrument advertised to preserve purchasing power does not actually preserve purchasing power.

Starper
Posts: 120
Joined: Sun Oct 26, 2014 10:02 pm

Re: Series I Bonds in April/May 2018

Post by Starper » Sat May 19, 2018 10:24 am

Quick question. I bought $10K's worth of i series bonds a few days ago via Treasury Direct website for the first time. I am currently in a high tax bracket and would like to defer taxes payable on interest until I retire and switch to a lower tax bracket (ideally zero). I'll just use the i-bonds as an emergency fund after the initial one year holding period.

Do I need to do anything or change any interest payout options on the TD website? The website is not easy to navigate and I can't find any information in the bogleheads wiki section about that.

Another question: if TD issues i-bonds that pay higher interest in the future, can I just sell the i-bonds i already have and buy new ones?

Chuck
Posts: 2086
Joined: Thu May 21, 2009 12:19 pm

Re: Series I Bonds in April/May 2018

Post by Chuck » Sat May 19, 2018 10:28 am

You will not get a 1099 until you redeem. You won't get interest payments, the value will just accumulate in the bond itself. So the deferral is automatic.

If you redeem a bond to buy one with a higher fixed rate, you can not "roll over." You will pay tax on the bond that you redeemed. You will also pay a 3 month penalty if you have held it for less than 5 years, and use up some or all of your annual purchase limit.

Starper
Posts: 120
Joined: Sun Oct 26, 2014 10:02 pm

Re: Series I Bonds in April/May 2018

Post by Starper » Sat May 19, 2018 11:19 am

Chuck wrote:
Sat May 19, 2018 10:28 am
You will not get a 1099 until you redeem. You won't get interest payments, the value will just accumulate in the bond itself. So the deferral is automatic.

If you redeem a bond to buy one with a higher fixed rate, you can not "roll over." You will pay tax on the bond that you redeemed. You will also pay a 3 month penalty if you have held it for less than 5 years, and use up some or all of your annual purchase limit.
Thanks, that's what I thought, just wanted to confirm.

User avatar
cruzbay
Posts: 53
Joined: Thu Jan 25, 2018 5:47 pm

Re: Series I Bonds in April/May 2018

Post by cruzbay » Thu May 31, 2018 1:42 pm

I meant to buy 10K x 2 iBonds effective the last day of May which, as I understand it, would pay interest from May 1st. Just opened my account to initiate purchase and the effective date they give is tomorrow. Should I hold my money and buy at the end of a month, thus earning interest in two places at once for the month? Thanks in advance for your insight.

oslocal
Posts: 109
Joined: Sat May 21, 2016 5:30 pm

Re: Series I Bonds in April/May 2018

Post by oslocal » Thu May 31, 2018 1:56 pm

You can if you really want to. It would make you an extra $12.50 assuming 1.5% interest. Maybe give yourself a couple of days leeway, no need to push for that extra 40 cents and risk the additional ~$7 in higher interest that compounds on the I bonds as well as starting the clock for no penalty withdrawals.

I scheduled my purchase on the 20th for the 29th in case there was some funny 30 day convention or something.

User avatar
cruzbay
Posts: 53
Joined: Thu Jan 25, 2018 5:47 pm

Re: Series I Bonds in April/May 2018

Post by cruzbay » Thu May 31, 2018 2:20 pm

oslocal wrote:
Thu May 31, 2018 1:56 pm
You can if you really want to. It would make you an extra $12.50 assuming 1.5% interest. Maybe give yourself a couple of days leeway, no need to push for that extra 40 cents and risk the additional ~$7 in higher interest that compounds on the I bonds as well as starting the clock for no penalty withdrawals.

I scheduled my purchase on the 20th for the 29th in case there was some funny 30 day convention or something.
Good advice. I will do as you suggest in the future. The month flew by and I didn't set a reminder for myself. Thanks!

Post Reply