Two tranche I bond emergency fund?

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Willmunny
Posts: 127
Joined: Mon Jun 16, 2014 6:35 pm

Two tranche I bond emergency fund?

Post by Willmunny »

I'm trying to think about a tax efficient way to keep an emergency fund and have liquidity. I don't own any I bonds, and I hear Treasury Direct is not the easiest site to use. That makes me a bit uneasy as one purpose of an emergency fund is to be able to access the funds quickly.

So I was thinking what if one purchases paper and electronic I bonds and uses the paper tranche as the more "liquid" first tranche of the emergency fund. So if one kept, for example due to purchase limits, the first 1/3 tranche of the emergency fund in paper I bonds and the second 2/3 tranche in electronic, having the paper available to give one enough time to deal with any issues at Treasury Direct may be attractive. I understand that paper I bonds can be redeemed at financial institutions.

So my question is, if you have any experience in redeeming paper I bonds at financial institutions fairly recently, could you please share. For example, which bank did you use, how easy was it, did you get your funds the same day, etc.

Thanks!
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JoMoney
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Joined: Tue Jul 23, 2013 5:31 am

Re: Two tranche I bond emergency fund?

Post by JoMoney »

I've heard people complain about Treasury Direct as well, I don't get it. I've found it extremely easy to use, and buying/selling works as well and as quickly as any other ACH transfer.

I don't have personal experience with paper Savings Bonds, but my understanding of it is that they're difficult to purchase (only through having excess tax withholding returned, and requires special forms)... Cashing them in is also a nuisance process requiring forms, and I believe you have to keep track of the cost basis yourself with paper savings bonds (you should probably do that anyway for all your investments, but it's nice seeing that the TD records match yours).

For 'emergency' situations when problems come up, it's hard to beat having a small amount of cash around. These days, if there's a problem with electronic networks, a lot of brick and mortar institutions aren't going to be functioning either. Having a small amount of cash available to get you through a potential hiccup would likely smooth over a lot of disaster/liquidity crisis scenarios one can dream up.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Dandy
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Joined: Sun Apr 25, 2010 7:42 pm

Re: Two tranche I bond emergency fund?

Post by Dandy »

I haven't redeemed I bonds at a bank but did redeem EE bonds a Bank of America recently. Why not call your bank?

If you own a home another way to have E money available is to have a HELOC with checkwriting. I have one that required no up front or ongoing fee. A real life example was my daughter had a car accident and needed to buy a used one quickly. We looked at one Saturday afternoon when the banks were closed. The cost was $12k. The dealer agreed to accept my HELOC check. Deal done - I paid off that loan in a few days --so very little interest paid. Maybe not every car dealer would do that but emergencies that can be paid by check --an HELOC will do the trick at much better rates than a credit card. Having a paper I bond would not have been a solution in my case.
mbasherp
Posts: 506
Joined: Mon Jun 26, 2017 8:48 am

Re: Two tranche I bond emergency fund?

Post by mbasherp »

I can’t comment on the primary question regarding paper bonds. I’m just replying to add that while the Treasury Direct website is unique, it is not problematic at all. Anyone who has issues using it is not following the clear instructions which are quite evident on the website itself.

No boogeyman to worry about!
Angst
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Joined: Sat Jun 09, 2007 11:31 am

Re: Two tranche I bond emergency fund?

Post by Angst »

I suggest you invest $25 in your understanding of Treasury Direct by purchasing $25 in I Bonds, now.

I agree with JoMoney. I've been buying electronic savings bonds ever since they stopped offering paper (still available w/ tax refunds) and I have no trouble with Treasury Direct, I even like their website. I do find the virtual keyboard for entering my PW a pain, and do NOT use your browser's "back page" button or [Alt-left arrow], or you'll lose your current sign-in! But that's about it. Not very difficult as far as I'm concerned.

I think you're way overthinking things with this paper vs. electronic plan of yours. It's the paper bonds that I would consider "less liquid" and certainly more of a pain to cash in. I've converted all of my paper ones to electronic and have no regrets whatsoever. Now if there's some Armageddon/internet crash scenario that's driving your concern... :shock:
Broken Man 1999
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Re: Two tranche I bond emergency fund?

Post by Broken Man 1999 »

mbasherp wrote: Wed Sep 16, 2020 8:21 am I can’t comment on the primary question regarding paper bonds. I’m just replying to add that while the Treasury Direct website is unique, it is not problematic at all. Anyone who has issues using it is not following the clear instructions which are quite evident on the website itself.

No boogeyman to worry about!
Yep! I don't see the problem with the website, either.

Only issue I have had was my fault, as I had to train myself not to use the browser's back button to navigate.

As well, the redemptions of savings bonds were easy, and the funds made it into my credit union account very rapidly.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
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