Can someone show me how to buy i-bonds?

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Topic Author
frugalor
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Can someone show me how to buy i-bonds?

Post by frugalor »

I just opened a TreasureDirect Account. It's very confusing and I don't know which option is i-bond.

I am in the BuyDirect tab now. Is the " Series I" where I need to click and submit?:
Savings Bonds (NO Paper Savings Bonds)

Series EE - An accrual-type security with a fixed interest rate

Series I - An accrual-type security with a combination interest rate of a fixed and an inflation rate
Is it really 3.54% interest rate?
vas
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Re: Can someone show me how to buy i-bonds?

Post by vas »

There is nothing you can't prove if your outlook is sufficiently limited
Exeter
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Re: Can someone show me how to buy i-bonds?

Post by Exeter »

For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
Topic Author
frugalor
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Re: Can someone show me how to buy i-bonds?

Post by frugalor »

Exeter wrote: Wed Oct 13, 2021 3:26 pm For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
OK. I hit the submit button. Do you know if it matures in 1 year?
Topic Author
frugalor
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Re: Can someone show me how to buy i-bonds?

Post by frugalor »

vas wrote: Wed Oct 13, 2021 3:23 pm This is a very nice guide: https://thefinancebuff.com/how-to-buy-i-bonds.html
Thanks!
Lalamimi
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Re: Can someone show me how to buy i-bonds?

Post by Lalamimi »

I just did the same!! But my first purchase last week, I forgot to add POD XXX, and don't seem to be able to fix that one. I did just buy the final $2K and remembered to add it to my name. New to me as well.
dbr
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Re: Can someone show me how to buy i-bonds?

Post by dbr »

frugalor wrote: Wed Oct 13, 2021 3:19 pm

Is it really 3.54% interest rate?
Yes and no. That rate is the sum of a constant fixed rate for the duration of the bond and a temporary variable rate which is based on current inflation. The current fixed rate on I bonds is 0.0% That means that if inflation eases the interest rate you will get going on will be less that what you see there. In a period of zero inflation your bond will have an interest rate of 0.0% Because we are suddenly in a period of high inflation there are short term "windfalls" to be had with I bonds. As a long term investment you should think of an I bond bought now as just having a real rate of 0.0%

By comparison here are the real rates on the other Treasury inflation instrument, TIPS: https://www.treasury.gov/resource-cente ... =realyield

A real rate of 0.0% is actually pretty good right now, but against a longer term average it is not good. Also note that if you buy I bonds now you won't have much of an option to replace them with better paying I bonds because the purchase limit stops you from rolling over much at a time.

It is still probably not a bad idea to consider an I bond purchase now.
dbr
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Re: Can someone show me how to buy i-bonds?

Post by dbr »

frugalor wrote: Wed Oct 13, 2021 3:32 pm
Exeter wrote: Wed Oct 13, 2021 3:26 pm For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
OK. I hit the submit button. Do you know if it matures in 1 year?
You really need to read all the material at Treasury Direct: https://www.treasurydirect.gov/indiv/pr ... glance.htm

An I bond does not mature in the usual sense of the word. The one year is the holding period before you can redeem the bond, and there is a five year period during which there is a redemption penalty. After 30 years the bond will stop accruing interest and the the tax deferred interest will all come due at once unless you paid it beforehand.
Topic Author
frugalor
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Re: Can someone show me how to buy i-bonds?

Post by frugalor »

dbr wrote: Wed Oct 13, 2021 3:40 pm
frugalor wrote: Wed Oct 13, 2021 3:32 pm
Exeter wrote: Wed Oct 13, 2021 3:26 pm For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
OK. I hit the submit button. Do you know if it matures in 1 year?
You really need to read all the material at Treasury Direct: https://www.treasurydirect.gov/indiv/pr ... glance.htm

An I bond does not mature in the usual sense of the word. The one year is the holding period before you can redeem the bond, and there is a five year period during which there is a redemption penalty. After 30 years the bond will stop accruing interest and the the tax deferred interest will all come due at once unless you paid it beforehand.
OK. I didn't know this. I read so many posts here saying savings bond is more liquid than say VTIP (Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares) and savings bond is better for parking emergency fund cash. I don't see how this is true knowing the above info.
khunron
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Re: Can someone show me how to buy i-bonds?

Post by khunron »

[/quote]

OK. I hit the submit button. Do you know if it matures in 1 year?

It's your money, but I would recommend you do some research on the bonds, equities, annuities, etc., BEFORE you buy them.
Topic Author
frugalor
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Re: Can someone show me how to buy i-bonds?

Post by frugalor »

khunron wrote: Wed Oct 13, 2021 3:49 pm

It's your money, but I would recommend you do some research on the bonds, equities, annuities, etc., BEFORE you buy them.
Thanks. Just put in $100. so no harm done. I learned enough to start super small :)
dbr
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Re: Can someone show me how to buy i-bonds?

Post by dbr »

frugalor wrote: Wed Oct 13, 2021 3:48 pm
dbr wrote: Wed Oct 13, 2021 3:40 pm
frugalor wrote: Wed Oct 13, 2021 3:32 pm
Exeter wrote: Wed Oct 13, 2021 3:26 pm For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
OK. I hit the submit button. Do you know if it matures in 1 year?
You really need to read all the material at Treasury Direct: https://www.treasurydirect.gov/indiv/pr ... glance.htm

An I bond does not mature in the usual sense of the word. The one year is the holding period before you can redeem the bond, and there is a five year period during which there is a redemption penalty. After 30 years the bond will stop accruing interest and the the tax deferred interest will all come due at once unless you paid it beforehand.
OK. I didn't know this. I read so many posts here saying savings bond is more liquid than say VTIP (Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares) and savings bond is better for parking emergency fund cash. I don't see how this is true knowing the above info.
What people would do is start buying I bonds in the amounts allowed (or less) early on so that the bonds that are redeemable and beyond interest rate penalties are indeed easy to redeem without any loss of inflation increased face value. But technically, no, I bonds are not more liquid than TIPS. The right language is that they are less risky in the sense that a TIPS that has not matured has some market risk and a fund of TIPS never matures. I bonds are indeed better for parking cash (allowing for the one year thing) because there is no possibility for loss due to market pricing and the loss of 3 months interest for before five year redemption is pretty minor. Also I bonds can be used for education spending tax free.
tibbitts
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Re: Can someone show me how to buy i-bonds?

Post by tibbitts »

Lalamimi wrote: Wed Oct 13, 2021 3:34 pm I just did the same!! But my first purchase last week, I forgot to add POD XXX, and don't seem to be able to fix that one. I did just buy the final $2K and remembered to add it to my name. New to me as well.
I don't recall it being difficult to edit the PoD information, although I might have been editing it, not adding it.
tibbitts
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Re: Can someone show me how to buy i-bonds?

Post by tibbitts »

frugalor wrote: Wed Oct 13, 2021 3:32 pm
Exeter wrote: Wed Oct 13, 2021 3:26 pm For what-it's-worth, I purchased my first I-Bonds this week and it went just fine following the instructions that were thoughtfully provided. Go for it!
OK. I hit the submit button. Do you know if it matures in 1 year?
I suggest being a little more cautious before hitting "submit." On the other hand if somebody offered me a 15mo CD yielding about 5%, but without any provision for early withdrawal even with a penalty, I'd probably take it, as long as I was willing to lock up the funds for 15mo.
Topic Author
frugalor
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Re: Can someone show me how to buy i-bonds?

Post by frugalor »

dbr wrote: Wed Oct 13, 2021 3:37 pm
frugalor wrote: Wed Oct 13, 2021 3:19 pm

Is it really 3.54% interest rate?
Yes and no. That rate is the sum of a constant fixed rate for the duration of the bond and a temporary variable rate which is based on current inflation. The current fixed rate on I bonds is 0.0% That means that if inflation eases the interest rate you will get going on will be less that what you see there. In a period of zero inflation your bond will have an interest rate of 0.0% Because we are suddenly in a period of high inflation there are short term "windfalls" to be had with I bonds. As a long term investment you should think of an I bond bought now as just having a real rate of 0.0%

By comparison here are the real rates on the other Treasury inflation instrument, TIPS: https://www.treasury.gov/resource-cente ... =realyield

A real rate of 0.0% is actually pretty good right now, but against a longer term average it is not good. Also note that if you buy I bonds now you won't have much of an option to replace them with better paying I bonds because the purchase limit stops you from rolling over much at a time.

It is still probably not a bad idea to consider an I bond purchase now.
I see. So the 3.54% is all because inflation is at that level. So it will go even higher if the fed raises interest rates, right?
dbr
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Re: Can someone show me how to buy i-bonds?

Post by dbr »

frugalor wrote: Wed Oct 13, 2021 4:23 pm
dbr wrote: Wed Oct 13, 2021 3:37 pm
frugalor wrote: Wed Oct 13, 2021 3:19 pm

Is it really 3.54% interest rate?
Yes and no. That rate is the sum of a constant fixed rate for the duration of the bond and a temporary variable rate which is based on current inflation. The current fixed rate on I bonds is 0.0% That means that if inflation eases the interest rate you will get going on will be less that what you see there. In a period of zero inflation your bond will have an interest rate of 0.0% Because we are suddenly in a period of high inflation there are short term "windfalls" to be had with I bonds. As a long term investment you should think of an I bond bought now as just having a real rate of 0.0%

By comparison here are the real rates on the other Treasury inflation instrument, TIPS: https://www.treasury.gov/resource-cente ... =realyield

A real rate of 0.0% is actually pretty good right now, but against a longer term average it is not good. Also note that if you buy I bonds now you won't have much of an option to replace them with better paying I bonds because the purchase limit stops you from rolling over much at a time.

It is still probably not a bad idea to consider an I bond purchase now.
I see. So the 3.54% is all because inflation is at that level. So it will go even higher if the fed raises interest rates, right?
No, it is not that simple. If the FED raises interest rates to fight inflation and succeeds then inflation will go down and the combined interest on the bond in future will be less. On the other hand future I bonds, but not this one, might start to get a fixed rate greater than zero. The FED does not raise all interest rates at all, so the results can be complicated.

You should not expect these bonds to pay nominal interest at the current very temporary high rate because that would mean very high inflation, which would be a disaster.
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