Swap my Bond funds for iBonds?

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vgc303
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Swap my Bond funds for iBonds?

Post by vgc303 »

I'm currently holding the following funds in a taxable brokerage:

BRHYX BlackRock High Yield Bond Portfolio Class K $4,672.00
MWTIX Metropolitan West Total Return Bond Fund Class I $58,514.00
VTABX Vanguard Total International Bond Index Fund Admiral Shares $8,234.00

The VTABX has had a negative performance since the purchase back in 2016. I'm thinking of selling all of the VTABX holdings + all BRHYX holdings and a portion of MWTIX to purchase $20k of ibonds before the end of January. Is this a wise decision?
SpideyIndexer
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Re: Swap my Bond funds for iBonds?

Post by SpideyIndexer »

One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

vgc303 wrote: [/color]r_id=165897]
I'm currently holding the following funds in a taxable brokerage:

BRHYX BlackRock High Yield Bond Portfolio Class K $4,672.00
MWTIX Metropolitan West Total Return Bond Fund Class I $58,514.00
VTABX Vanguard Total International Bond Index Fund Admiral Shares $8,234.00

The VTABX has had a negative performance since the purchase back in 2016. I'm thinking of selling all of the VTABX holdings + all BRHYX holdings and a portion of MWTIX to purchase $20k of ibonds before the end of January. Is this a wise decision?
Depends upon your motivation. Can you state your reason for inquiry?
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
UpperNwGuy
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Re: Swap my Bond funds for iBonds?

Post by UpperNwGuy »

vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
How can this be? According to both Vanguard and Portfolio Visualizer VTABX has a positive annualized total return of 3% since 2016. I think you are calculating your performance incorrectly.
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Cheez-It Guy
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Re: Swap my Bond funds for iBonds?

Post by Cheez-It Guy »

Probably looking at cost basis info rather than total return.
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Re: Swap my Bond funds for iBonds?

Post by galawdawg »

vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
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vgc303
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Re: Swap my Bond funds for iBonds?

Post by vgc303 »

chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
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Re: Swap my Bond funds for iBonds?

Post by MrJedi »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
A significant portion of a bonds return is in the coupon payments / dividends, not in share appreciation.
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vgc303
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Re: Swap my Bond funds for iBonds?

Post by vgc303 »

MrJedi wrote: Mon Jan 10, 2022 9:55 am A significant portion of a bonds return is in the coupon payments / dividends, not in share appreciation.
It's likely because I have automatic dividend reinvestment turned off then.
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Re: Swap my Bond funds for iBonds?

Post by MrJedi »

vgc303 wrote: Mon Jan 10, 2022 9:57 am
MrJedi wrote: Mon Jan 10, 2022 9:55 am A significant portion of a bonds return is in the coupon payments / dividends, not in share appreciation.
It's likely because I have automatic dividend reinvestment turned off then.
Reinvestment gives you more shares, it does not show as higher share appreciation. Cost basis isn't the right way to look at total return, especially for bond funds.
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retired@50
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Re: Swap my Bond funds for iBonds?

Post by retired@50 »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
If only it were this simple.

The current rate of somewhere around 7% resets periodically, so you're not really guaranteed that rate for more than 6 months. As inflation goes up (or down), so will the rate.

Regards,
This is one person's opinion. Nothing more.
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Re: Swap my Bond funds for iBonds?

Post by dbr »

retired@50 wrote: Mon Jan 10, 2022 10:04 am
vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
If only it were this simple.

The current rate of somewhere around 7% resets periodically, so you're not really guaranteed that rate for more than 6 months. As inflation goes up (or down), so will the rate.

Regards,
Yes, it is unfortunate that people talk about a guaranteed 7% when the guarantee is 0% real with whatever inflation might be added on a six month basis. From the point of view of variability of nominal return, when comparing to other investments, I bonds have high risk as bonds go. For the person whose use of bonds derives from the expected real return, then at this time I bonds are a possible option if 0% real is enough return. Whether the nominal returns can be projected over time is a different question. The purchase limits on I bonds make some of the optionality one might choose more difficult to plan. If there is a lesson it is that someone who has a good role for I bonds should have been acquiring them starting a long time ago.
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Re: Swap my Bond funds for iBonds?

Post by Mel Lindauer »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
That's correct. And you can get an additional 10k per trust and another 5k in paper I Bonds via your tax refund.
Best Regards - Mel | | Semper Fi
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Re: Swap my Bond funds for iBonds?

Post by dbr »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...

The price of a share can change. The return is the total of share price gains or losses and dividend paid. If you don't reinvest the dividend the value of your holding could go down while the return is positive. That is because you withdrew some of the value if you didn't reinvest. If the dividend has been reinvested then the missing value is in the lots purchased with the dividends. You have to add up the value of the entire holding.
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
Then I bonds aren't for you.
That 7.12% annual rate is good for six months (so you'll get just over 3.5% for the six months) if you purchase prior to May 2022 with no guarantee or prediction of what the rate will be reset to come this May.
No idea where anyone gets a guaranteed 7.12% annual rate. Please let us know if you find something :happy :moneybag :moneybag
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
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Re: Swap my Bond funds for iBonds?

Post by ivgrivchuck »

vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm
vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
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Re: Swap my Bond funds for iBonds?

Post by ivgrivchuck »

chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm
vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
vgc303 wrote: Mon Jan 10, 2022 12:32 am The VTABX has had a negative performance since the purchase back in 2016.
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm
vgc303 wrote: Mon Jan 10, 2022 9:53 am
chipperd wrote: Mon Jan 10, 2022 5:33 am Depends upon your motivation. Can you state your reason for inquiry?
To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.
galawdawg wrote: Mon Jan 10, 2022 7:48 am
I believe you are incorrect about that. VTABX has had an average annual return of 3.32% since 2016. $10k invested in January 2016 would now be worth just over $12k.
Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...
SpideyIndexer wrote: Mon Jan 10, 2022 4:23 am One can normally buy $10K per year per person, $15K if you overpay your taxes by withholding or estimates. So it takes some time to ramp up a significant holding. Rebalancing into IBonds is a slow process. So basically they are good for inflation protecting your portfolio but I wouldn't recommend replacing all of one's bond holdings with them.
$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
If so, that's locking up a lot of $ at zero interest for years 2-10. If not, and the interest starts accruing at the time the gift is purchased, not received, it could be promising, although riskier than typical I bond purchase in some ways.
If you don't mind being the canary in the coal mine, please let me know if my understanding is correct, and if you don't mind sharing the results of any gifted I bonds being cashed out.
Thanks.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
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Re: Swap my Bond funds for iBonds?

Post by exodusNH »

chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm
vgc303 wrote: Mon Jan 10, 2022 9:53 am

To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.



Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...



$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
If so, that's locking up a lot of $ at zero interest for years 2-10. If not, and the interest starts accruing at the time the gift is purchased, not received, it could be promising, although riskier than typical I bond purchase in some ways.
If you don't mind being the canary in the coal mine, please let me know if my understanding is correct, and if you don't mind sharing the results of any gifted I bonds being cashed out.
Thanks.
They accrue interest like all the rest. You can only gift $10k per recipient, who will be responsible for the taxes when they cash them out. You can't gift yourself or a trust.
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Re: Swap my Bond funds for iBonds?

Post by exodusNH »

vgc303 wrote: Mon Jan 10, 2022 12:32 am I'm currently holding the following funds in a taxable brokerage:

BRHYX BlackRock High Yield Bond Portfolio Class K $4,672.00
MWTIX Metropolitan West Total Return Bond Fund Class I $58,514.00
VTABX Vanguard Total International Bond Index Fund Admiral Shares $8,234.00

The VTABX has had a negative performance since the purchase back in 2016. I'm thinking of selling all of the VTABX holdings + all BRHYX holdings and a portion of MWTIX to purchase $20k of ibonds before the end of January. Is this a wise decision?
Fyi, high yield (junk) bonds act like a combination of stocks and bonds. When times are good and interest rates are low, they'll be OK. But once things turn, they'll drop similarly to stocks, though not as deep. (Roughly, 1/2.) If you are counting this allocation as 100% bonds, you are overstating the safety of your portfolio.

As others have said, you cannot look at the share price of the bonds to determine return.
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Re: Swap my Bond funds for iBonds?

Post by Intrepyd »

Series I Bonds are a free lunch, since you can buy a higher coupon (7%) without a higher face value. A marketable bond yielding 7% nominal would be priced far above face value right now.

Yes, the coupon will reset with inflation every 6 months, but you can liquidate with minimal penalty after 1 year.
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Re: Swap my Bond funds for iBonds?

Post by ivgrivchuck »

chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm
vgc303 wrote: Mon Jan 10, 2022 9:53 am

To pickup a guaranteed 7% return in I bonds as opposed to a unknown and likely much lower return in any other bond fund.



Weird, I think you're right, but for whatever reason when I look at the cost basis in VTABX, each lot purchased has decreased in value. (2) lots purchased in '16, one in '17, and (2) in 2020 and each one has lost value. I'm not sure how this is even possible...



$20k for a married couple though right? $10k per SSN?
Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: Swap my Bond funds for iBonds?

Post by Eagle33 »

ivgrivchuck wrote: Tue Jan 11, 2022 11:45 am
chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm

Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
Does the accrued I bond interest count against the $10k gift, or is it the I-Bond original purchase price that is used for the $10k gift limit and the accrued interest doesn't count against the gift limit?
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exodusNH
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Re: Swap my Bond funds for iBonds?

Post by exodusNH »

Eagle33 wrote: Tue Jan 11, 2022 7:42 pm
ivgrivchuck wrote: Tue Jan 11, 2022 11:45 am
chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm

Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
Does the accrued I bond interest count against the $10k gift, or is it the I-Bond original purchase price that is used for the $10k gift limit and the accrued interest doesn't count against the gift limit?
All that matters is the purchase value.
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

ivgrivchuck wrote: Tue Jan 11, 2022 11:45 am
chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm
ivgrivchuck wrote: Mon Jan 10, 2022 12:27 pm

Married couple can also purchase unlimited amount of bonds as gifts to each other. But gifts can only be delivered $10k per year per person, so the money is going to be stuck. It works like a laddered CD that one cannot break.

If this is for you, you can easily get $100k into I-bonds immediately...
Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
That makes the gift idea very appealing in today's environment.

Do you know what happens to the I bonds held in the TD "gift box" upon the purchaser's death, esp if the gifts total more than 10k for one individual? I couldn't find an answer.

Thanks for the education. :sharebeer
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
ivgrivchuck
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Re: Swap my Bond funds for iBonds?

Post by ivgrivchuck »

chipperd wrote: Tue Jan 11, 2022 8:11 pm
ivgrivchuck wrote: Tue Jan 11, 2022 11:45 am
chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm
chipperd wrote: Mon Jan 10, 2022 3:55 pm

Not according to treasury direct/U.S. gov't:
"How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for."
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm
viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
That makes the gift idea very appealing in today's environment.

Do you know what happens to the I bonds held in the TD "gift box" upon the purchaser's death, esp if the gifts total more than 10k for one individual? I couldn't find an answer.

Thanks for the education. :sharebeer
I can only speculate, but https://www.treasurydirect.gov/indiv/re ... y.htm#gift states:
Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit
So I would speculate that the estate executor would contact TD, send a death certificate, and ask that all bonds in the giftbox to be delivered to their final owners. What else could happen?

But this is only speculation, there are probably very few people who have encountered this situation...
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vgc303
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Re: Swap my Bond funds for iBonds?

Post by vgc303 »

Well, I guess I thought the overall sentiment right now was that you should be buying I bonds due to inflation. But I guess that is not the case and I should do nothing? Are I bonds not the protection against inflation like I thought they were?
chipperd
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Re: Swap my Bond funds for iBonds?

Post by chipperd »

ivgrivchuck wrote: Tue Jan 11, 2022 8:22 pm
chipperd wrote: Tue Jan 11, 2022 8:11 pm
ivgrivchuck wrote: Tue Jan 11, 2022 11:45 am
chipperd wrote: Tue Jan 11, 2022 4:31 am
ivgrivchuck wrote: Mon Jan 10, 2022 4:07 pm

viewtopic.php?f=1&t=306297

So if I'm reading and interpreting the thread you referenced correctly, you are stating that any amount of I bonds can be purchased as gifts, but only given in 10k increments per year per individual, and the interest doesn't start to accrue until that I bond gift is received?
correct, except the interest starts accruing immediately.
That makes the gift idea very appealing in today's environment.

Do you know what happens to the I bonds held in the TD "gift box" upon the purchaser's death, esp if the gifts total more than 10k for one individual? I couldn't find an answer.

Thanks for the education. :sharebeer
I can only speculate, but https://www.treasurydirect.gov/indiv/re ... y.htm#gift states:
Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit
So I would speculate that the estate executor would contact TD, send a death certificate, and ask that all bonds in the giftbox to be delivered to their final owners. What else could happen?

But this is only speculation, there are probably very few people who have encountered this situation...
Thanks for your thoughts on this question.
I would guess bonds are "Payable Upon Death".
I try to think of all contingencies best I can.
In addition, I was thinking, since i bonds can be purchased up to 5 years in advance, that this would be a nice way for heirs to receive an annual "gift from the grave. "
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
exodusNH
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Re: Swap my Bond funds for iBonds?

Post by exodusNH »

vgc303 wrote: Tue Jan 11, 2022 10:02 pm Well, I guess I thought the overall sentiment right now was that you should be buying I bonds due to inflation. But I guess that is not the case and I should do nothing? Are I bonds not the protection against inflation like I thought they were?
It's not that they aren't a good product. The issue is the purchase limit that prevents big moves.

Since you can't gift them to yourself, if you load up your gift box, all you can do is give them away. If you have a spouse, you both could load your gift boxes and gift $10k to each other. Those $10k gifts count against your personal limit each year. You cannot both receive $10k and purchase $10k for yourself, though you could load another $10k into your gift box.

In general, it's not a good idea to make big moves based on recent performance. I bonds worked the best when you had the foresight to buy them over years. (I did not.)

Keep in mind that the fixed rate part of the bond is set at purchase. Right now, that's 0%. The full return from the bond will be the inflation adjustments. That's not necessarily a bad thing. But there's no way to change that except by redeeming the bonds and buying new ones. That's fine for the bonds in your account, but the ones tied up in the gift box are stuck.
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Re: Swap my Bond funds for iBonds?

Post by ivgrivchuck »

vgc303 wrote: Tue Jan 11, 2022 10:02 pm Well, I guess I thought the overall sentiment right now was that you should be buying I bonds due to inflation. But I guess that is not the case and I should do nothing? Are I bonds not the protection against inflation like I thought they were?
At the moment, they are the best fixed income asset available (at least for most people)
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: Swap my Bond funds for iBonds?

Post by arcticpineapplecorp. »

Mel Lindauer wrote: Mon Jan 10, 2022 11:41 am That's correct. And you can get an additional 10k per trust and another 5k in paper I Bonds via your tax refund.
for the OP, more information regarding how to buy an additional $10k in a trust (revocable) can be found here:
https://thefinancebuff.com/buy-more-i-b ... trust.html
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SpideyIndexer
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Re: Swap my Bond funds for iBonds?

Post by SpideyIndexer »

Why lock the money away with no interest or other return? One can open TOD accounts banks for money market certificates, or at investment firms with all sorts of investments. Besides the return, these would allow you to change your mind.
BrokerageZelda
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Re: Swap my Bond funds for iBonds?

Post by BrokerageZelda »

SpideyIndexer wrote: Fri Jan 14, 2022 1:45 pm Why lock the money away with no interest or other return? One can open TOD accounts banks for money market certificates, or at investment firms with all sorts of investments. Besides the return, these would allow you to change your mind.
"0% real return" is very different from "no return".

You can open a TOD certificate account at a bank or credit union right now for a totally safe -6% real return if you feel that is smarter.

You can also "change your mind" about an I Bond anytime after 1 year. This isn't a black hole.
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Re: Swap my Bond funds for iBonds?

Post by SpideyIndexer »

BrokerageZelda wrote: Fri Jan 14, 2022 2:00 pm
SpideyIndexer wrote: Fri Jan 14, 2022 1:45 pm Why lock the money away with no interest or other return? One can open TOD accounts banks for money market certificates, or at investment firms with all sorts of investments. Besides the return, these would allow you to change your mind.
"0% real return" is very different from "no return".

You can open a TOD certificate account at a bank or credit union right now for a totally safe -6% real return if you feel that is smarter.

You can also "change your mind" about an I Bond anytime after 1 year. This isn't a black hole.
I was referring to queuing up I Bond gifts in one's Treasury account that will earn nothing until the gift is finally "delivered." Apparently the Treasure transfers one's funds but does not purchase the bonds until its time, if one has already purchased one's annual maximum. Scroll back a few posts. This seems like a bad deal to me.

I am not knocking I Bonds in general. I've never gifted I Bonds so cannot verify the above.
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Re: Swap my Bond funds for iBonds?

Post by fujiters »

SpideyIndexer wrote: Fri Jan 14, 2022 2:13 pm
BrokerageZelda wrote: Fri Jan 14, 2022 2:00 pm
SpideyIndexer wrote: Fri Jan 14, 2022 1:45 pm Why lock the money away with no interest or other return? One can open TOD accounts banks for money market certificates, or at investment firms with all sorts of investments. Besides the return, these would allow you to change your mind.
"0% real return" is very different from "no return".

You can open a TOD certificate account at a bank or credit union right now for a totally safe -6% real return if you feel that is smarter.

You can also "change your mind" about an I Bond anytime after 1 year. This isn't a black hole.
I was referring to queuing up I Bond gifts in one's Treasury account that will earn nothing until the gift is finally "delivered." Apparently the Treasure transfers one's funds but does not purchase the bonds until its time, if one has already purchased one's annual maximum. Scroll back a few posts. This seems like a bad deal to me.

I am not knocking I Bonds in general. I've never gifted I Bonds so cannot verify the above.
That's not correct. After delivery, the savings bonds maintain their original purchase date. They earn interest from the date of purchase, and have their 30 year maturity based on it.
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Re: Swap my Bond funds for iBonds?

Post by BrokerageZelda »

SpideyIndexer wrote: Fri Jan 14, 2022 2:13 pm
BrokerageZelda wrote: Fri Jan 14, 2022 2:00 pm "0% real return" is very different from "no return".

You can open a TOD certificate account at a bank or credit union right now for a totally safe -6% real return if you feel that is smarter.

You can also "change your mind" about an I Bond anytime after 1 year. This isn't a black hole.
I was referring to queuing up I Bond gifts in one's Treasury account that will earn nothing until the gift is finally "delivered." Apparently the Treasure transfers one's funds but does not purchase the bonds until its time, if one has already purchased one's annual maximum. Scroll back a few posts. This seems like a bad deal to me.

I am not knocking I Bonds in general. I've never gifted I Bonds so cannot verify the above.
Apologies for the mixup. In that case, my response would be the same as fujiters - I Bonds in the Gift Box are considered 'issued' as of the date of purchase inside the Gift Box, will earn interest while they wait to be delivered, and can even mature while still inside the Gift Box.

https://www.treasurydirect.gov/indiv/he ... GiftGiving
What happens when a gift security matures before being delivered?
If the gift bond has not been delivered to the recipient prior to maturity, the redemption amount will be held as Gift Box Proceeds in your Gift Box until delivered.
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