I bonds - Are they worth it to you?

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Outer Marker
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Re: I bonds - Are they worth it to you?

Post by Outer Marker »

I’m glad someone finally said it. I’ve been thinking it for a long time. IBonds are a pain in the a** with purchase limits, a clunky and cumbersome website, and pay close to nothing. I wish I’d never gotten caught up in them. Not worth the effort. Might feel differently if I’d bought in when chunks of $30,000 were allowed and they paid 2-3% plus the rate of inflation. But now ... meh...
tindel
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Re: I bonds - Are they worth it to you?

Post by tindel »

I generally like Ibonds for a second or third tier emergency fund. Buy I-bonds with purpose. What's your purpose for holding Ibonds?

In general I was turned off of TD when I tried to purchase my last $5k of Ibonds last year at 0.5% fixed. They locked me out of my account for no apparent reason and wouldn't let me buy the bonds until I went to the bank and got some sort of proof of identification. By the time I did that work, the rate had changed. :annoyed Now that $5k is sitting in a savings account making 0.6% total. :annoyed :x :annoyed

I did buy $15k at the 0.5% fixed rate though, so not all was lost. :sharebeer
000
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Re: I bonds - Are they worth it to you?

Post by 000 »

Sounding more and more like stocks are a better place for $10k/yr after all.
ivgrivchuck
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Re: I bonds - Are they worth it to you?

Post by ivgrivchuck »

000 wrote: Mon Oct 19, 2020 11:24 pm Sounding more and more like stocks are a better place for $10k/yr after all.
Sure if you either:

A) Go 100% into stocks. But that's way above my risk tolerance.
B) Maintain a 7-figure portfolio. Then you probably can't purchase a meaningful amount of I-bonds to make a difference.

P.S. For couples it's actually 10k + 10k + 5k per year. Plus extra 10k for every trust.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
000
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Re: I bonds - Are they worth it to you?

Post by 000 »

ivgrivchuck wrote: Tue Oct 20, 2020 12:35 am
000 wrote: Mon Oct 19, 2020 11:24 pm Sounding more and more like stocks are a better place for $10k/yr after all.
Sure if you either:

A) Go 100% into stocks. But that's way above my risk tolerance.
B) Maintain a 7-figure portfolio. Then you probably can't purchase a meaningful amount of I-bonds to make a difference.

P.S. For couples it's actually 10k + 10k + 5k per year. Plus extra 10k for every trust.
Let's say I want a $10k emergency fund. I either:
1. Put $10k in I bonds and keep $10k in cash for the first year (as I bonds are not accessible for that year) and then move it to stocks in year 2
2. Put $10k in cash and $10k in stocks immediately

What's the opportunity cost of missing a year's worth of growth in stocks?

How many years do I need to hold the I bonds for the yield spread between I bonds and cash to outpace the lost gains of a single year in stocks?

I'm guessing it could be several years. So if I end up needing to spend my emergency fund, keeping it in cash all along and immediately investing the other $10k in stocks probably beats I bonds because they're illiquid for the first year and there is a penalty within the next four years.
ivgrivchuck
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Re: I bonds - Are they worth it to you?

Post by ivgrivchuck »

000 wrote: Tue Oct 20, 2020 1:11 am
ivgrivchuck wrote: Tue Oct 20, 2020 12:35 am
000 wrote: Mon Oct 19, 2020 11:24 pm Sounding more and more like stocks are a better place for $10k/yr after all.
Sure if you either:

A) Go 100% into stocks. But that's way above my risk tolerance.
B) Maintain a 7-figure portfolio. Then you probably can't purchase a meaningful amount of I-bonds to make a difference.

P.S. For couples it's actually 10k + 10k + 5k per year. Plus extra 10k for every trust.
Let's say I want a $10k emergency fund. I either:
1. Put $10k in I bonds and keep $10k in cash for the first year (as I bonds are not accessible for that year) and then move it to stocks in year 2
2. Put $10k in cash and $10k in stocks immediately

What's the opportunity cost of missing a year's worth of growth in stocks?

How many years do I need to hold the I bonds for the yield spread between I bonds and cash to outpace the lost gains of a single year in stocks?

I'm guessing it could be several years. So if I end up needing to spend my emergency fund, keeping it in cash all along and immediately investing the other $10k in stocks probably beats I bonds because they're illiquid for the first year and there is a penalty within the next four years.
That's one way of looking into it. Another way to look into the issue is that for the first year, you don't actually consider i-bonds as part of your emergency fund, but as part of your bond allocation (of course this doesn't work if you are 100% in stocks).

When the i-bond becomes liquid you move the i-bond from your bond allocation into emergency fund, and 10k cash from emergency fund into your bond allocation (which you will then reinvest into a bond fund - or another i-bond).

This way, the opportunity cost is zero (assuming that your stock allocation is less than 100%)
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
finite_difference
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Re: I bonds - Are they worth it to you?

Post by finite_difference »

Can portfoliovisualizer model I bonds?

I’m curious if they’ve ever beaten Vanguard Total Bond in taxable over a period of time.
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Re: I bonds - Are they worth it to you?

Post by Jack FFR1846 »

epictetus wrote: Mon Oct 19, 2020 5:38 pm a con:
if you die with more than $100,000 in savings bonds your will has to go through probate.

or at least that is my understanding
Every single bond I own is co-owned by my wife or one of my sons. When I die, they become the sole owner.
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ivgrivchuck
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Re: I bonds - Are they worth it to you?

Post by ivgrivchuck »

finite_difference wrote: Tue Oct 20, 2020 10:21 am Can portfoliovisualizer model I bonds?

I’m curious if they’ve ever beaten Vanguard Total Bond in taxable over a period of time.
Probably they haven't, at least not for the last 25 years. It has been incredible time for bond holders, especially for long duration bond holders.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Old Guy
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Re: I bonds - Are they worth it to you?

Post by Old Guy »

I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
finite_difference
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Re: I bonds - Are they worth it to you?

Post by finite_difference »

Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
You beat bonds ($46,627) and global stocks ($43,950), from Jan 2001 - Sep 2020.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
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weltschmerz
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Re: I bonds - Are they worth it to you?

Post by weltschmerz »

Willmunny wrote: Sun Oct 18, 2020 7:34 pm I currently own no U.S. savings bonds. Given the relatively small annual purchase limit, I would, in an ideal world, like to begin the process of gradually moving most of my emergency fund into I bonds.
I am in the same position as you, I currently hold no savings bonds, but in the current environment, I would like to start building up a position in I bonds (and also EE bonds). I once held positions in both of these types of bonds years ago, but I sold them and consolidated my holdings at banks and brokerages. I regret having done this, and I now have a greater appreciation of the unique qualities of these bonds. I have no qualms about re-starting to build up positions in these bonds based on my previous positive experiences with TreasuryDirect.
Willmunny wrote: Sun Oct 18, 2020 7:34 pm - I have seen posts from Mel and others in which, it appears to me, they have analyzed the Treasury Direct's online policy and do not feel comfortable that they will be necessarily made whole if the site gets hacked or there is some other cyber theft. I could be reading it wrong, but these concerns appeared to be specific to the Treasury Direct's website and they didn't appear to have similar concerns with online brokerages such as Vanguard. I am not sure if these prior concerns have been addressed adequately by the Treasury.
I am no more concerned about being hacked at TreasuryDirect than at any other bank/brokerage. I get notification emails whenever any changes are made to the accounts, and even if someone gained access to the account, all they could do is sell bonds and transfer it to my checking. I do suggest keeping a pdf or print copy of the current holdings and the transaction history, just in case a holding "disappears", but I have never heard of this happening to anyone.
Willmunny wrote: Sun Oct 18, 2020 7:34 pm - Aside from the above, many say they find the Treasury Direct's website to be a pain/hassle. I can deal with hassles, but if you couple it with the above, I am not sure.
I do not find the website to be a hassle, just don't click the back button on your browser, as others have said. You also can't click 'cancel' too many times either. I found this out the hard way, 3 cancel clicks on the security questions page will also lock the account. It did give me a good opportunity to give them a call and test out their customer service. They answered the phone promptly, were very knowledgeable and courteous, and got the account unlocked right away, so it was a very positive experience.
Willmunny wrote: Sun Oct 18, 2020 7:34 pm It's frustrating because, mathematically, the I bonds seem to be such a better deal than TIPS now. I can deal with the small purchase limits as they have always been sort of an average Joe savings tool and not something for institutional investors, but I wonder if the juice is worth the squeeze here...
I believe it is worth it. A couple can sock away $20k/year of I bonds with no hassle (even more if you have trusts and overpayment of taxes). I jump through hoops each year to do the backdoor Roth contributions, and that is only for $12k/year (for a couple). Also, the tax deferral is a big bonus for me. I don't hold bonds in any tax preferred accounts, those are all set to 100% stocks since I still have decades before I can access them. Adding tax-deferred savings bonds helps to round out the portfolio.
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Re: I bonds - Are they worth it to you?

Post by FactualFran »

Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I-bonds have a minimum earnings rate of 0%. The earnings rate is a composite of a fixed rate in effect when the bond was issued and inflation over a recent six month period. The composite rate of all I-bonds was 0% with the semi-annual inflation adjustment that was in effect for May 2009 through October 2009.
Last edited by FactualFran on Tue Oct 20, 2020 4:03 pm, edited 1 time in total.
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mmmodem
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Re: I bonds - Are they worth it to you?

Post by mmmodem »

I think ibonds are great but I'm not buying anymore. I have $30k stuck in treasury direct requiring a medallion signature to access. If I am having trouble accessing it, I don't know how my hiers will get to it. If that's the price we for security, then they are a very secure and safe place to put your money.
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Re: I bonds - Are they worth it to you?

Post by Old Guy »

Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
Plus I paid for them with a Marriott credit card and got reward points. Btw, the interest rate for October on those bonds was 4.08%.
weltschmerz
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Re: I bonds - Are they worth it to you?

Post by weltschmerz »

mmmodem wrote: Tue Oct 20, 2020 3:31 pm I think ibonds are great but I'm not buying anymore. I have $30k stuck in treasury direct requiring a medallion signature to access. If I am having trouble accessing it, I don't know how my hiers will get to it. If that's the price we for security, then they are a very secure and safe place to put your money.
Can you elaborate on your circumstance requiring a medallion signature? Is it related to a change in linked bank accounts? I thought that they had made the process for adding/changing banks easier over the years.
000
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Re: I bonds - Are they worth it to you?

Post by 000 »

ivgrivchuck wrote: Tue Oct 20, 2020 1:28 am That's one way of looking into it. Another way to look into the issue is that for the first year, you don't actually consider i-bonds as part of your emergency fund, but as part of your bond allocation (of course this doesn't work if you are 100% in stocks).

When the i-bond becomes liquid you move the i-bond from your bond allocation into emergency fund, and 10k cash from emergency fund into your bond allocation (which you will then reinvest into a bond fund - or another i-bond).

This way, the opportunity cost is zero (assuming that your stock allocation is less than 100%)
I appreciate your response.

I don't have a bond allocation and only hold fixed income for emergency/liquidity fund, so my long term portfolio is 100% non-stocks (i.e. 2 buckets).

Also, with some of the reports about getting locked out of TD, I think I bonds are not for me.
Ed 2
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Re: I bonds - Are they worth it to you?

Post by Ed 2 »

Prokofiev wrote: Sun Oct 18, 2020 7:44 pm
Kookaburra wrote: Sun Oct 18, 2020 7:40 pm I’m also on the fence, albeit for possibly different reasons. I just have a hard time getting excited for something that has a real yield of 0%. Also, I don’t feel that the inflation index that it uses tracks my personal inflation, meaning it has a negative real yield to me.

I’ll be interested to hear what others say.
And what is your alternative?
Equity’s mostly. Since 1999. Neve understood bonds anyway. Maybe because my risk tolerance. Never reacted negatively during market down periods.
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hdcd
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Re: I bonds - Are they worth it to you?

Post by hdcd »

Over the years I bought about 30k in I-bonds in paper and on TD. Sold some paper and TD bonds too. They are kinda a pain to deal with.

When I was selling some paper i-bonds, found out my credit union didn't deal with them. A lot of banks won't/can't. So I had to find a bank where I could redeem a few bonds. I live in Southern California, millions of people, hundreds of banks. It wasn't an easy task. Everyone I called required that I open a new account. I also didn't want to have to pay any monthly account fees just to have an account. So I ended up opening up a new savings account and maintain a $1000 balance for the sole purpose of redeeming a few i-bonds.

Treasury Direct website is fairly easy to use. My bet is it running on an old IBM or UNISYS mainframe. The interface hasn't changed in at least 20 years. Not that it is a bad thing. Just kinda clunky.
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mmmodem
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Re: I bonds - Are they worth it to you?

Post by mmmodem »

weltschmerz wrote: Tue Oct 20, 2020 3:58 pm
mmmodem wrote: Tue Oct 20, 2020 3:31 pm I think ibonds are great but I'm not buying anymore. I have $30k stuck in treasury direct requiring a medallion signature to access. If I am having trouble accessing it, I don't know how my hiers will get to it. If that's the price we for security, then they are a very secure and safe place to put your money.
Can you elaborate on your circumstance requiring a medallion signature? Is it related to a change in linked bank accounts? I thought that they had made the process for adding/changing banks easier over the years.
Yes, I closed my bank account and it was the one I used to initially fund the ibonds in treasurydirect. I actually went to my bank and they claimed they had never heard of a medallion signature guarantee before. I even showed them the treasurydirect website and the forms. Literally, no one at the branch knew what the process was and they even called into corporate. I never heard of a medallion either.

This was Chase by the way. I guessing because it was weekend no one knowledgeable was at work? I don't know. They eventually found a large stamp and filled out the forms but I wasn't comfortable sending it in for confirmation if the bank wasn't sure this is what a medallion is. I made a mental note to go to another bank branch on a weekday in the future.

Is it easier to link a bank account now? Honestly, if they fixed this problem, I would be a happy customer again. I'll check but I think treasurydirect only made logging into their website easier.
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Willmunny
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Re: I bonds - Are they worth it to you?

Post by Willmunny »

ivgrivchuck wrote: Mon Oct 19, 2020 9:19 pm
Kookaburra wrote: Mon Oct 19, 2020 8:24 pm
And what if interest rates fall further / go negative? What wins in that situation - VBTLX or I-bonds? Predicting that interest rates must go up is as foolish as trying to predict the stock market.
I think there is a misunderstanding here. Nobody is trying to predict whether rates go up or down. What we are talking about are probability distributions.

While it's true that FED rate can go somewhat negative, it can't go more than around -0.75% without breaking the economy and banking system. So there is very little room to go downwards.

At the same time there is a lot of room for the rates to increase, somewhere up to 8% (and in theory infinity, but in practice no).

So the future interest rates lie somewhere between [-0.75%, 8%].

This is called one-sided duration risk, and it's very unfavorable for bond holdings, especially for bonds with long durations.
I agree with you on VBTLX (ETF symbol BND), which is why I bonds interest me. I wouldn't touch BND right now. The way I view it, unless I think investors on a large scale are going to accept a materially negative yield on a medium duration portfolio of government, agency, and corporate debt, the mathematics dictate that there is very little upside in BND compared to the risk that is taken. I don't think investors will accept materially negative returns on such risk (although they may for FDIC insured deposits or ultra short treasuries). I only want to take risk when there is a reasonable expected reward.

I believe John Bogle timed the market prior to the dot.com bubble and significantly reduced his stock position on a temporary basis. Just like every rule of thumb he taught, I don't believe he would say turn off your brain, suspend critical thought, and plow ahead into the abyss no matter the facts before you. It is my conjecture that John Bogle would have recognized this right now and personally would have not have held BND in this environment.

John Bogle did more for small fish like me to have a chance at a meaningful retirement than anyone in the investment industry. I am very grateful for that. But even he had an exception to "stay the course."
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Harry Livermore
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Re: I bonds - Are they worth it to you?

Post by Harry Livermore »

Wilderness Librarian wrote: Sun Oct 18, 2020 7:59 pm I reluctantly stopped buying I-bonds when they stopped issuing them in paper through local banks. My reasoning somewhat like OP's but more so about my eyesight/computer skills/website changes over time including possible password lockout if I haven't used the site in a decade etc. when I (or heirs) try to cash them 30 yrs later at maturity.
Me as well. Not so much about the eyesight/ computer thing. In fact, admittedly, I was just miffed that I no longer would get cool paper bonds to put into the special binder in my fire safe. Also, part of the charm of EE and I bonds (for me) was that I could simply go to a bank and exchange for cash.
And by that time I was starting to buy corporate bonds in my brokerage account (though not really a large amount and it would still be another decade before I would really start to allocate a serious part of our funds to any kind of bonds)
So, irrational on my part and not looking to defend my "strategy" (not that there is a strategy) but simply a data point.
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Re: I bonds - Are they worth it to you?

Post by Duckinator »

Dad was 90+ when he announced someone had stolen $60K face value worth of paper I bonds. We were skeptical but went through the motions of police report and getting them replaced electronically on Treasury Direct. It helped that he had a photocopy of the bonds so we knew the serial numbers. During all that I found a note in his file where he had written TD a letter 20 years ago about an online account he had lost access to. We jumped through some more hoops and found another $35k in bonds online. Total of $164K value now, with one EE bond about to mature. Another factoid - POD heirs do not get a step up in basis.

The "stolen" bonds were later found in his apartment as we suspected all along. I found the TD people to be very helpful and will keep the bonds when I inherit them. Not sure if I will be buying more.
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Re: I bonds - Are they worth it to you?

Post by tonyclifton »

Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
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Re: I bonds - Are they worth it to you?

Post by wriley4409 »

I find a very compelling case for using I-bonds as a second tier of an emergency fund. The yield will never be lower than the rate of inflation, and the present value can never decrease (unlike TIPS). At present the yield on I-bonds exceeds the yield on most (if not all) money market accounts and CDs.

As I approach retirement, I am building a stash of I-bonds that I can rely on when conventional bond and stock markets are both depressed. While a pure stock portfolio will almost always outperform I-bonds, I can say without a doubt that I will sleep better with that government guaranteed safety net in place.
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SmileyFace
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Re: I bonds - Are they worth it to you?

Post by SmileyFace »

tonyclifton wrote: Wed Oct 21, 2020 12:23 pm
Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
Could be I Bonds since at one time I Bonds had a 3% fixed rate (in addition to the variable/inflation-rate) so if you have those - I would certainly hold them. (Right now the fixed rate is 0%, a couple of years ago it was 0.5%).
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Re: I bonds - Are they worth it to you?

Post by FactualFran »

tonyclifton wrote: Wed Oct 21, 2020 12:23 pm
Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
The values are consistent with I-Bonds. $19,000 of I-Bonds issued between May and October 2001 would have a redemption value 19 years later (in 2020) of $50,114. $19,000 of EE-Bonds (amount paid, not face value of paper bonds) issued between May and October 2001 would have a redemption value 19 years later (in 2020) of $39,642.
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Re: I bonds - Are they worth it to you?

Post by Angst »

tonyclifton wrote: Wed Oct 21, 2020 12:23 pm
Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
Any Boglehead who's buying I Bonds needs to bookmark #Cruncher's website!
http://eyebonds.info/ibonds/1000/ib_2001_05.html
Last edited by Angst on Wed Oct 21, 2020 3:25 pm, edited 2 times in total.
aristotelian
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Re: I bonds - Are they worth it to you?

Post by aristotelian »

I have some. I like that they are tax deferred, guaranteed to beat inflation, and generally beat savings accounts with the same level of security. That said, I will probably not buy I Bonds until the fixed rate improves, which may be never again.
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HomerJ
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Re: I bonds - Are they worth it to you?

Post by HomerJ »

Willmunny wrote: Wed Oct 21, 2020 7:28 amI believe John Bogle timed the market prior to the dot.com bubble and significantly reduced his stock position on a temporary basis.
Just FYI, he significantly reduced his stock position on a permanent basis.

It was more of realizing his life situation had changed that led him to a more conservative allocation. (But yes there was "some" market-timing involved, since he said to himself that bonds are paying really well, I don't need extra money, why bother with so much in stocks at these high valuations anymore)

But he didn't dive back into stocks later. It wasn't a pure market-timing play.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: I bonds - Are they worth it to you?

Post by Broken Man 1999 »

SmileyFace wrote: Wed Oct 21, 2020 2:31 pm
tonyclifton wrote: Wed Oct 21, 2020 12:23 pm
Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
Could be I Bonds since at one time I Bonds had a 3% fixed rate (in addition to the variable/inflation-rate) so if you have those - I would certainly hold them. (Right now the fixed rate is 0%, a couple of years ago it was 0.5%).
Way to go, Jack FFR1846! That is a bodacious stash!

We have 92 paper I-bonds purchased in 2000, and 2001 for $57,350.00, all fixed rate between 3.0% and 3.6%. Last time I updated their value was this past May, now worth $164,066.68. Plus most, if not all, were purchased via a cash back credit card. One year I received a letter telling me I had exceeded the limit on purchases. They were nice enough to let me keep the bonds over my limit. I will have to find a sensible method to redeem them, as in 2030 and 2031 both of us will be into RMDs.

OTOH, I might be gone and my DW might be cashing them in like crazy. :D

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
Kookaburra
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Re: I bonds - Are they worth it to you?

Post by Kookaburra »

Broken Man 1999 wrote: Wed Oct 21, 2020 3:44 pm
SmileyFace wrote: Wed Oct 21, 2020 2:31 pm
tonyclifton wrote: Wed Oct 21, 2020 12:23 pm
Old Guy wrote: Tue Oct 20, 2020 12:53 pm I have 19 paper I bonds purchased in 2001 for $19,000. They’re now worth just about $50,000. I’ll be keeping them since the interest rate is a minimum of 3% if I remember right.
I think you may be referring to EE Bonds which are guaranteed to double if held for 20 years. This works out to about 3%.
Could be I Bonds since at one time I Bonds had a 3% fixed rate (in addition to the variable/inflation-rate) so if you have those - I would certainly hold them. (Right now the fixed rate is 0%, a couple of years ago it was 0.5%).
Way to go, Jack FFR1846! That is a bodacious stash!

We have 92 paper I-bonds purchased in 2000, and 2001 for $57,350.00, all fixed rate between 3.0% and 3.6%. Last time I updated their value was this past May, now worth $164,066.68. Plus most, if not all, were purchased via a cash back credit card. One year I received a letter telling me I had exceeded the limit on purchases. They were nice enough to let me keep the bonds over my limit. I will have to find a sensible method to redeem them, as in 2030 and 2031 both of us will be into RMDs.

OTOH, I might be gone and my DW might be cashing them in like crazy. :D

Broken Man 1999
Do I-bonds have to be redeemed within a certain number of years from purchase, or can they be held / passed down forever?
Wrench
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Re: I bonds - Are they worth it to you?

Post by Wrench »

mmmodem wrote: Wed Oct 21, 2020 6:40 am
weltschmerz wrote: Tue Oct 20, 2020 3:58 pm
mmmodem wrote: Tue Oct 20, 2020 3:31 pm I think ibonds are great but I'm not buying anymore. I have $30k stuck in treasury direct requiring a medallion signature to access. If I am having trouble accessing it, I don't know how my hiers will get to it. If that's the price we for security, then they are a very secure and safe place to put your money.
Can you elaborate on your circumstance requiring a medallion signature? Is it related to a change in linked bank accounts? I thought that they had made the process for adding/changing banks easier over the years.
Yes, I closed my bank account and it was the one I used to initially fund the ibonds in treasurydirect. I actually went to my bank and they claimed they had never heard of a medallion signature guarantee before. I even showed them the treasurydirect website and the forms. Literally, no one at the branch knew what the process was and they even called into corporate. I never heard of a medallion either.

This was Chase by the way. I guessing because it was weekend no one knowledgeable was at work? I don't know. They eventually found a large stamp and filled out the forms but I wasn't comfortable sending it in for confirmation if the bank wasn't sure this is what a medallion is. I made a mental note to go to another bank branch on a weekday in the future.

Is it easier to link a bank account now? Honestly, if they fixed this problem, I would be a happy customer again. I'll check but I think treasurydirect only made logging into their website easier.
FWIW, I had to get a medallion signature to do a rollover of funds from a Fidelity IRA to another institution. They needed a wet signature wtih medallion guarantee and I had to mail the form to them, then they drafted a check and mailed it. Process is still not complete after two weeks. Near as I can tell, Treasury Direct is WAY easier than that. I bank a a regional bank and went to my local branch and they knew exactly what a medallion signature was and provided it immediately. The medallion signagure was by far the easiest part of the entire process!
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Re: I bonds - Are they worth it to you?

Post by Da5id »

Kookaburra wrote: Wed Oct 21, 2020 3:49 pm Do I-bonds have to be redeemed within a certain number of years from purchase, or can they be held / passed down forever?
30 years max earning period, per https://www.treasurydirect.gov/indiv/pr ... glance.htm

And I'm with those who are criticizing the hassle factor of dealing with I and EE bonds... I have some I-bonds which I'm pondering ditching. Not because I have a better way to park cashish money, but just to simplify my life. The hassle factor is noticable.
Angst
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Re: I bonds - Are they worth it to you?

Post by Angst »

Da5id wrote: Wed Oct 21, 2020 4:13 pm
Kookaburra wrote: Wed Oct 21, 2020 3:49 pm Do I-bonds have to be redeemed within a certain number of years from purchase, or can they be held / passed down forever?
30 years max earning period, per https://www.treasurydirect.gov/indiv/pr ... glance.htm

And I'm with those who are criticizing the hassle factor of dealing with I and EE bonds... I have some I-bonds which I'm pondering ditching. Not because I have a better way to park cashish money, but just to simplify my life. The hassle factor is noticable.
I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
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Willmunny
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Re: I bonds - Are they worth it to you?

Post by Willmunny »

HomerJ wrote: Wed Oct 21, 2020 3:37 pm
Willmunny wrote: Wed Oct 21, 2020 7:28 amI believe John Bogle timed the market prior to the dot.com bubble and significantly reduced his stock position on a temporary basis.
Just FYI, he significantly reduced his stock position on a permanent basis.

It was more of realizing his life situation had changed that led him to a more conservative allocation. (But yes there was "some" market-timing involved, since he said to himself that bonds are paying really well, I don't need extra money, why bother with so much in stocks at these high valuations anymore)

But he didn't dive back into stocks later. It wasn't a pure market-timing play.
Thanks for the clarification. Do you have information on his asset allocation post 2008 financial crisis? I know he had mentioned in the interview speaking about 2000 that it was based on some of his life and personal circumstances (as well as where the market and bond yields were). I guess I had assumed he moved his equity allocation upward eventually since he enjoyed good health for many more years, but it sounds like that was an incorrect assumption.

I certainly wasn't criticizing it. It was very smart. Just trying to point out that even originators of "rule of thumb" slogans can deviate in exceptional circumstances.
Da5id
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Re: I bonds - Are they worth it to you?

Post by Da5id »

Angst wrote: Wed Oct 21, 2020 4:27 pm I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
My I-bonds are also electronic (I converted the paper bonds). But the website is clunky, and it is 0.5% of my holdings. Kind of needless clutter. Not clear it is worth having. And I have a bunch of paper EE-bonds my kids were given still to be dealt with as they are coming up on 20 years.
Angst
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Re: I bonds - Are they worth it to you?

Post by Angst »

Da5id wrote: Wed Oct 21, 2020 5:39 pm
Angst wrote: Wed Oct 21, 2020 4:27 pm I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
My I-bonds are also electronic (I converted the paper bonds). But the website is clunky, and it is 0.5% of my holdings. Kind of needless clutter. Not clear it is worth having. And I have a bunch of paper EE-bonds my kids were given still to be dealt with as they are coming up on 20 years.
Uhgg, that does sound somewhat painful. I don't have that problem.

My I & EE Bonds represent a larger % of my holdings than yours, but not huge, less than 10%. Still, I think I've always purchased in $10k or $5k increments, and to me that's not a bothersome amount of money to deal with at one time.

Not that this is you, but anyone accumulating savings bonds in drips and drabs over time, will come to regret it, someday down the road.
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anon_investor
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Re: I bonds - Are they worth it to you?

Post by anon_investor »

000 wrote: Tue Oct 20, 2020 1:11 am
ivgrivchuck wrote: Tue Oct 20, 2020 12:35 am
000 wrote: Mon Oct 19, 2020 11:24 pm Sounding more and more like stocks are a better place for $10k/yr after all.
Sure if you either:

A) Go 100% into stocks. But that's way above my risk tolerance.
B) Maintain a 7-figure portfolio. Then you probably can't purchase a meaningful amount of I-bonds to make a difference.

P.S. For couples it's actually 10k + 10k + 5k per year. Plus extra 10k for every trust.
Let's say I want a $10k emergency fund. I either:
1. Put $10k in I bonds and keep $10k in cash for the first year (as I bonds are not accessible for that year) and then move it to stocks in year 2
2. Put $10k in cash and $10k in stocks immediately

What's the opportunity cost of missing a year's worth of growth in stocks?

How many years do I need to hold the I bonds for the yield spread between I bonds and cash to outpace the lost gains of a single year in stocks?

I'm guessing it could be several years. So if I end up needing to spend my emergency fund, keeping it in cash all along and immediately investing the other $10k in stocks probably beats I bonds because they're illiquid for the first year and there is a penalty within the next four years.
FYI I Bonds can be redeemed before 1 year if you live in a presidential declared disaster area. Most of the US fell under this due to covid at least at one point this year (not sure if this is still the case). But I used this year to move $20k of my EF to I Bonds. I will move another $20k next year. But I have a large emergency fund.
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Rowan Oak
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Re: I bonds - Are they worth it to you?

Post by Rowan Oak »

HomerJ wrote: Wed Oct 21, 2020 3:37 pm
Willmunny wrote: Wed Oct 21, 2020 7:28 amI believe John Bogle timed the market prior to the dot.com bubble and significantly reduced his stock position on a temporary basis.
Just FYI, he significantly reduced his stock position on a permanent basis.

It was more of realizing his life situation had changed that led him to a more conservative allocation. (But yes there was "some" market-timing involved, since he said to himself that bonds are paying really well, I don't need extra money, why bother with so much in stocks at these high valuations anymore)

But he didn't dive back into stocks later. It wasn't a pure market-timing play.
Here's the video interview with Jack Bogle from 2014 talking about the decision he made in 2000:
https://youtu.be/k6ra5POdsYg

- He was around 70 yrs old at the time;
- his heart was failing;
- equity position 70-80%;
- bonds yielding around 7%;
- stocks yielding 1%;
- stock market closer to 40x earnings than to 30;

Quoted from the interview:

Jack Bogle: I think it's impossible in the next decade, and I look at things in decade lengths, that stocks will outperform bonds. So returns on stocks ought to be, you know, pretty close to nominal and the returns on bonds gonna be 7% a year. That's doubling your money in a decade. And then I looked at him and said, "You know, Don, sometimes I sit here and worry why I have any money in stocks whatsoever.

And I was in the process then, and I can't remember the exact timing, but obviously around that time, of reducing my own equity position from about what's normal of about 70-75%. I don't even remember, maybe 80% down to about 25-30%. And I did that.

...everybody said, "you knew what was going to happen", and I suppose you could argue that I did, but that was also, my heart was failing; my life was in danger. I wanted to make sure what kind of estate I had mostly my retirement plan here (Vanguard) was protected for my family so it was a personal financial decision greatly abetted by the fact that it made totally financial and economic sense. How many times in a lifetime does that come along.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger
Ninjadoc
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Re: I bonds - Are they worth it to you?

Post by Ninjadoc »

What advantage do I-bonds have over a TIPS mutual fund?

edit: Nevermind found the extremely helpful wiki page
https://www.bogleheads.org/wiki/I_Bonds_vs_TIPS
Last edited by Ninjadoc on Wed Oct 21, 2020 7:51 pm, edited 1 time in total.
ivgrivchuck
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Re: I bonds - Are they worth it to you?

Post by ivgrivchuck »

Ninjadoc wrote: Wed Oct 21, 2020 7:28 pm What advantage do I-bonds have over a TIPS mutual fund?
A higher yield (at least currently)
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Iorek
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Re: I bonds - Are they worth it to you?

Post by Iorek »

Angst wrote: Wed Oct 21, 2020 6:41 pm
Da5id wrote: Wed Oct 21, 2020 5:39 pm
Angst wrote: Wed Oct 21, 2020 4:27 pm I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
My I-bonds are also electronic (I converted the paper bonds). But the website is clunky, and it is 0.5% of my holdings. Kind of needless clutter. Not clear it is worth having. And I have a bunch of paper EE-bonds my kids were given still to be dealt with as they are coming up on 20 years.
Uhgg, that does sound somewhat painful. I don't have that problem.

My I & EE Bonds represent a larger % of my holdings than yours, but not huge, less than 10%. Still, I think I've always purchased in $10k or $5k increments, and to me that's not a bothersome amount of money to deal with at one time.

Not that this is you, but anyone accumulating savings bonds in drips and drabs over time, will come to regret it, someday down the road.
Curious why you say this. I guess redeeming 10 $1,000 bonds is marginally more work than 1 $10k bond, since it requires clicking on 10 boxes instead of one, but that hardly seems enough to make someone regret it.
Angst
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Re: I bonds - Are they worth it to you?

Post by Angst »

Iorek wrote: Wed Oct 21, 2020 9:14 pm
Angst wrote: Wed Oct 21, 2020 6:41 pm
Da5id wrote: Wed Oct 21, 2020 5:39 pm
Angst wrote: Wed Oct 21, 2020 4:27 pm I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
My I-bonds are also electronic (I converted the paper bonds). But the website is clunky, and it is 0.5% of my holdings. Kind of needless clutter. Not clear it is worth having. And I have a bunch of paper EE-bonds my kids were given still to be dealt with as they are coming up on 20 years.
Uhgg, that does sound somewhat painful. I don't have that problem.

My I & EE Bonds represent a larger % of my holdings than yours, but not huge, less than 10%. Still, I think I've always purchased in $10k or $5k increments, and to me that's not a bothersome amount of money to deal with at one time.

Not that this is you, but anyone accumulating savings bonds in drips and drabs over time, will [likely] come to regret it, someday down the road.
Curious why you say this. I guess redeeming 10 $1,000 bonds is marginally more work than 1 $10k bond, since it requires clicking on 10 boxes instead of one, but that hardly seems enough to make someone regret it.

Life is short, and I've found that this seems so, even more so, the older you get!

Note, I [edit] my statement above, just slightly! I should also point out, I've read of some people buying small amounts of savings bonds with every paycheck. That's going to be a lot of little transactions to mop up someday later on.

It's just my 2¢, my perspective, but as such, dealing with cashing in $5k or $10k at TD once or twice a year sounds a whole lot better to me than doing it for much lesser amounts 10 or 12 times a year. :beer
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Re: I bonds - Are they worth it to you?

Post by 3funder »

Never felt the need.
Global stocks, US bonds, and time.
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crystalbank
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Re: I bonds - Are they worth it to you?

Post by crystalbank »

Angst wrote: Thu Oct 22, 2020 9:11 am
Iorek wrote: Wed Oct 21, 2020 9:14 pm
Angst wrote: Wed Oct 21, 2020 6:41 pm
Da5id wrote: Wed Oct 21, 2020 5:39 pm
Angst wrote: Wed Oct 21, 2020 4:27 pm I couldn't agree more about the "hassle factor" with having to manage paper savings bonds. I solved the problem though by converting all of mine to electronic. I have never had trouble with the website, although I find the virtual keyboard somewhat silly and tedious. My TD account is linked to my bank account, just like Vanguard, just like Fidelity, just like the credit cards... No problems, 2 factor authentication, everything online, easy for me.
My I-bonds are also electronic (I converted the paper bonds). But the website is clunky, and it is 0.5% of my holdings. Kind of needless clutter. Not clear it is worth having. And I have a bunch of paper EE-bonds my kids were given still to be dealt with as they are coming up on 20 years.
Uhgg, that does sound somewhat painful. I don't have that problem.

My I & EE Bonds represent a larger % of my holdings than yours, but not huge, less than 10%. Still, I think I've always purchased in $10k or $5k increments, and to me that's not a bothersome amount of money to deal with at one time.

Not that this is you, but anyone accumulating savings bonds in drips and drabs over time, will [likely] come to regret it, someday down the road.
Curious why you say this. I guess redeeming 10 $1,000 bonds is marginally more work than 1 $10k bond, since it requires clicking on 10 boxes instead of one, but that hardly seems enough to make someone regret it.

Life is short, and I've found that this seems so, even more so, the older you get!

Note, I [edit] my statement above, just slightly! I should also point out, I've read of some people buying small amounts of savings bonds with every paycheck. That's going to be a lot of little transactions to mop up someday later on.

It's just my 2¢, my perspective, but as such, dealing with cashing in $5k or $10k at TD once or twice a year sounds a whole lot better to me than doing it for much lesser amounts 10 or 12 times a year. :beer
Can't you just schedule these small transactions once every year in Treasury Direct?
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Re: I bonds - Are they worth it to you?

Post by Angst »

crystalbank wrote: Thu Oct 22, 2020 11:24 am Can't you just schedule these small transactions once every year in Treasury Direct?
It's my understanding that you cannot schedule or automate the redemption of your savings bonds, you must go to TD and redeem them yourself. You can schedule your purchases though. I think you might even be able to automate direct, periodic purchases from your employer payroll as well?

If you could automate redemption, and have the proceeds transfer into your bank account and not simply into your TD cash account, that would obviate any need for me to complain.

[Edit update]
HueyLD wrote: Fri Oct 23, 2020 6:38 am Per TD:
“ What happens when my EE or I Bond reaches maturity?

The bond will automatically be redeemed and the proceeds will be used to purchase a Zero-Percent C of I in your Primary account on the next business day.”

https://www.treasurydirect.gov/indiv/he ... vingsBonds
Thank you for this info and the link, I was wrong. And it also appears that you can schedule a future redemption. I'll update my earlier post.
Last edited by Angst on Fri Oct 23, 2020 9:00 am, edited 1 time in total.
Iorek
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Re: I bonds - Are they worth it to you?

Post by Iorek »

Angst wrote: Thu Oct 22, 2020 11:45 am
crystalbank wrote: Thu Oct 22, 2020 11:24 am Can't you just schedule these small transactions once every year in Treasury Direct?
It's my understanding that you cannot schedule or automate the redemption of your savings bonds, you must go to TD and redeem them yourself. You can schedule your purchases though. I think you might even be able to automate direct, periodic purchases from your employer payroll as well?

If you could automate redemption, and have the proceeds transfer into your bank account and not simply into your TD cash account, that would obviate any need for me to complain.
I’m not sure but I think if you hit 30 years Treasury Direct will redeem your bond for you, although the cash will probably sit at TD until log on.

It’s been a while since I redeemed a bond but I recall it just taking a few clicks of my mouse. I really don’t think it would matter it if it was 1 or 10 but ymmv!
Angst
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Re: I bonds - Are they worth it to you?

Post by Angst »

Iorek wrote: Thu Oct 22, 2020 7:45 pmI’m not sure but I think if you hit 30 years Treasury Direct will redeem your bond for you, although the cash will probably sit at TD until log on.
I don't believe this is precisely correct. Perhaps someone with relevant experience can respond, but I think that once your savings bond hits 30 years, either I or EE, it simply stops earning any interest but it does not redeem itself, per se. Not that it matters, it just sits there until you do something with it. This is my understanding at least.

[Edit update]
HueyLD wrote: Fri Oct 23, 2020 6:38 am Per TD:
“ What happens when my EE or I Bond reaches maturity?

The bond will automatically be redeemed and the proceeds will be used to purchase a Zero-Percent C of I in your Primary account on the next business day.”

https://www.treasurydirect.gov/indiv/he ... vingsBonds
Thank you for this info and the link, I was wrong. And it also appears that you can schedule a future redemption. I'll update my earlier post.
Last edited by Angst on Fri Oct 23, 2020 8:59 am, edited 1 time in total.
sandramjet
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Re: I bonds - Are they worth it to you?

Post by sandramjet »

Angst wrote: Thu Oct 22, 2020 9:10 pm
Iorek wrote: Thu Oct 22, 2020 7:45 pmI’m not sure but I think if you hit 30 years Treasury Direct will redeem your bond for you, although the cash will probably sit at TD until log on.
I don't believe this is precisely correct. Perhaps someone with relevant experience can respond, but I think that once your savings bond hits 30 years, either I or EE, it simply stops earning any interest but it does not redeem itself, per se. Not that it matters, it just sits there until you do something with it. This is my understanding at least.
Not sure about i bonds but EE bonds are automatically redeemed at 30 yrs in TD system. I assume my I bonds will also redeem automatically but they don't come due for another 10 years
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