Buying I-Bonds

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8hygro
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Buying I-Bonds

Post by 8hygro » Tue Sep 18, 2018 11:23 am

How does one go about purchasing and holding I-bonds in a taxable account?

TIA

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Pranav
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Re: Buying I-Bonds

Post by Pranav » Tue Sep 18, 2018 11:32 am

Last edited by Pranav on Tue Sep 18, 2018 11:36 am, edited 1 time in total.
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Darth Xanadu
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Re: Buying I-Bonds

Post by Darth Xanadu » Tue Sep 18, 2018 11:35 am

^^^ Yes, I believe this is the only way to purchase and hold I-Bonds.
"A courageous teacher, failure is."

8hygro
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Re: Buying I-Bonds

Post by 8hygro » Tue Sep 18, 2018 11:47 am

Thanks everyone,

I likely should have been more clear. I often see commented that I-bonds can be held in ones Taxable account. I am trying to understand how they actually get into the taxable account. Is this performed at the time of purchase through Treasury Direct?

Maybe I am misunderstanding this. My intentions was to purchase them electronically. Should that make any difference?

TIA


edited for spelling.

Darth Xanadu
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Re: Buying I-Bonds

Post by Darth Xanadu » Tue Sep 18, 2018 11:52 am

Well, it's a pseudo-tax-deferred account since you don't pay tax on earnings as long as you hold the bond (up to 30 years) but you buy with money that's already been taxed.

I'm not sure what you mean by holding it in a Taxable account. You must purchase through the TD website electronically (ignoring tax return option for paper bonds) and hold it at TD. That's my understanding.
"A courageous teacher, failure is."

asif408
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Re: Buying I-Bonds

Post by asif408 » Tue Sep 18, 2018 11:54 am

8hygro wrote:
Tue Sep 18, 2018 11:47 am
Thanks everyone,

I likely should have been more clear. I often see commented that I-bonds can be held in ones Taxable account. I am trying to understand how they actually get into the taxable account. Is this performed at the time of purchase through Treasury Direct?

Maybe I am misunderstanding this. My intentions was to purchase them electronically. Should that make any difference?
The only way to purchase them is through Treasury Direct. The Treasury Direct account is a taxable account. You can't hold I-bonds outside of that account or move them like you can Treasuries or TIPS.

8hygro
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Re: Buying I-Bonds

Post by 8hygro » Tue Sep 18, 2018 12:01 pm

Thanks for the clarification.

My intention was to purchase the i-bonds to draw from for collage expenses starting in 18-24 months. I noticed the tips required 5 years for tax free usage vs 1 for the I-bonds, pertaining to being education use tax free.

Darth Xanadu
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Re: Buying I-Bonds

Post by Darth Xanadu » Tue Sep 18, 2018 12:09 pm

8hygro wrote:
Tue Sep 18, 2018 12:01 pm
Thanks for the clarification.

My intention was to purchase the i-bonds to draw from for collage expenses starting in 18-24 months. I noticed the tips required 5 years for tax free usage vs 1 for the I-bonds, pertaining to being education use tax free.
Just curious, do you have a state that offers a tax deduction for 529 plans? If so it might be better to go that route. That tax savings on 18-24 months of I-Bonds earnings is likely to be pretty small.
"A courageous teacher, failure is."

aristotelian
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Re: Buying I-Bonds

Post by aristotelian » Tue Sep 18, 2018 12:13 pm

8hygro wrote:
Tue Sep 18, 2018 11:47 am
Thanks everyone,

I likely should have been more clear. I often see commented that I-bonds can be held in ones Taxable account. I am trying to understand how they actually get into the taxable account. Is this performed at the time of purchase through Treasury Direct?

Maybe I am misunderstanding this. My intentions was to purchase them electronically. Should that make any difference?

TIA


edited for spelling.
I think the idea is that they have the advantage of deferred tax on interest even though you do not hold them within an IRA. You do not literally hold them in one single taxable account with all other taxable investments.

8hygro
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Re: Buying I-Bonds

Post by 8hygro » Tue Sep 18, 2018 12:56 pm

Thanks to everyone for your help. It is starting to make sense, "one response at a time" :) . It is one thing to have read the forum for many hours, it entirely another to actually go through the motions as opportunities present themselves. I am having fun though.


I am attempting to accomplish a couple things with some new $. For one, simplicity, or more pointedly, tax simplicity. This is an area I am not up to speed on, so worry about. Two, I am trying to ready myself for the upcoming needed collage funds using the new $ vs upsetting current investments causing rebalancing, etc. The way I really see it now, is how best to protect 10-15k of new money each of the next few years, for use starting in 18-24 months. Maybe I would be better simply putting it in my taxable accounts money market fund considering the short term nature. Setting the new $ aside for this coming expense, I should not have to touch any current retirement savings or fall short of maximizing contributions, which is a concern for me. Thanks again for everyone's time.

Da5id
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Re: Buying I-Bonds

Post by Da5id » Sat Sep 29, 2018 10:50 am

Got to say, this is really small potatoes though for the hassle of dealing with treasury direct. I'm thinking of bagging my ibonds.

Consider that your $10000 investment (max per social security number) currently is yielding 2.53%. So that is $253 interest. Not saying that avoiding tax on it may be worth it, but 2 year CD rates are pushing 3%. Vanguard short term treasury is 2.5-2.6% (normal vs Admiral). So are the i-bonds worthwhile? Kind of doubt it, but that is of course your call. Note too that you lose 3 months interest if you withdraw in less than 5 years.

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Mel Lindauer
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Re: Buying I-Bonds

Post by Mel Lindauer » Sat Sep 29, 2018 12:02 pm

You could put the money in a 529 Plan and any earnings would be tax-free if used for qualifying educational expenses. However with a short time horizon, the interest earned on a safe investment will probably be very small, so it may not be worth the effort.
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