What to do with i-series bonds

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nkaufman
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What to do with i-series bonds

Post by nkaufman »

Hello,

I purchased i-series bonds in Oct-2022.
Should I continue to keep it or move it to another instrument?

Any advice?

Thanks,
thedaybeforetoday
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Re: What to do with i-series bonds

Post by thedaybeforetoday »

Why do you ask?
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
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StewedCarrot
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Re: What to do with i-series bonds

Post by StewedCarrot »

Hard to know without context.

Generally I suggest reviewing recent posts in the "I-Bonds Rejoice" and "I-Bonds Manifesto" threads.

Tipswatch.com also has very informative advice on whether or not to sell/sell-rebuy.
runner3081
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Re: What to do with i-series bonds

Post by runner3081 »

Topic Author
nkaufman
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Re: What to do with i-series bonds

Post by nkaufman »

thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
tibbitts
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Re: What to do with i-series bonds

Post by tibbitts »

nkaufman wrote: Sat Nov 18, 2023 8:37 pm
thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
It's a complicated question and it depends on your personal objectives for the money. Personally I'm selling my 0% I-bonds and replacing them with newer (now 1.3%) I-bonds gradually, but I'm accepting that I'll end up with fewer I-bonds than I would if I simply added more to my collection.
tfunk
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Re: What to do with i-series bonds

Post by tfunk »

I would wait until March 1, 2024. That way you will only lose three months interest at 3.38%. If you sell now you will lose three months of 6.48% interest.

You can check the details at: https://eyebonds.info/ibonds/home1000.html
chassis
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Re: What to do with i-series bonds

Post by chassis »

nkaufman wrote: Sat Nov 18, 2023 6:51 pm Hello,

I purchased i-series bonds in Oct-2022.
Should I continue to keep it or move it to another instrument?

Any advice?

Thanks,
Sell the iBonds and buy short term Treasuries if they suit your needs.
thedaybeforetoday
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Re: What to do with i-series bonds

Post by thedaybeforetoday »

nkaufman wrote: Sat Nov 18, 2023 8:37 pm
thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
I sold my Ibonds that I purchased from that time period and purchased current Ibonds due to the fixed rate difference.
For you, it's difficult to answer without knowing how Ibonds fit into your overall personal investment plan.
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
thedaybeforetoday
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Re: What to do with i-series bonds

Post by thedaybeforetoday »

duplicate
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MrJedi
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Re: What to do with i-series bonds

Post by MrJedi »

tfunk wrote: Sat Nov 18, 2023 9:08 pm I would wait until March 1, 2024. That way you will only lose three months interest at 3.38%. If you sell now you will lose three months of 6.48% interest.

You can check the details at: https://eyebonds.info/ibonds/home1000.html
Did you mean January 1, 2024?
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beyou
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Re: What to do with i-series bonds

Post by beyou »

Personally I never consider CDs.
Don’t want the inconvenience of moving from bank to bank, opening new accts. Maybe if I found good options for brokered CDs would consider those, no others.

Savings bonds have many pros and cons though.

Can keep all in one place.
But that place has terrible service (up to 20 weeks to perform simple common services they provide or force you to request such as locking then unlocking your acct).

Deferred interest. If you want deferral. Remember 2017 tax cuts sunset in another 2+ years. Maybe if in high tax bracket would deferral is still a benefit anyway.

Safety about the same.

Quantity, annual limited for savings bonds, fdic limit by bank. There are other alternatives without any limits.

State income tax ? None for savings bonds, yes for CD
if you are in one of those states, where it matters. Like above, there are other options to get state tax free income and even federal tax free.

I am not a fan of savings bonds lately, but not moving to CDs either. Muni bonds and TIPS are where I am consolidating away from savings bonds.
Yarlonkol12
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Re: What to do with i-series bonds

Post by Yarlonkol12 »

nkaufman wrote: Sat Nov 18, 2023 8:37 pm
thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
Are you planning to spend the money after the 9 month CD expires? If not, yields might be lower at that point in time, or maybe they are the following 9 months, etc.

The I bond yields CPI + fixed for 30 years, compounded tax deferred
My posts are for entertainment purposes only.
dbr
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Re: What to do with i-series bonds

Post by dbr »

It would be better to shop for fixed income according to what you want it for rather than according to how one option compares to another.

For example an intermediate TIPS fund for the long run might stand you just as well as anything else depending on what you are trying to do and where you hold it. If you bought those I bonds because for a little bit of time the nominal yields were a windfall, then maybe you don't want them at all anymore. Still for a long term holding I bonds can have a place though that might depend a lot on what fixed rate you get. The one's you bought at 0% might not seem very attractive as a long run holding.

Another consideration is that as time goes by you might not end up with a large enough fraction of your assets in I bonds to bother with unless you make a point of that being a major holding and go out and put the money in over time. As an emergency fund that is a different choice that might make sense.
coachd50
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Re: What to do with i-series bonds

Post by coachd50 »

nkaufman wrote: Sat Nov 18, 2023 6:51 pm Hello,

I purchased i-series bonds in Oct-2022.
Should I continue to keep it or move it to another instrument?

Any advice?

Thanks,
Why did you buy them in Oct 2022?

Based off your question and some replies, presumably because of the yield they offered for 6 months. If that is the case, then yes, you should redeem them once forfeiting the last 3 months of interest they have earned becomes a small enough figure that it makes sense to do so. Because your purpose was just to get a high yield.

Have a plan. Work the plan.

You could probably search the site and find 15 or so in depth multi-page threads discussing this exact topic.
Outer Marker
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Re: What to do with i-series bonds

Post by Outer Marker »

I plan to keep them until I need to spend the money, or when they mature after 30 years. You can only buy $10,000 a year, so it take a while to build up a respectable stockpile. I buy mine every January along with my backdoor roth contribution. It's just a regular start of the year routine.
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Re: What to do with i-series bonds

Post by grabiner »

nkaufman wrote: Sat Nov 18, 2023 6:51 pm I purchased i-series bonds in Oct-2022.
Should I continue to keep it or move it to another instrument?
I would suggest redeeming the bond in January 2024. The rate reset in October 2023 and is now well below the market rate. If you redeem in January, the three-month penalty means that you get the interest up to the reset.

If you still want inflation protection, you can replace the I-Bonds with new I-Bonds or TIPS with a higher yield.
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krafty81
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Re: What to do with i-series bonds

Post by krafty81 »

I have bought some over the past two years. I plan on keeping them as an inflation hedge.
coachd50
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Re: What to do with i-series bonds

Post by coachd50 »

krafty81 wrote: Sun Nov 19, 2023 9:35 pm I have bought some over the past two years. I plan on keeping them as an inflation hedge.
So you plan to buy more this year/next year?
SantaClaraSurfer
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Re: What to do with i-series bonds

Post by SantaClaraSurfer »

I keep mine, and buy more each year. Sometimes more, sometimes less, depending.

In 15 more years we should have about $200K total in I Bonds, depending on inflation going forward.

For me, that's solid.
DesertGator
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Re: What to do with i-series bonds

Post by DesertGator »

nkaufman wrote: Sat Nov 18, 2023 6:51 pm Hello,

I purchased i-series bonds in Oct-2022.
Should I continue to keep it or move it to another instrument?

Any advice?

Thanks,
I recommend you read this:
https://tipswatch.com/i-bond-manifesto/
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markjk
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Re: What to do with i-series bonds

Post by markjk »

nkaufman wrote: Sat Nov 18, 2023 8:37 pm Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
With this philosophy, you'll be chasing different investments over and over again. If that is what you want to do, you might be better off with a process like a treasury/CD latter. However, no one can say which is going to truly be better long term (e.g. holding your iBond for say 10 years or laddering).
z3r0c00l
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Re: What to do with i-series bonds

Post by z3r0c00l »

Don't chase interest rates back and forth, that sounds like a miserable game. I bonds are no better or worse than they were last year, they always offer the same thing. If you like that predictability, which sometimes comes at a cost compared to other options, then stick with it. If you want to buy bonds now and possibly see them lose money again if inflation returns, just be prepared for what could happen. Don't, for example, sell those bonds in another year and try to get back into I bonds.

One other concern, I bonds suffer from a $10,000 annual purchase limit for simple folk like me. So you have to accumulate for years in a row to have a meaningful amount. (Sure you can go through all kinds of hoops like overpay taxes, get a paper I bond refund, possibly in the form of a bunch of small I bonds, possibly for the wrong amount due to an error, possibly months later due to IRS delays... Or you can establish trusts and s-corps and make gift purchases with relatives... none of which is remotely interesting to me.)
Last edited by z3r0c00l on Mon Nov 20, 2023 5:53 am, edited 1 time in total.
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dcabler
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Re: What to do with i-series bonds

Post by dcabler »

I-bonds are not the best instruments for chasing yield even if from time to time, the composite yield is high. Their purpose is to provide inflation protection for up to 30 years without any market risk.

They mature in 30 years which is one sign that they were intended for long term. Others include the 1 year exclusionary period which prevents you from redeeming as well as the forfeit of the last 3 months interest if you redeem between 1 year and 5 years. Finally, there are the purchase limits, though there are ways to get around that if you're willing.

As long term instruments that essentially pay a "real yield", we pay attention to the fixed rate, not the composite rate. We've been purchasing the max limits since 2017, including $10K for each of us and $5K from tax refunds. Every year we take the $5K in paper Ibonds that come from our tax refund and convert them to electronic form. There can be delays once they're sent in but they'll get to it. We've never had an issue with the conversion process going wrong. We have no plans to ever redeem even our 0% fixed Ibonds to purchase higher fixed rate Ibonds. They're already doing what we need them to do.

We're retired and will likely continue to purchase a few more rounds over the next few years - these will be used for the larger lumpy expenses as we move through retirement.

Cheers.
coachd50
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Re: What to do with i-series bonds

Post by coachd50 »

dcabler wrote: Mon Nov 20, 2023 5:48 am I-bonds are not the best instruments for chasing yield even if from time to time, the composite yield is high. Their purpose is to provide inflation protection for up to 30 years without any market risk.

They mature in 30 years which is one sign that they were intended for long term. Others include the 1 year exclusionary period which prevents you from redeeming as well as the forfeit of the last 3 months interest if you redeem between 1 year and 5 years. Finally, there are the purchase limits, though there are ways to get around that if you're willing.

As long term instruments that essentially pay a "real yield", we pay attention to the fixed rate, not the composite rate. We've been purchasing the max limits since 2017, including $10K for each of us and $5K from tax refunds. Every year we take the $5K in paper Ibonds that come from our tax refund and convert them to electronic form. There can be delays once they're sent in but they'll get to it. We've never had an issue with the conversion process going wrong. We have no plans to ever redeem even our 0% fixed Ibonds to purchase higher fixed rate Ibonds. They're already doing what we need them to do.

We're retired and will likely continue to purchase a few more rounds over the next few years - these will be used for the larger lumpy expenses as we move through retirement.

Cheers.
I agree with much of this except the "no plans to ever redeem your 0% fixed". I think that once you reach "your number" of bonds with enough liquidity, there doesn't seem any reason to keep 0% fixed for long term.
tibbitts
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Re: What to do with i-series bonds

Post by tibbitts »

dcabler wrote: Mon Nov 20, 2023 5:48 am I-bonds are not the best instruments for chasing yield even if from time to time, the composite yield is high. Their purpose is to provide inflation protection for up to 30 years without any market risk.
While generally the case, I believe for a brief period during the recent high inflation, I-bonds were one of if not the best way to chase yield, at least on a small scale without much effort. But even before that I had redeemed 0% I-bonds when I was able to replace them with slightly higher yielding vintages.
dcabler
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Re: What to do with i-series bonds

Post by dcabler »

coachd50 wrote: Mon Nov 20, 2023 6:54 am
dcabler wrote: Mon Nov 20, 2023 5:48 am I-bonds are not the best instruments for chasing yield even if from time to time, the composite yield is high. Their purpose is to provide inflation protection for up to 30 years without any market risk.

They mature in 30 years which is one sign that they were intended for long term. Others include the 1 year exclusionary period which prevents you from redeeming as well as the forfeit of the last 3 months interest if you redeem between 1 year and 5 years. Finally, there are the purchase limits, though there are ways to get around that if you're willing.

As long term instruments that essentially pay a "real yield", we pay attention to the fixed rate, not the composite rate. We've been purchasing the max limits since 2017, including $10K for each of us and $5K from tax refunds. Every year we take the $5K in paper Ibonds that come from our tax refund and convert them to electronic form. There can be delays once they're sent in but they'll get to it. We've never had an issue with the conversion process going wrong. We have no plans to ever redeem even our 0% fixed Ibonds to purchase higher fixed rate Ibonds. They're already doing what we need them to do.

We're retired and will likely continue to purchase a few more rounds over the next few years - these will be used for the larger lumpy expenses as we move through retirement.

Cheers.
I agree with much of this except the "no plans to ever redeem your 0% fixed". I think that once you reach "your number" of bonds with enough liquidity, there doesn't seem any reason to keep 0% fixed for long term.
Personal decision. As I noted, they're doing what they need to do and there's no reason for us to chase yield given everything else we're invested in. In other words "our number" is fluid...

Cheers.
Last edited by dcabler on Mon Nov 20, 2023 9:59 am, edited 1 time in total.
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Youngblood
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Re: What to do with i-series bonds

Post by Youngblood »

tibbitts wrote: Sat Nov 18, 2023 8:48 pm
nkaufman wrote: Sat Nov 18, 2023 8:37 pm
thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
It's a complicated question and it depends on your personal objectives for the money. Personally I'm selling my 0% I-bonds and replacing them with newer (now 1.3%) I-bonds gradually, but I'm accepting that I'll end up with fewer I-bonds than I would if I simply added more to my collection.
This is what I am doing also.
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Yvy
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Re: What to do with i-series bonds

Post by Yvy »

nkaufman wrote: Sat Nov 18, 2023 8:37 pm
thedaybeforetoday wrote: Sat Nov 18, 2023 7:01 pm Why do you ask?
Because it seems the rate on them currently is lower than one can get say get from a 9-month CD (around 5.5%)
1-First, if you are in a state that have state taxes, calculate the after-State tax rate of the CD rate since there are no state taxes on I bonds for better comparison
2-It depends on your goal. Do you have an investment statement-what does it state?
For example, I bought I bond recently with the higher new flat rate as part of my emergency fund that is splitted in between Money market fund/CD/I bond. The I bond portion of the E-fund if not used will also serve as fixed inflation protected portion of my long term investment.
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Re: What to do with i-series bonds

Post by exodusNH »

coachd50 wrote: Sun Nov 19, 2023 9:39 pm
krafty81 wrote: Sun Nov 19, 2023 9:35 pm I have bought some over the past two years. I plan on keeping them as an inflation hedge.
So you plan to buy more this year/next year?
I am planning on buying the rest of my allocation at the end of December.

While performing my last refi, I realized that by the time my mortgage is finished that my property taxes were going to have increased to what my mortgage is now. I'll never be free from a housing payment.

With that realization, I decided that the $10k of inflation protected money would cover property taxes and insurance on a yearly basis, meaning that I would never be homeless.

That allows me to maintain an aggressive asset allocation.

For next year, I may redeem some of the 0% fixed to capture the 1.3% rate. I'll wait until mid-April to make that decision, at which point well know the inflation rate and have educated guesses on the fixed.
coachd50
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Re: What to do with i-series bonds

Post by coachd50 »

exodusNH wrote: Tue Nov 21, 2023 3:27 pm
coachd50 wrote: Sun Nov 19, 2023 9:39 pm
krafty81 wrote: Sun Nov 19, 2023 9:35 pm I have bought some over the past two years. I plan on keeping them as an inflation hedge.
So you plan to buy more this year/next year?
I am planning on buying the rest of my allocation at the end of December.

While performing my last refi, I realized that by the time my mortgage is finished that my property taxes were going to have increased to what my mortgage is now. I'll never be free from a housing payment.

With that realization, I decided that the $10k of inflation protected money would cover property taxes and insurance on a yearly basis, meaning that I would never be homeless.

That allows me to maintain an aggressive asset allocation.

For next year, I may redeem some of the 0% fixed to capture the 1.3% rate. I'll wait until mid-April to make that decision, at which point well know the inflation rate and have educated guesses on the fixed.
I was asking the other poster if they were planning on buying NEW I bonds this upcoming year- because if the answer was "no", and his desire was to keep the ones he previously bought as an inflation hedge--then it almost certainly makes sense to redeem the 0% fixed and buy the 1.30% fixed rate with those funds.

Essentially, asking the other poster if they had reached their desired level of I bond holdings. If so- then it seems like an almost no brainer to redeem 0% fixed and buy 1.3% fixed. If one has not reached the desired level of I bond holdings, then the decision making is a bit different.
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Re: What to do with i-series bonds

Post by Agitated_Analyst »

I-bonds are a unique investment. They are a government-subsidized instrument that no private party would ever issue. They are an inflation hedge without interest rate risk. The government issues them as a benefit to citizens and their unique features are why they have purchase limits. I include them as part of my overall fixed income allocation and I buy more every year. They may currently be yielding lower rates than other instruments, but that won't always be the case. In my opinion, they should be viewed as a long-term investment that can be balanced with the nominal portion of your fixed income allocation to guard against unexpected inflation. Being able to hold them and not move them around is part of their appeal as well. Rate chasing is a lot of work and with little benefit over time for those with a balanced portfolio.

All of the above is just my way of saying to take some time to think about redeeming your I-Bonds. You'll never be able to repurchase the I-Bonds you redeem. They are truly unique and, even after the last 3 years of unexpected inflation, not as respected as they should be. That's just my humble opinion.
dbr
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Re: What to do with i-series bonds

Post by dbr »

Agitated_Analyst wrote: Thu Nov 23, 2023 10:43 am I-bonds are a unique investment. They are a government-subsidized instrument that no private party would ever issue. They are an inflation hedge without interest rate risk. The government issues them as a benefit to citizens and their unique features are why they have purchase limits. I include them as part of my overall fixed income allocation and I buy more every year. They may currently be yielding lower rates than other instruments, but that won't always be the case. In my opinion, they should be viewed as a long-term investment that can be balanced with the nominal portion of your fixed income allocation to guard against unexpected inflation. Being able to hold them and not move them around is part of their appeal as well. Rate chasing is a lot of work and with little benefit over time for those with a balanced portfolio.

All of the above is just my way of saying to take some time to think about redeeming your I-Bonds. You'll never be able to repurchase the I-Bonds you redeem. They are truly unique and, even after the last 3 years of unexpected inflation, not as respected as they should be. That's just my humble opinion.
This is well said and I agree with it completely. A recent situation where I bonds appear to offer windfall nominal interest rates for a short time has distorted the view of this particular asset. It is, of course, always better to find fixed rates better than zero.
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Re: What to do with i-series bonds

Post by Mr. Potter »

FWIW I’m in a similar situation and plan to dump all my ibonds on 1/1/2024. There’s better options out there plus I want to reduce my number of accounts and TD is the first to go.
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Re: What to do with i-series bonds

Post by coachd50 »

Mr. Potter wrote: Thu Nov 23, 2023 1:26 pm FWIW I’m in a similar situation and plan to dump all my ibonds on 1/1/2024. There’s better options out there plus I want to reduce my number of accounts and TD is the first to go.
What are the better options? That is going to depend on the investor isn't it?
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