Should I invest in I Bonds?

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dcarste
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Joined: Mon Apr 27, 2015 4:55 pm

Should I invest in I Bonds?

Post by dcarste »

I have 40K sitting in a regular savings account earning .5%. It is part of my "bond allocation", and used to be in CD's until they stopped giving any decent interest.

For those who understand I bonds, right now it pays 0% base+ 3.4 percent for inflation, adjusted for cpi every 6 months going forward.

Most of my other bond dollars are in the total bond market index. However I have been ready to do I bonds in some sort of fashion.

Is it a good idea to start including I bonds as part of my savings allocation? Or do you see just investing it in a bond fund better?
z06ray
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Re: Should I invest in I Bonds?

Post by z06ray »

I am thinking about doing the same thing. Glad you asked because I know very little and will be following this thread.
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leeks
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Re: Should I invest in I Bonds?

Post by leeks »

We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
investmax
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Re: Should I invest in I Bonds?

Post by investmax »

dcarste wrote: Thu Jun 10, 2021 12:48 pm I have 40K sitting in a regular savings account earning .5%. It is part of my "bond allocation", and used to be in CD's until they stopped giving any decent interest.

For those who understand I bonds, right now it pays 0% base+ 3.4 percent for inflation, adjusted for cpi every 6 months going forward.

Most of my other bond dollars are in the total bond market index. However I have been ready to do I bonds in some sort of fashion.

Is it a good idea to start including I bonds as part of my savings allocation? Or do you see just investing it in a bond fund better?
Please note that there is a 10K limit per person/ssn per year you can invest in I bonds. If you are married, you and your spouse can invest 20K per year. So you may not be able to move the entire 40K amount to I-Bonds immediately.

Also note that there is a lock in period of 1 year before you can withdraw so please keep that in mind before you use any emergency funds for this purpose.
investmax
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Re: Should I invest in I Bonds?

Post by investmax »

leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
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leeks
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Re: Should I invest in I Bonds?

Post by leeks »

investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
Yep, that is a good reminder for anyone reading this. $40k of our Ibonds are available for withdrawal now, the other $10K not till next year. So for this year, it would be more accurate to say our emergency fund is $40K (more than adequate for us as we have other resources that could be repurposed for emergency need).

In our family financial spreadsheet, I do track the "redeemable now" Ibonds separately from the newer Ibond purchases.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

I also just started my i-bond journey in June 2021. I wish I started earlier ... But like everyone said, there are a couple of things to keep in mind.

1. there is a holding period of 1 year. after 1 year, and before 5 years, if you redeem, you will have to forfeit the last 3 months of interest.
2. Every SSN can buy only $10K.
3. Interest is compounded i believe semi-annually. and right now the inflation portion is 3.4% but that's only lock for 6 months.
4. Interest grow tax free in the account as long as you don't redeem it (big +++ for me)
5. If you use the proceed in higher education for your kid, it's also tax free (anther ++)

I purchased 5K already. and plan to put in another 5K by Oct. and probably will get my spouse to get 10K too. I'm taking this as my "emergency fund". I have had my emergency fund sitting around earning so little for so many years. in I-bond at least, it's keeping up with inflation. After I fully funded my emergency fund in I-bond, I will see if I will continue buying more. But looks like a lot of ppl in this forum buy i-bond regularly, so there must be something attractive there.
desconhecido
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Re: Should I invest in I Bonds? xfer to brkr acct?

Post by desconhecido »

Is it easy or hard to transfer ibonds from a treasury direct account to a Vanguard joint brokerage account? Got everything consolidated at Vanguard and the idea of having two new accounts to keep track of is really not appealing to me.
Thesaints
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Re: Should I invest in I Bonds?

Post by Thesaints »

It is also possible to "manufacture" a 5k federal tax refund and collect it in I bonds. See Form 8888.
That brings the total for a married couple to 25k/year.

Given today's CPI-release, we are on pace for another high-interest 6-month period following the present 3.54%.
It looks like a no brainer, even factoring in the 3 months penalty.
Keep in mind that it is only a relative good yield. In fact, the present 3.54% yield is well below the latest inflation data clocking at 4.99%.
On the other hand, based on the past two months the next I bond rate would be above 10% annualized. Clearly, that is not going to happen, so the CPI data will slow down and maybe getting 3.5-4% from those bonds won't be such a bad deal.

I bonds can only be held in your treasurydirect account, or in paper form when issued that way. Can't transfer them to Vanguard, nor anywhere else.
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MrMars
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Re: Should I invest in I Bonds? xfer to brkr acct?

Post by MrMars »

desconhecido wrote: Thu Jun 10, 2021 1:47 pm Is it easy or hard to transfer ibonds from a treasury direct account to a Vanguard joint brokerage account? Got everything consolidated at Vanguard and the idea of having two new accounts to keep track of is really not appealing to me.
I-Bonds are not transferable to a brokerage account.
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anon_investor
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Re: Should I invest in I Bonds?

Post by anon_investor »

Thesaints wrote: Thu Jun 10, 2021 1:54 pm It is also possible to "manufacture" a 5k federal tax refund and collect it in I bonds. See Form 8888.
That brings the total for a married couple to 25k/year.

Given today's CPI-release, we are on pace for another high-interest 6-month period following the present 3.54%.
It looks like a no brainer, even factoring in the 3 months penalty.
Keep in mind that it is only a relative good yield. In fact, the present 3.54% yield is well below the latest inflation data clocking at 4.99%.
On the other hand, based on the past two months the next I bond rate would be above 10% annualized. Clearly, that is not going to happen, so the CPI data will slow down and maybe getting 3.5-4% from those bonds won't be such a bad deal.

I bonds can only be held in your treasurydirect account, or in paper form when issued that way. Can't transfer them to Vanguard, nor anywhere else.
10% I Bonds would be insane!
Makefile
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Re: Should I invest in I Bonds?

Post by Makefile »

anon_investor wrote: Thu Jun 10, 2021 3:22 pm
Thesaints wrote: Thu Jun 10, 2021 1:54 pm It is also possible to "manufacture" a 5k federal tax refund and collect it in I bonds. See Form 8888.
That brings the total for a married couple to 25k/year.

Given today's CPI-release, we are on pace for another high-interest 6-month period following the present 3.54%.
It looks like a no brainer, even factoring in the 3 months penalty.
Keep in mind that it is only a relative good yield. In fact, the present 3.54% yield is well below the latest inflation data clocking at 4.99%.
On the other hand, based on the past two months the next I bond rate would be above 10% annualized. Clearly, that is not going to happen, so the CPI data will slow down and maybe getting 3.5-4% from those bonds won't be such a bad deal.

I bonds can only be held in your treasurydirect account, or in paper form when issued that way. Can't transfer them to Vanguard, nor anywhere else.
10% I Bonds would be insane!
I've got a few hundred in those 1999 ones with a higher fixed rate (won them as part of some school contest). They are at 7% already.
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anon_investor
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Re: Should I invest in I Bonds?

Post by anon_investor »

Makefile wrote: Thu Jun 10, 2021 3:30 pm
anon_investor wrote: Thu Jun 10, 2021 3:22 pm
Thesaints wrote: Thu Jun 10, 2021 1:54 pm It is also possible to "manufacture" a 5k federal tax refund and collect it in I bonds. See Form 8888.
That brings the total for a married couple to 25k/year.

Given today's CPI-release, we are on pace for another high-interest 6-month period following the present 3.54%.
It looks like a no brainer, even factoring in the 3 months penalty.
Keep in mind that it is only a relative good yield. In fact, the present 3.54% yield is well below the latest inflation data clocking at 4.99%.
On the other hand, based on the past two months the next I bond rate would be above 10% annualized. Clearly, that is not going to happen, so the CPI data will slow down and maybe getting 3.5-4% from those bonds won't be such a bad deal.

I bonds can only be held in your treasurydirect account, or in paper form when issued that way. Can't transfer them to Vanguard, nor anywhere else.
10% I Bonds would be insane!
I've got a few hundred in those 1999 ones with a higher fixed rate (won them as part of some school contest). They are at 7% already.
:shock:
lakpr
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Re: Should I invest in I Bonds?

Post by lakpr »

mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm 5. If you use the proceed in higher education for your kid, it's also tax free (another ++)
I was under the same impression, but it had been recently pointed out to me that there are income limits for this exclusion.

https://www.treasurydirect.gov/indiv/pl ... cation.htm

The limits for 2020 are: $97,350 if single, head of household, or qualifying widow(er); $153,550 if married filing jointly.

These limits are announced in Form 8815, and therefore always lag by an year.
desconhecido
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Re: Should I invest in I Bonds? xfer to brkr acct?

Post by desconhecido »

MrMars wrote: Thu Jun 10, 2021 3:22 pm
desconhecido wrote: Thu Jun 10, 2021 1:47 pm Is it easy or hard to transfer ibonds from a treasury direct account to a Vanguard joint brokerage account? Got everything consolidated at Vanguard and the idea of having two new accounts to keep track of is really not appealing to me.
I-Bonds are not transferable to a brokerage account.
Yeah, that appears to be the case. I stumbled upon one reference which said it could be done, and it's on the internet so it must be true. Unfortunately, not so much.
investmax
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Re: Should I invest in I Bonds?

Post by investmax »

lakpr wrote: Thu Jun 10, 2021 3:32 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm 5. If you use the proceed in higher education for your kid, it's also tax free (another ++)
I was under the same impression, but it had been recently pointed out to me that there are income limits for this exclusion.

https://www.treasurydirect.gov/indiv/pl ... cation.htm

The limits for 2020 are: $97,350 if single, head of household, or qualifying widow(er); $153,550 if married filing jointly.

These limits are announced in Form 8815, and therefore always lag by an year.
The I-Bonds interest earnings are exempt from State Tax, regardless of income.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

lakpr wrote: Thu Jun 10, 2021 3:32 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm 5. If you use the proceed in higher education for your kid, it's also tax free (another ++)
I was under the same impression, but it had been recently pointed out to me that there are income limits for this exclusion.

https://www.treasurydirect.gov/indiv/pl ... cation.htm

The limits for 2020 are: $97,350 if single, head of household, or qualifying widow(er); $153,550 if married filing jointly.

These limits are announced in Form 8815, and therefore always lag by an year.
Ouch. Thanks for pointing that out. This is the first year I started buying I-bond, so thanks!! Then, even without my point #5, just that it's tax-deferred and exempt from state tax is good enough for me to use I-bond to hold my cash.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

investmax wrote: Thu Jun 10, 2021 5:15 pm
lakpr wrote: Thu Jun 10, 2021 3:32 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm 5. If you use the proceed in higher education for your kid, it's also tax free (another ++)
I was under the same impression, but it had been recently pointed out to me that there are income limits for this exclusion.

https://www.treasurydirect.gov/indiv/pl ... cation.htm

The limits for 2020 are: $97,350 if single, head of household, or qualifying widow(er); $153,550 if married filing jointly.

These limits are announced in Form 8815, and therefore always lag by an year.
The I-Bonds interest earnings are exempt from State Tax, regardless of income.
Yes, right. I think i read about it. :happy Thanks for pointing it out. another reason for it to be a keeper in my whole financial picture.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

leeks wrote: Thu Jun 10, 2021 1:05 pm
investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
Yep, that is a good reminder for anyone reading this. $40k of our Ibonds are available for withdrawal now, the other $10K not till next year. So for this year, it would be more accurate to say our emergency fund is $40K (more than adequate for us as we have other resources that could be repurposed for emergency need).

In our family financial spreadsheet, I do track the "redeemable now" Ibonds separately from the newer Ibond purchases.
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
BrokerageZelda
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Re: Should I invest in I Bonds?

Post by BrokerageZelda »

mrsgoldilocks wrote: Thu Jun 10, 2021 8:45 pm
leeks wrote: Thu Jun 10, 2021 1:05 pm
investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
Yep, that is a good reminder for anyone reading this. $40k of our Ibonds are available for withdrawal now, the other $10K not till next year. So for this year, it would be more accurate to say our emergency fund is $40K (more than adequate for us as we have other resources that could be repurposed for emergency need).

In our family financial spreadsheet, I do track the "redeemable now" Ibonds separately from the newer Ibond purchases.
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
You can cash out fractions of electronic bonds on TreasuryDirect (minimum $25). There's no need to break up your purchases just for ease of redemption, and buying more earlier means it reaches 12 months sooner.
nolesrule
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Re: Should I invest in I Bonds?

Post by nolesrule »

mrsgoldilocks wrote: Thu Jun 10, 2021 8:45 pm
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
You can partially redeem I Bonds at treasury direct. Minimum partial redemption is $25 and you have to leave at least $25 unredeemed. So there's no reason to break up purchases for redemption reasons.

Spreading them out for the 1 year unavailability might be wise. We purchase quarterly in 2 accounts, offset by a month in each account.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

nolesrule wrote: Thu Jun 10, 2021 9:04 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 8:45 pm
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
You can partially redeem I Bonds at treasury direct. Minimum partial redemption is $25 and you have to leave at least $25 unredeemed. So there's no reason to break up purchases for redemption reasons.

Spreading them out for the 1 year unavailability might be wise. We purchase quarterly in 2 accounts, offset by a month in each account.
Ok. learn something new again. :happy As a first time i-bond investor, I probably didn't read enough ... Thanks for letting me know.
mrsgoldilocks
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Re: Should I invest in I Bonds?

Post by mrsgoldilocks »

BrokerageZelda wrote: Thu Jun 10, 2021 8:52 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 8:45 pm
leeks wrote: Thu Jun 10, 2021 1:05 pm
investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
Yep, that is a good reminder for anyone reading this. $40k of our Ibonds are available for withdrawal now, the other $10K not till next year. So for this year, it would be more accurate to say our emergency fund is $40K (more than adequate for us as we have other resources that could be repurposed for emergency need).

In our family financial spreadsheet, I do track the "redeemable now" Ibonds separately from the newer Ibond purchases.
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
You can cash out fractions of electronic bonds on TreasuryDirect (minimum $25). There's no need to break up your purchases just for ease of redemption, and buying more earlier means it reaches 12 months sooner.
Oops .. learn something new again. Thanks for correcting me.
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anon_investor
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Re: Should I invest in I Bonds?

Post by anon_investor »

mrsgoldilocks wrote: Thu Jun 10, 2021 9:10 pm
BrokerageZelda wrote: Thu Jun 10, 2021 8:52 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 8:45 pm
leeks wrote: Thu Jun 10, 2021 1:05 pm
investmax wrote: Thu Jun 10, 2021 1:01 pm

Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
Yep, that is a good reminder for anyone reading this. $40k of our Ibonds are available for withdrawal now, the other $10K not till next year. So for this year, it would be more accurate to say our emergency fund is $40K (more than adequate for us as we have other resources that could be repurposed for emergency need).

In our family financial spreadsheet, I do track the "redeemable now" Ibonds separately from the newer Ibond purchases.
Same here. Also, i think it's good to purchase the i-bonds in smaller chucks. Instead of buying 10K as 1 transaction, I made 10 x $1K purchase. So in case, i need to access it for emergency, I can redeem just enough to cover my situation, and I will not be forced to redeem the whole 10K.
You can cash out fractions of electronic bonds on TreasuryDirect (minimum $25). There's no need to break up your purchases just for ease of redemption, and buying more earlier means it reaches 12 months sooner.
Oops .. learn something new again. Thanks for correcting me.
Makes I Bonds sound even better and better for use as an emergency fund, aye? After learning about I Bonds I started shifting my emergency fund to them last year.
grok87
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Re: Should I invest in I Bonds?

Post by grok87 »

investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
the 3 month interest penalty only applies if sold within 5 years
RIP Mr. Bogle.
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anon_investor
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Re: Should I invest in I Bonds?

Post by anon_investor »

grok87 wrote: Thu Jun 10, 2021 9:23 pm
investmax wrote: Thu Jun 10, 2021 1:01 pm
leeks wrote: Thu Jun 10, 2021 12:53 pm We consider our Ibonds to be emergency funds, we don't emotionally consider them as "investments." We have built it up to $50K so far. We are happy to mostly ignore it but know it will keep up with inflation so that the real value of emergency funds will be the same in 10 or 20 years.
Please note there is a lock-in period of 1 year before you wan withdraw from I-Bonds, in case you are planning to keep this as an emergency fund. After 1 year, yes you can withdraw anytime with a 3 month interest penalty.
the 3 month interest penalty only applies if sold within 5 years
If you time it so your purchase is at the end of a month and redemption at the beginning of a month, then you can effectively reduce the penalty to 2 month, since I Bonds purchased any time during a month receive interest for the entire month.
Buckrodgerz
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Re: Should I invest in I Bonds?

Post by Buckrodgerz »

Your will do better with a diversified investment portfolio.
MishkaWorries
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Re: Should I invest in I Bonds?

Post by MishkaWorries »

Buckrodgerz wrote: Thu Jun 10, 2021 9:39 pm Your will do better with a diversified investment portfolio.
Your advice is to take $40,000 from maturing CDs and put it in a diversified portfolio? Wouldn't that change the OPs asset allocation to a more risky portfolio? Isn't that performance chasing?

I think it would be better for the OP to place the money in the highest yielding cash equivalent they can find.
We plan. G-d laughs.
renegade06
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Re: Should I invest in I Bonds?

Post by renegade06 »

mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm I also just started my i-bond journey in June 2021. I wish I started earlier ... But like everyone said, there are a couple of things to keep in mind.

1. there is a holding period of 1 year. after 1 year, and before 5 years, if you redeem, you will have to forfeit the last 3 months of interest.
2. Every SSN can buy only $10K.
3. Interest is compounded i believe semi-annually. and right now the inflation portion is 3.4% but that's only lock for 6 months.
4. Interest grow tax free in the account as long as you don't redeem it (big +++ for me)
5. If you use the proceed in higher education for your kid, it's also tax free (anther ++)

I purchased 5K already. and plan to put in another 5K by Oct. and probably will get my spouse to get 10K too. I'm taking this as my "emergency fund". I have had my emergency fund sitting around earning so little for so many years. in I-bond at least, it's keeping up with inflation. After I fully funded my emergency fund in I-bond, I will see if I will continue buying more. But looks like a lot of ppl in this forum buy i-bond regularly, so there must be something attractive there.
Will the I bond continue to earn interest indefinitely? For example, is it 3.4% per year that you earn on the $10k? (I understand the 3.4% is the current rate, but will change.
BrokerageZelda
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Re: Should I invest in I Bonds?

Post by BrokerageZelda »

renegade06 wrote: Fri Jun 11, 2021 6:59 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm I also just started my i-bond journey in June 2021. I wish I started earlier ... But like everyone said, there are a couple of things to keep in mind.

1. there is a holding period of 1 year. after 1 year, and before 5 years, if you redeem, you will have to forfeit the last 3 months of interest.
2. Every SSN can buy only $10K.
3. Interest is compounded i believe semi-annually. and right now the inflation portion is 3.4% but that's only lock for 6 months.
4. Interest grow tax free in the account as long as you don't redeem it (big +++ for me)
5. If you use the proceed in higher education for your kid, it's also tax free (anther ++)

I purchased 5K already. and plan to put in another 5K by Oct. and probably will get my spouse to get 10K too. I'm taking this as my "emergency fund". I have had my emergency fund sitting around earning so little for so many years. in I-bond at least, it's keeping up with inflation. After I fully funded my emergency fund in I-bond, I will see if I will continue buying more. But looks like a lot of ppl in this forum buy i-bond regularly, so there must be something attractive there.
Will the I bond continue to earn interest indefinitely? For example, is it 3.4% per year that you earn on the $10k? (I understand the 3.4% is the current rate, but will change.
I Bonds earn interest for 30 years after their issue date. At 30 years they 'mature' and stop increasing in value.

The interest rate is expressed as an annual percentage, but that earning rate is only guaranteed for a six-month period at a time. The interest compounds (i.e. you start earning interest on the new interest) every six months when the rate changes.
renegade06
Posts: 358
Joined: Sat Jan 12, 2019 3:00 pm

Re: Should I invest in I Bonds?

Post by renegade06 »

Thanks for explaining that!
BrokerageZelda wrote: Fri Jun 11, 2021 7:24 pm
renegade06 wrote: Fri Jun 11, 2021 6:59 pm
mrsgoldilocks wrote: Thu Jun 10, 2021 1:12 pm I also just started my i-bond journey in June 2021. I wish I started earlier ... But like everyone said, there are a couple of things to keep in mind.

1. there is a holding period of 1 year. after 1 year, and before 5 years, if you redeem, you will have to forfeit the last 3 months of interest.
2. Every SSN can buy only $10K.
3. Interest is compounded i believe semi-annually. and right now the inflation portion is 3.4% but that's only lock for 6 months.
4. Interest grow tax free in the account as long as you don't redeem it (big +++ for me)
5. If you use the proceed in higher education for your kid, it's also tax free (anther ++)

I purchased 5K already. and plan to put in another 5K by Oct. and probably will get my spouse to get 10K too. I'm taking this as my "emergency fund". I have had my emergency fund sitting around earning so little for so many years. in I-bond at least, it's keeping up with inflation. After I fully funded my emergency fund in I-bond, I will see if I will continue buying more. But looks like a lot of ppl in this forum buy i-bond regularly, so there must be something attractive there.
Will the I bond continue to earn interest indefinitely? For example, is it 3.4% per year that you earn on the $10k? (I understand the 3.4% is the current rate, but will change.
I Bonds earn interest for 30 years after their issue date. At 30 years they 'mature' and stop increasing in value.

The interest rate is expressed as an annual percentage, but that earning rate is only guaranteed for a six-month period at a time. The interest compounds (i.e. you start earning interest on the new interest) every six months when the rate changes.
chw
Posts: 1063
Joined: Thu May 24, 2012 4:22 pm

Re: Should I invest in I Bonds?

Post by chw »

Yes. I allocate 20% of my FI allocation to them, which I’ve been working towards avoid 20 years. The 10k per person annual limit makes it difficult to fill the allocation at times, but if you’re diligent, it can be done.
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