Is an I-bond a good place to park some cash?

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Stillwater1971
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Is an I-bond a good place to park some cash?

Post by Stillwater1971 »

I have some extra cash sitting in my savings acct (which is making squat with a sad interest rate). Had the thought of going with a non-brick and mortar "bank" such as HM Bradley which was offering 3%. But it seems a bit sketchy.

Then I came across Gov't I-bonds and was curious what Bogleheads thought of it? I won't need the money for about 5-6 years. Right now, it's at 3.54%.

Pros?
Cons?

Thanks in advance.
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
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Re: Is an I-bond a good place to park some cash?

Post by KlingKlang »

Your plan to purchase Series I US Savings Bonds is sound. Just be aware of the one year mandatory holding period, the five year holding period to avoid the three month interest penalty, and the $10,000 per year per person purchase limit at Treasury Direct plus $5000 per year Federal Income Tax refund limit.
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Re: Is an I-bond a good place to park some cash?

Post by indexlover »

“If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.” - Mr. Buffett - Berkshire Hathaway ’s 2016 annual report.
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Re: Is an I-bond a good place to park some cash?

Post by z3r0c00l »

anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Not really true, if you forget your password and try to guess it 5x you might get seriously locked out, but I appreciate the extra security. Don't press the back button on this (or any other) secure web page while banking online and you will be fine. There is support if you need it but I only know that from others since I never needed any support. Just made an account and started buying bonds 10 years ago. Once a month I check the balance and once a year I buy another bond.

There is probably no better completely safe investment available today than I bonds, 100% guaranteed not to lose money and to keep pace with inflation, and your time horizon of 5+ years is appropriate. After that time the I bonds have no early withdrawal penalty.
Last edited by z3r0c00l on Tue Jul 20, 2021 5:03 pm, edited 1 time in total.
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tomsense76
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Re: Is an I-bond a good place to park some cash?

Post by tomsense76 »

Yeah that seems reasonable to me (also have some I Bonds). Some people look at them as an emergency fund. Others look at them as additional retirement savings or savings for a specific goal. Some more thoughts on how they are used here ( viewtopic.php?t=329648 ).

Pros: Seems like you have a good handle on this. Mainly it is inflation protected cash that sits in taxable with taxes deferred until maturity or redemption (whichever comes first). One can pay taxes annually if they want, but that isn't needed (and suspect most don't as the overall tax may be lower). There are also exempt from state taxes (like Treasuries), which can be a perk. Pretty easy to transfer money to/from a bank account. One can also get paper bonds as part of their tax refund and cash those at a bank when needed (an inflation protected form of physical cash :D).

Cons: There is a 1yr lock up and holding for less than 5yrs results in a 3month interest penalty. The main one that comes up again and again is the purchase limits. This strikes me as just a different way of saying I Bonds are in high demand (so maybe not much of a con :wink: ). Some gripe about dealing with TreasuryDirect (the only way to buy I Bonds electronically). The website feels like it comes from the 90s and some struggle with the interface. They can be finicky about opening accounts, linking to bank accounts, etc. (requiring additional paperwork with special certification to do so). Sometimes they get weird if your spouse interacts with them over your account. Mostly this seems like a very intense interest in keeping things secure (though can see how it may be burdensome for some). Here are some threads that go into more details on cons ( viewtopic.php?t=345096 ) ( viewtopic.php?t=311644 )
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Re: Is an I-bond a good place to park some cash?

Post by fuddbogle »

anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
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Stillwater1971
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Re: Is an I-bond a good place to park some cash?

Post by Stillwater1971 »

I appreciate everyone's knowledge and wisdom on the I-bonds. My son will be in college in a few years so having some money there that will be tax exempt if used for College is good to know.

Also, EE Bonds is new to me. Do you have to hold on to it for 30 years? Or is it similar to I-bonds in that regard? I see that they currently have a fixed .1%? Is that correct?
It seems the Treasury Direct Website offers TIPS too?

Of the 3 options, which makes the most sense when needed in less than 10 years?
Last edited by Stillwater1971 on Tue Jul 20, 2021 5:34 pm, edited 1 time in total.
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Re: Is an I-bond a good place to park some cash?

Post by MishkaWorries »

anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
The Treasury Direct website is quirky but functional. It takes a little to get used to but it works just fine. From all accounts I've seen, the telephone support is outstanding.

The only people I would counsel not to use TD are people who live overseas or travel a lot because they require signature guarantee to change bank accounts or to prove identity.
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

I vote yes. I find TreasuryDirect a completely fine website. It has slightly more security than it needs, but if you can remember/hide a password, no problem. As for parking cash: that's how I started ... and now a decade later I'm still buying them and so glad I did. It's hard (virtually impossible, safely at least) to beat 0% real in fixed income with a flexible cash-out date up to 30 years, state tax exempt and federal tax deferred.

Also regarding the website: if you're like me and just log on once a year, it's especially not a hassle. And since the taxes are deferred, there's no need to log in to get tax forms, etc... from year to year (I just log in to make my purchases of both I and EE bonds).
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

Stillwater1971 wrote: Tue Jul 20, 2021 5:27 pm I appreciate everyone's knowledge and wisdom on the I-bonds. My son will be in college in a few years so having some money there that will be tax exempt if used for College is good to know.

Also, EE Bonds is new to me. Do you have to hold on to it for 30 years? Or is it similar to I-bonds in that regard? I see that they currently have a fixed .1%? Is that correct?
It seems the Treasury Direct Website offers TIPS too?

Of the 3 options, which makes the most sense when needed in less than 10 years?
EE bonds are great - but I would buy them *after* I bonds if you have to pick, and certainly if you want them shorter term. The beauty of EE bonds is that they're like cash (i.e. low interest, you can cash them out any time) with a 'bond' option at the 20 year point when they double. So if you cash out early, you don't lose much compared to a savings account, but if you can hold for 20 years, they double. In your situation, though: I bonds first IMO. And to be clear: you could hold EE bonds for 30 years, but optimal is 20 years - they are worth very little if you cash them out before and accrue little after.

So if you aren't hitting the max (10K/year) on I Bonds, I would start there for less than 10 years. After that, depends on your flexibility. TIPS are going to be inferior to I Bonds though at current rates (most TIPS are negative real while I Bonds have a 0% real floor).
Last edited by Noobvestor on Tue Jul 20, 2021 5:41 pm, edited 1 time in total.
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Stillwater1971
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Re: Is an I-bond a good place to park some cash?

Post by Stillwater1971 »

When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year since your last purchase or once per calendar year?
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year sine your last purchase or once per calendar year?
I don't recall reading that (though I only make a purchase once a year so I'm not sure). If it does say that somewhere I would assume calendar year - that's how the amount caps work. For example: you could buy $10K of I bonds in December of 2021 and another $10K the next month (January 2022).

(For my own curiosity: do you have a link? I feel like I should know one way or another if that's really a thing - one buy per year).
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year since your last purchase or once per calendar year?
I never saw that; as far as I know you can purchase every day, but only $10k per person per calendar year total for each bond type.
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Re: Is an I-bond a good place to park some cash?

Post by Stillwater1971 »

Sorry, I should have been more specific. I meant that if I maxed it out to 10k, would I have to wait 365 days to invest more or until the end of the calendar year.
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

MishkaWorries wrote: Tue Jul 20, 2021 5:29 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
The Treasury Direct website is quirky but functional. It takes a little to get used to but it works just fine. From all accounts I've seen, the telephone support is outstanding.

The only people I would counsel not to use TD are people who live overseas or travel a lot because they require signature guarantee to change bank accounts or to prove identity.

Noobvestor wrote: Tue Jul 20, 2021 5:35 pm I vote yes. I find TreasuryDirect a completely fine website. It has slightly more security than it needs, but if you can remember/hide a password, no problem. As for parking cash: that's how I started ... and now a decade later I'm still buying them and so glad I did. It's hard (virtually impossible, safely at least) to beat 0% real in fixed income with a flexible cash-out date up to 30 years, state tax exempt and federal tax deferred.

Also regarding the website: if you're like me and just log on once a year, it's especially not a hassle. And since the taxes are deferred, there's no need to log in to get tax forms, etc... from year to year (I just log in to make my purchases of both I and EE bonds).
You guys are getting me excited.

How are the fees and how hard is it to redeem?
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

anaparafunds wrote: Tue Jul 20, 2021 5:51 pm How are the fees and how hard is it to redeem?
No fees and easy to redeem! The catch: 1 year minimum holding period. Very tiny other catch: you lose 3 months of interest if you cash it in before 5 years (but given current rates on CDs, savings, etc... even with that penalty they're a great deal).
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Re: Is an I-bond a good place to park some cash?

Post by anon_investor »

Stillwater1971 wrote: Tue Jul 20, 2021 5:51 pm Sorry, I should have been more specific. I meant that if I maxed it out to 10k, would I have to wait 365 days to invest more or until the end of the calendar year.
No it is just $10k total during a calendar year (Jan 1-Dec 31). So you can buy $10k in Dec 2021 and $10k in Jan 2022.
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

Noobvestor wrote: Tue Jul 20, 2021 5:55 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm How are the fees and how hard is it to redeem?
No fees and easy to redeem! The catch: 1 year minimum holding period. Very tiny other catch: you lose 3 months of interest if you cash it in before 5 years (but given current rates on CDs, savings, etc... even with that penalty they're a great deal).
Not bad at all.

Does it go directly to my bank account? What do I use? Debit? Credit?
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Re: Is an I-bond a good place to park some cash?

Post by anon_investor »

anaparafunds wrote: Tue Jul 20, 2021 6:04 pm
Noobvestor wrote: Tue Jul 20, 2021 5:55 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm How are the fees and how hard is it to redeem?
No fees and easy to redeem! The catch: 1 year minimum holding period. Very tiny other catch: you lose 3 months of interest if you cash it in before 5 years (but given current rates on CDs, savings, etc... even with that penalty they're a great deal).
Not bad at all.

Does it go directly to my bank account? What do I use? Debit? Credit?
You have to fund from one of your linked bank accounts. The proceeds can be sent directly to one of your linked bank account account. The proceeds can also be sent to an internal TD holding account that earns no interest to buy more treasury securities.
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
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Re: Is an I-bond a good place to park some cash?

Post by stupidkid »

tibbitts wrote: Tue Jul 20, 2021 6:11 pm
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years.
While true I feel this a) comes up often and b) applies generally under the rule of caveat emptor for any asset you might purchase - but gets framed with other caveats like "past performance isn't indicative of future returns".

EE bonds - absolutely, they're a 20 year investment. The whole investment philosophy here is for the long term so that doesn't seem like a big deal at all. The "risk free" aspect is amazing, and tax deferral of 20 years would seem to be a benefit vs draw back.

I bonds - you're (basically) guaranteed to lose less/make more than cash, which is pretty good. Also tax deferral, pretty good. Plus side perks like tax free for education which can be advantageous.

Generally I've come around to the philosophy that bonds are not for growth, they are for preservation - full stop. Anything else is a bonus. Get my growth with risk on the equity side.
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket.
It's all a matter of alternatives and I wouldn't get hung up on the negative real returns in a world where all safe fixed income is negative right now.

5-year TIPS: -1.6% real before taxes
I Bonds: 0% real before taxes
Cash/Treasuries: almost certainly negative but TBD because future inflation is unknown

So for an apples-to-apples comparison, I bonds will beat 5-year TIPS by 1.6%/year, which is substantial. On top of that, unlike TIPS, you don't have to hold them for exactly five years to hit your target - you can cash them out years earlier or decades later - massively flexible! As for the 10K/year not being worth it - probably not for really high earners. As a medium-high earner I find 10K/year each in I and EE bonds incredibly valuable. It didn't feel like a lot the first year, but having maxed these out for a decade now, well, it adds up and I have no regrets.
Last edited by Noobvestor on Tue Jul 20, 2021 6:47 pm, edited 1 time in total.
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Re: Is an I-bond a good place to park some cash?

Post by anon_investor »

Noobvestor wrote: Tue Jul 20, 2021 6:45 pm
tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket.
It's all a matter of alternatives and I wouldn't get hung up on the negative real returns in a world where all safe fixed income is negative right now.

5-year TIPS: -1.6% real before taxes
I Bonds: 0% real before taxes
Cash/Treasuries: almost certainly negative but TBD because future inflation is unknown

So for an apples-to-apples comparison, I bonds will beat 5-year TIPS by 1.6%/year, which is substantial. On top of that, unlike TIPS, you don't have to hold them for exactly five years - you can cash them out years earlier or decades later - massively flexible! As for the 10K/year not being worth it - probably not for really high earners. As a medium-high earner I find 10K/year each in I and EE bonds incredibly valuable.
A married couple can get annually $25k in I Bonds (using tax refund) and $20k in EE Bonds. That is a good amount even for high income folks.
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
So 6 months. I'll think about it.

What credit card bonus strategy are you talking about? I'm interested.

Where are other good parking spots for money that beats the +3.5% rate of I-bonds?
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

anon_investor wrote: Tue Jul 20, 2021 6:06 pm
anaparafunds wrote: Tue Jul 20, 2021 6:04 pm
Noobvestor wrote: Tue Jul 20, 2021 5:55 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm How are the fees and how hard is it to redeem?
No fees and easy to redeem! The catch: 1 year minimum holding period. Very tiny other catch: you lose 3 months of interest if you cash it in before 5 years (but given current rates on CDs, savings, etc... even with that penalty they're a great deal).
Not bad at all.

Does it go directly to my bank account? What do I use? Debit? Credit?
You have to fund from one of your linked bank accounts. The proceeds can be sent directly to one of your linked bank account account. The proceeds can also be sent to an internal TD holding account that earns no interest to buy more treasury securities.
Thanks
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Re: Is an I-bond a good place to park some cash?

Post by tomsense76 »

Noobvestor wrote: Tue Jul 20, 2021 5:42 pm
Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year sine your last purchase or once per calendar year?
I don't recall reading that (though I only make a purchase once a year so I'm not sure). If it does say that somewhere I would assume calendar year - that's how the amount caps work. For example: you could buy $10K of I bonds in December of 2021 and another $10K the next month (January 2022).

(For my own curiosity: do you have a link? I feel like I should know one way or another if that's really a thing - one buy per year).
Yeah they say 12months in this TD FAQ. It also says it here, but the FAQ was easier to link to :happy
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

tomsense76 wrote: Tue Jul 20, 2021 7:00 pm
Noobvestor wrote: Tue Jul 20, 2021 5:42 pm
Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year sine your last purchase or once per calendar year?
I don't recall reading that (though I only make a purchase once a year so I'm not sure). If it does say that somewhere I would assume calendar year - that's how the amount caps work. For example: you could buy $10K of I bonds in December of 2021 and another $10K the next month (January 2022).

(For my own curiosity: do you have a link? I feel like I should know one way or another if that's really a thing - one buy per year).
Yeah they say 12months in this TD FAQ. It also says it here, but the FAQ was easier to link to :happy
OK I see - I think they're talking about redemptions though, yes? Like: you can't redeem I or EE within a year (12 months).
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Re: Is an I-bond a good place to park some cash?

Post by tomsense76 »

Noobvestor wrote: Tue Jul 20, 2021 7:13 pm
tomsense76 wrote: Tue Jul 20, 2021 7:00 pm
Noobvestor wrote: Tue Jul 20, 2021 5:42 pm
Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year sine your last purchase or once per calendar year?
I don't recall reading that (though I only make a purchase once a year so I'm not sure). If it does say that somewhere I would assume calendar year - that's how the amount caps work. For example: you could buy $10K of I bonds in December of 2021 and another $10K the next month (January 2022).

(For my own curiosity: do you have a link? I feel like I should know one way or another if that's really a thing - one buy per year).
Yeah they say 12months in this TD FAQ. It also says it here, but the FAQ was easier to link to :happy
OK I see - I think they're talking about redemptions though, yes? Like: you can't redeem I or EE within a year (12 months).
Ah my bad. Sorry I misread. Yes that's about redemptions

Yeah I don't there is any rule about how many EE Bonds one can purchase. There is a purchase limit of $10k as you had already said. There's also a minimum purchase size of $25. So I guess one can purchase 400 separate purchases of $25 each (not that I know why one would want to do that as one can choose any arbitrary amount greater than $25 and just purchase that).
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

anaparafunds wrote: Tue Jul 20, 2021 6:53 pm
tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
So 6 months. I'll think about it.

What credit card bonus strategy are you talking about? I'm interested.

Where are other good parking spots for money that beats the +3.5% rate of I-bonds?
You must have missed the 5412 posts (at the moment - wait a few minutes and there will be more) in the "credit card rewards strategy" thread.

There are no other better parking places for money that I'm aware of. I'm "parking" my money by sending it to the IRS for Roth conversions.
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

Yeah - nothing even remotely safe is going to approach 3% right now. Check out Treasuries, CDs, savings accounts, etc... no dice. Note that I Bonds bought now will continue to follow the inflation rate, so they won't be 3%+ forever (will maybe/likely reset downward), but I doubt they'll fall behind these other options anytime soon. And the nice thing is: if they do, you can just cash them out and switch things up. That flexibility is worth quite a bit IMO.

I've been buying I Bonds for ten years thinking 'if a really better deal comes along, I'll take it' and not only have they stayed a better deal (given tax considerations, flexibility, rates, etc...) but they've become an even better deal over that period instead. I'm a believer if you couldn't tell ;)
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

stupidkid wrote: Tue Jul 20, 2021 6:40 pm EE bonds - absolutely, they're a 20 year investment. The whole investment philosophy here is for the long term so that doesn't seem like a big deal at all. The "risk free" aspect is amazing, and tax deferral of 20 years would seem to be a benefit vs draw back.
The 20 years is a big deal for someone like the OP looking for a "parking place" for roughly 5 years.
anaparafunds
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

tibbitts wrote: Tue Jul 20, 2021 7:37 pm
anaparafunds wrote: Tue Jul 20, 2021 6:53 pm
tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
So 6 months. I'll think about it.

What credit card bonus strategy are you talking about? I'm interested.

Where are other good parking spots for money that beats the +3.5% rate of I-bonds?
You must have missed the 5412 posts (at the moment - wait a few minutes and there will be more) in the "credit card rewards strategy" thread.

There are no other better parking places for money that I'm aware of. I'm "parking" my money by sending it to the IRS for Roth conversions.
I'm pretty new here. What threads are those in? Are they usually posted here in Personal Investments thread? Thanks.
Destiple
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Re: Is an I-bond a good place to park some cash?

Post by Destiple »

TIPS has limit of 1 million I think
Why not park cash there for sometime in periods of uncertainty rather than limited I bonds or EE BONds ?
02nz
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Re: Is an I-bond a good place to park some cash?

Post by 02nz »

anaparafunds wrote: Tue Jul 20, 2021 8:16 pm
tibbitts wrote: Tue Jul 20, 2021 7:37 pm
anaparafunds wrote: Tue Jul 20, 2021 6:53 pm
tibbitts wrote: Tue Jul 20, 2021 6:11 pm
anaparafunds wrote: Tue Jul 20, 2021 5:51 pm
You guys are getting me excited.
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
So 6 months. I'll think about it.

What credit card bonus strategy are you talking about? I'm interested.

Where are other good parking spots for money that beats the +3.5% rate of I-bonds?
You must have missed the 5412 posts (at the moment - wait a few minutes and there will be more) in the "credit card rewards strategy" thread.

There are no other better parking places for money that I'm aware of. I'm "parking" my money by sending it to the IRS for Roth conversions.
I'm pretty new here. What threads are those in? Are they usually posted here in Personal Investments thread? Thanks.
There's a search box at the top right of the page.
IowaFarmWife
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Re: Is an I-bond a good place to park some cash?

Post by IowaFarmWife »

Stillwater1971 wrote: Tue Jul 20, 2021 5:41 pm When purchasing IBonds or EE bonds, it says you can only purchase once a year. Is that once a year since your last purchase or once per calendar year?
You can purchase as many times a year as you wish. I purchase some at the end of every month. The website is not that difficult to navigate, and the one time I locked myself out, I was able to call customer service and I was back in business in less than 5 minutes.
“The quickest way to double your money is to fold it in half and put it in your back pocket.” —Will Rogers
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Re: Is an I-bond a good place to park some cash?

Post by tomsense76 »

z3r0c00l wrote: Tue Jul 20, 2021 4:59 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Not really true, if you forget your password and try to guess it 5x you might get seriously locked out, but I appreciate the extra security. Don't press the back button on this (or any other) secure web page while banking online and you will be fine. There is support if you need it but I only know that from others since I never needed any support. Just made an account and started buying bonds 10 years ago. Once a month I check the balance and once a year I buy another bond.

There is probably no better completely safe investment available today than I bonds, 100% guaranteed not to lose money and to keep pace with inflation, and your time horizon of 5+ years is appropriate. After that time the I bonds have no early withdrawal penalty.
Would second this. Have emailed their customer support a few times and have found them to be very helpful and supportive.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Re: Is an I-bond a good place to park some cash?

Post by KlingKlang »

Destiple wrote: Tue Jul 20, 2021 8:33 pm TIPS has limit of 1 million I think
Why not park cash there for sometime in periods of uncertainty rather than limited I bonds or EE BONds ?
The limit for noncompetitive purchases is $5 million for each security type and term, for each auction. This limit applies regardless of whether you're buying a bill, note, bond, Floating Rate Note, or TIPS, and regardless of what method you use to make the purchase (TreasuryDirect, broker, or dealer).

If you are making competitive purchases of Treasury securities you need more advice than you are going to get here.
stupidkid
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Re: Is an I-bond a good place to park some cash?

Post by stupidkid »

tibbitts wrote: Tue Jul 20, 2021 7:54 pm
stupidkid wrote: Tue Jul 20, 2021 6:40 pm EE bonds - absolutely, they're a 20 year investment. The whole investment philosophy here is for the long term so that doesn't seem like a big deal at all. The "risk free" aspect is amazing, and tax deferral of 20 years would seem to be a benefit vs draw back.
The 20 years is a big deal for someone like the OP looking for a "parking place" for roughly 5 years.
Fair - though I wasn't suggesting them as a good place for five years, pretty bad for that. Just that they're a pretty good place for 20 years, for what they do/offer.

But in the context of this thread/question - not a good place to park cash. I bonds though are a good place for five years, again for what they do.

To the other suggestions of credit card rewards, probably chasing bank account bonuses (depending how much cash) is a more relevant suggestion for parking cash. Though credit card rewards can definitely generate some more cash...
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Re: Is an I-bond a good place to park some cash?

Post by anon_investor »

tomsense76 wrote: Tue Jul 20, 2021 8:52 pm
z3r0c00l wrote: Tue Jul 20, 2021 4:59 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Not really true, if you forget your password and try to guess it 5x you might get seriously locked out, but I appreciate the extra security. Don't press the back button on this (or any other) secure web page while banking online and you will be fine. There is support if you need it but I only know that from others since I never needed any support. Just made an account and started buying bonds 10 years ago. Once a month I check the balance and once a year I buy another bond.

There is probably no better completely safe investment available today than I bonds, 100% guaranteed not to lose money and to keep pace with inflation, and your time horizon of 5+ years is appropriate. After that time the I bonds have no early withdrawal penalty.
Would second this. Have emailed their customer support a few times and have found them to be very helpful and supportive.
I have had to call TD CS before, they were very helpful.
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Noobvestor
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Re: Is an I-bond a good place to park some cash?

Post by Noobvestor »

KlingKlang wrote: Tue Jul 20, 2021 9:22 pm
Destiple wrote: Tue Jul 20, 2021 8:33 pm TIPS has limit of 1 million I think
Why not park cash there for sometime in periods of uncertainty rather than limited I bonds or EE BONds ?
The limit for noncompetitive purchases is $5 million for each security type and term, for each auction.
Oh man totally worthless then for my billions! -= Jeff Bezos (JK, but I really didn't even know there WAS a limit)
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Re: Is an I-bond a good place to park some cash?

Post by Mel Lindauer »

Destiple wrote: Tue Jul 20, 2021 8:33 pm TIPS has limit of 1 million I think
Why not park cash there for sometime in periods of uncertainty rather than limited I bonds or EE BONds ?
Because, at the present time, with TIPS' current negative real yields, you're guaranteed to lose spending power.
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Re: Is an I-bond a good place to park some cash?

Post by tomsense76 »

Noobvestor wrote: Tue Jul 20, 2021 10:23 pm
KlingKlang wrote: Tue Jul 20, 2021 9:22 pm
Destiple wrote: Tue Jul 20, 2021 8:33 pm TIPS has limit of 1 million I think
Why not park cash there for sometime in periods of uncertainty rather than limited I bonds or EE BONds ?
The limit for noncompetitive purchases is $5 million for each security type and term, for each auction.
Oh man totally worthless then for my billions! -= Jeff Bezos (JK, but I really didn't even know there WAS a limit)
Interesting do you know why that limit exists? I understand why the Treasury would want some limit, but am curious why $5 million in particular was picked? Does that have something to do with the liquidity of the TIPS market? Or the size of the auctions?
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

stupidkid wrote: Tue Jul 20, 2021 9:45 pm
tibbitts wrote: Tue Jul 20, 2021 7:54 pm
stupidkid wrote: Tue Jul 20, 2021 6:40 pm EE bonds - absolutely, they're a 20 year investment. The whole investment philosophy here is for the long term so that doesn't seem like a big deal at all. The "risk free" aspect is amazing, and tax deferral of 20 years would seem to be a benefit vs draw back.
The 20 years is a big deal for someone like the OP looking for a "parking place" for roughly 5 years.
Fair - though I wasn't suggesting them as a good place for five years, pretty bad for that. Just that they're a pretty good place for 20 years, for what they do/offer.

But in the context of this thread/question - not a good place to park cash. I bonds though are a good place for five years, again for what they do.

To the other suggestions of credit card rewards, probably chasing bank account bonuses (depending how much cash) is a more relevant suggestion for parking cash. Though credit card rewards can definitely generate some more cash...
Good point on bank/brokerage bonuses. I was thinking $10k and for example 4% from I-bonds over the next year, and thinking that $400 wouldn't be too hard to get with just credit card bonuses, but you're correct that bank/brokerage bonuses are more directly applicable if the OP could meet the requirements. The brokerage bonuses may require relatively large amounts to deposit, but the bank bonuses are usually available for very low amounts and maybe some transaction activities. The bank or brokerage bonuses will probably be taxable, though, while credit card signup bonuses generally aren't.
anaparafunds
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

02nz wrote: Tue Jul 20, 2021 8:34 pm
anaparafunds wrote: Tue Jul 20, 2021 8:16 pm
tibbitts wrote: Tue Jul 20, 2021 7:37 pm
anaparafunds wrote: Tue Jul 20, 2021 6:53 pm
tibbitts wrote: Tue Jul 20, 2021 6:11 pm
Just make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket. And EEs really don't make any sense unless you hold for 20 years. I own EE and I bonds, but none under the currently available terms. I'm not saying they're terrible, but being limited to $10k/year without taking extraordinary measures, I wouldn't bother starting with them today. The website is okay; just yet another account to deal with, assuming you don't run into any problems. You could make more with similar effort using a credit card bonus.

Also be sure that you realize that when you see the rates for I-bonds, that rate will only be for the first 6 months; after that, you don't know what the rate will be.
So 6 months. I'll think about it.

What credit card bonus strategy are you talking about? I'm interested.

Where are other good parking spots for money that beats the +3.5% rate of I-bonds?
You must have missed the 5412 posts (at the moment - wait a few minutes and there will be more) in the "credit card rewards strategy" thread.

There are no other better parking places for money that I'm aware of. I'm "parking" my money by sending it to the IRS for Roth conversions.
I'm pretty new here. What threads are those in? Are they usually posted here in Personal Investments thread? Thanks.
There's a search box at the top right of the page.
Thanks
anaparafunds
Posts: 27
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Re: Is an I-bond a good place to park some cash?

Post by anaparafunds »

anon_investor wrote: Tue Jul 20, 2021 9:47 pm
tomsense76 wrote: Tue Jul 20, 2021 8:52 pm
z3r0c00l wrote: Tue Jul 20, 2021 4:59 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Not really true, if you forget your password and try to guess it 5x you might get seriously locked out, but I appreciate the extra security. Don't press the back button on this (or any other) secure web page while banking online and you will be fine. There is support if you need it but I only know that from others since I never needed any support. Just made an account and started buying bonds 10 years ago. Once a month I check the balance and once a year I buy another bond.

There is probably no better completely safe investment available today than I bonds, 100% guaranteed not to lose money and to keep pace with inflation, and your time horizon of 5+ years is appropriate. After that time the I bonds have no early withdrawal penalty.
Would second this. Have emailed their customer support a few times and have found them to be very helpful and supportive.
I have had to call TD CS before, they were very helpful.
Thanks.
SchruteB&B
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Re: Is an I-bond a good place to park some cash?

Post by SchruteB&B »

fuddbogle wrote: Tue Jul 20, 2021 5:05 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Remember your password
Remember and do NOT change your bank account

Do those 2 things and you'll be fine
I’ve changed the bank account I had linked to Treasury Direct and it went fine, absolutely no problems.
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

SchruteB&B wrote: Wed Jul 21, 2021 6:36 am
fuddbogle wrote: Tue Jul 20, 2021 5:05 pm
anaparafunds wrote: Tue Jul 20, 2021 4:44 pm I'm also interested in this idea but according to some comments I've seen, it can be an unrecoverable blackhole due to how old their site is? There's almost no support? Are these true?
Remember your password
Remember and do NOT change your bank account

Do those 2 things and you'll be fine
I’ve changed the bank account I had linked to Treasury Direct and it went fine, absolutely no problems.
I'm in the process of adding a second bank account, and based on the thread where I asked about it, it seemed like it should go smoothly. As far as I know "changing" would require adding (by USmail), then deleting the previous account electronically. I'm adding a second account just in case the first one gets lost somehow (for example the account number has to be changed for some reason.)
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Re: Is an I-bond a good place to park some cash?

Post by #Cruncher »

tibbitts wrote: Tue Jul 20, 2021 6:11 pmJust make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket.
This isn't strictly correct. I Bonds purchased until October will indeed have a 0% fixed rate. But, because its composite rate isn't allowed to be less than zero, a negative inflation rate for any six-month period during its life will cause the real value return for one of these to end up being more than 0%. (See TreasuryDirect's Combining the two rates.) If this increase in real value is large enough, it could cause a redeemed 0% fixed rate I Bond to have a positive after tax real return even with a non-zero tax rate.

Since they were introduced in 1998, there have been two six-month periods with a negative semi-annual inflation rate: -2.78% May - October 2009 and -0.80% May - October 2015. (See Inflation rates section of What have rates been in the past?.) Fourteen I Bonds have been issued with a 0% fixed rate. The far right column of the following table shows their actual real return which reflects the effect of one or both negative inflation rate periods on nine of them.

Code: Select all

Final CPI month  Mar 2021
Final CPI value   264.877
     Face value    10,000
                 Grows To   ---- Base CPI ---      Real           Real
         Issued  Nov 2021      Month    Value  Grows To  Years  Return

Code: Select all

       May 2008    13,184   Sep 2007  208.490    10,377   13.5   0.27% [1]
       
       Nov 2010    12,272   Mar 2010  217.631    10,083   11.0   0.08% [2]
       May 2011    12,232   Sep 2010  218.439    10,087   10.5   0.08%
       Nov 2011    11,952   Mar 2011  223.467    10,083   10.0   0.08%
       May 2012    11,772   Sep 2011  226.889    10,084    9.5   0.09%
       Nov 2012    11,640   Mar 2012  229.392    10,081    9.0   0.09%
       May 2013    11,548   Sep 2012  231.407    10,089    8.5   0.10%
       Nov 2014    11,300   Mar 2014  236.293    10,081    7.0   0.11%
       May 2015    11,220   Sep 2014  238.031    10,083    6.5   0.13%
       
       Nov 2016    11,128   Mar 2016  238.132    10,004    5.0   0.01% [3]
       May 2017    10,972   Sep 2016  241.428    10,001    4.5   0.00%
       May 2020    10,316   Sep 2019  256.759    10,000    1.5   0.00%
       Nov 2020    10,264   Mar 2020  258.115    10,002    1.0   0.02%
       May 2021    10,176   Sep 2020  260.280     9,999    0.5  -0.01%
Of course we don't know if there will be future cases of negative inflation rates that will benefit a 0% fixed rate I Bond's real return. However if the current spike in consumer prices does turn out to be transitory as some economists predict, I wouldn't be surprised if the six-month CPI change September 2021 - March 2022 or March 2022 - September 2022 was negative.

  1. Calculation of 0.27% real return for I Bond issued May 2008:
    • $10,000 grows to $13,184 in November 2021 including effect of two six-month periods with negative inflation rates.
    • Overall the CPI went from 208.490 in September 2007 to 264.877 in May 2021. (To get CPI values choose U.S. city average, All items - CUUR0000SA0 from the BLS Top Picks.) Adjusting the $13,184 ending value for this increase produces a $10,377 ending real value.
      10,377 = 13184 / (264.877 / 208.490)
    • This is a 0.27% return over the 13-1/2 years from May 2008 to November 2021.
      0.27% = 2 * ((10377 / 10000) ^ (1 / 27) - 1)
  2. These eight I Bonds benefitted from only one case of a negative inflation rate.
  3. There have been no cases of a negative inflation rate for these five I bonds. The Real Values aren't exactly $10,000 because of rounding; both of the rates and of the $25 I Bond -- of which larger I Bonds are multiples. (See the Wiki's I Savings Bonds - How interest is calculated.)
Last edited by #Cruncher on Wed Jul 21, 2021 8:43 am, edited 1 time in total.
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Re: Is an I-bond a good place to park some cash?

Post by tibbitts »

#Cruncher wrote: Wed Jul 21, 2021 7:59 am
tibbitts wrote: Tue Jul 20, 2021 6:11 pmJust make sure that you understand that with I-bonds you're guaranteed to lose money to inflation after taxes unless you're in the 0% bracket.
This isn't strictly correct. I Bonds purchased until October will indeed have a 0% fixed rate. But, because its composite rate isn't allowed to be less than zero, a negative inflation rate for any six-month period during its life will cause the real value for one of these to end up being more than 0%.
That's a good point; I should have thought of that since I did benefit from the 0% feature during the periods you mentioned. Thanks for the correction.
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