I Bonds variable rate @ 3.54% in May

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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

Mel Lindauer wrote: Mon Jun 21, 2021 7:05 pm
mangorunner wrote: Mon Jun 21, 2021 6:28 pm
bhtomj wrote: Wed Apr 14, 2021 12:36 am Buying now just means you wait until October for the new rate. IMO, it's better to buy now to get the clock started on a good (current) rate and the 1 year holding period.
I don't understand your April 2021 comment - why would purchasing bonds in April have meant you wait for the October rate? (I'm very new with I-bonds and working very hard to grasp all of the nuances. Thanks!)
Because you would have gotten the rate that was in effect in April for the first six months and then when you bought in October, you'd get the rate that was in effect from May thru October for the next six months.
Yeah this table might help: https://www.treasurydirect.gov/indiv/re ... htm#change

For example I bought some last December (didn't quite make it November), which have just now reset. Also have some from January that reset next month

Feel free to correct me if I read that wrong Mel :)
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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mangorunner
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Re: I Bonds variable rate @ 3.54% in May

Post by mangorunner »

RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
Acronyms: one of the greatest impediments to effective communication.
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Re: I Bonds variable rate @ 3.54% in May

Post by LittleMaggieMae »

mangorunner wrote: Mon Jun 21, 2021 7:24 pm
RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
DW = Dear Wife
DH = Dear Husband
DS,DS1, DS2 = Dear Son, Dear Son #1, Dear Son #2 -- in a very few cases it means Dear Spouse you have to figure it out from context.
DD,DD1, DD2 = Dear Daughter Dear Daughter#1, Dear Daughter #2
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Mel Lindauer
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

LittleMaggieMae wrote: Mon Jun 21, 2021 7:39 pm
mangorunner wrote: Mon Jun 21, 2021 7:24 pm
RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
DW = Dear Wife
DH = Dear Husband
DS,DS1, DS2 = Dear Son, Dear Son #1, Dear Son #2 -- in a very few cases it means Dear Spouse you have to figure it out from context.
DD,DD1, DD2 = Dear Daughter Dear Daughter#1, Dear Daughter #2
And add SO = Significant Other
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

tomsense76 wrote: Mon Jun 21, 2021 7:14 pm
Mel Lindauer wrote: Mon Jun 21, 2021 7:05 pm
mangorunner wrote: Mon Jun 21, 2021 6:28 pm
bhtomj wrote: Wed Apr 14, 2021 12:36 am Buying now just means you wait until October for the new rate. IMO, it's better to buy now to get the clock started on a good (current) rate and the 1 year holding period.
I don't understand your April 2021 comment - why would purchasing bonds in April have meant you wait for the October rate? (I'm very new with I-bonds and working very hard to grasp all of the nuances. Thanks!)
Because you would have gotten the rate that was in effect in April for the first six months and then when you bought in October, you'd get the rate that was in effect from May thru October for the next six months.
Yeah this table might help: https://www.treasurydirect.gov/indiv/re ... htm#change

For example I bought some last December (didn't quite make it November), which have just now reset. Also have some from January that reset next month

Feel free to correct me if I read that wrong Mel :)
Your link explains it perfectly.
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#Cruncher
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Re: I Bonds variable rate @ 3.54% in May

Post by #Cruncher »

mangorunner wrote: Mon Jun 21, 2021 6:28 pm
bhtomj wrote: Wed Apr 14, 2021 12:36 am Buying now just means you wait until October for the new rate. ...
I don't understand your April 2021 comment - why would purchasing bonds in April have meant you wait for the October rate? ...
The composite rate that I Bonds earn each six-month period is the combination of the following two rates which are announced the first business day every May and November:
  • The Fixed Rate that was in effect when you purchased. It never changes.
  • The Inflation Rate that is in effect on every six-month "anniversary" of your purchase. It only applies for the next six months.
Generally the composite rate is just the sum of the fixed rate and the inflation rate (both on an annualized basis). [1] Here is an illustration of this for four I Bond purchases: April / May 2021 and April / May 2020. In both cases you can see that an April purchase still gets a composite rate based on the Inflation Rate announced in May -- just not until the following October.

For the 2021 case, the fixed rate was the same for April and May purchases. I included the 2020 case to show this isn't always so. The April 2020 purchase got the 0.2% fixed rate announced November 2019, but a purchase one month later got only the 0.0% fixed rate announced May 2020. [2]

Code: Select all

               ---- Rates ----
                          Semi
                        Annual
 Announced     Fixed Inflation
  Nov 2019     0.20%     1.01%
  May 2020     0.00%     0.53%
  Nov 2020     0.00%     0.84%
  May 2021     0.00%     1.77%

    Bought  Apr 2021  May 2021    Apr 2020  May 2020
Fixed Rate     0.00%     0.00%       0.20%     0.00%
            ------------ Composite Rate ------------

Code: Select all

  Apr 2020                           2.22%          
  May 2020                             |       1.06%
  Jun 2020                             |         |  
  Jul 2020                             |         |  
  Aug 2020                             |         |  
  Sep 2020                             v         |  
  Oct 2020                           1.26%       v  
  Nov 2020                             |       1.68%
  Dec 2020                             |         |  
  Jan 2021                             |         |  
  Feb 2021                             |         |  
  Mar 2021                             v         |  
  Apr 2021     1.68%                 1.88%       v  
  May 2021       |       3.54%         |       3.54%
  Jun 2021       |         |           |         |  
  Jul 2021       |         |           |         |  
  Aug 2021       |         |           |         |  
  Sep 2021       v         |           v         |  
  Oct 2021     3.54%       v         3.74%       v  
  Nov 2021       |                     |
  Dec 2021       |                     |
  Jan 2022       |                     |
  Feb 2022       |                     |
  Mar 2022       v                     v
  1. The actual composite rate formula is
    Composite Rate = Fixed Rate + 2 X Inflation Rate + Fixed Rate X Inflation Rate
    But if the fixed rate is small, the last term gets truncated due to rounding.
    (See Combining the two rates for more.)
  2. For every fixed rate and semi-annual inflation rate, see What have rates been in the past?.
Bulgogi Head
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Re: I Bonds variable rate @ 3.54% in May

Post by Bulgogi Head »

From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

Bulgogi Head wrote: Tue Jun 22, 2021 7:25 pm From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Bulgogi Head
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Re: I Bonds variable rate @ 3.54% in May

Post by Bulgogi Head »

tomsense76 wrote: Tue Jun 22, 2021 8:29 pm
Bulgogi Head wrote: Tue Jun 22, 2021 7:25 pm From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
I suppose my question is how TD handles the 3-month penalty for cashing out before 5 years. Does TD withhold the first 3 months of interest, and then give that interest at the 5 year mark?
tim1999
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Re: I Bonds variable rate @ 3.54% in May

Post by tim1999 »

mangorunner wrote: Mon Jun 21, 2021 7:24 pm
RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
We actually had an entire thread on this.

viewtopic.php?t=341141
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tomsense76
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Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

Bulgogi Head wrote: Tue Jun 22, 2021 9:20 pm
tomsense76 wrote: Tue Jun 22, 2021 8:29 pm
Bulgogi Head wrote: Tue Jun 22, 2021 7:25 pm From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
I suppose my question is how TD handles the 3-month penalty for cashing out before 5 years. Does TD withhold the first 3 months of interest, and then give that interest at the 5 year mark?
They say the last 3months of interest is withheld ( https://treasurydirect.gov/indiv/resear ... m.htm#when ). So one would compute the interest all the way up to 3months prior to the redemption
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

tomsense76 wrote: Tue Jun 22, 2021 9:39 pm
Bulgogi Head wrote: Tue Jun 22, 2021 9:20 pm
tomsense76 wrote: Tue Jun 22, 2021 8:29 pm
Bulgogi Head wrote: Tue Jun 22, 2021 7:25 pm From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
I suppose my question is how TD handles the 3-month penalty for cashing out before 5 years. Does TD withhold the first 3 months of interest, and then give that interest at the 5 year mark?
They say the last 3months of interest is withheld ( https://treasurydirect.gov/indiv/resear ... m.htm#when ). So one would compute the interest all the way up to 3months prior to the redemption
The balance that TD shows is what you would get if redeemed. No guess work (TD doesn't show the interest that you would lose if you redeemed early, which is the 3 more recent months).
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

And at the five-year mark, you'll see a big increase since they'll show ALL of the interest without the last three months being withheld. You'll think you hit the jackpot! :D
Best Regards - Mel | | Semper Fi
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Mel Lindauer wrote: Wed Jun 23, 2021 12:18 am And at the five-year mark, you'll see a big increase since they'll show ALL of the interest without the last three months being withheld. You'll think you hit the jackpot! :D
Not as much as the jump someone holding EE Bonds will see at the 20 year mark!
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

anon_investor wrote: Wed Jun 23, 2021 12:19 am
Mel Lindauer wrote: Wed Jun 23, 2021 12:18 am And at the five-year mark, you'll see a big increase since they'll show ALL of the interest without the last three months being withheld. You'll think you hit the jackpot! :D
Not as much as the jump someone holding EE Bonds will see at the 20 year mark!
Yes, that's for sure! Twenty years is the magic doubling year for EE Bonds.
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Re: I Bonds variable rate @ 3.54% in May

Post by phantom0308 »

mangorunner wrote: Mon Jun 21, 2021 7:24 pm
RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
Am I the only one who has been making Roth IRA contributions for my Whirlpool? I haven’t found the mega backdoor on it yet.
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

phantom0308 wrote: Wed Jun 23, 2021 1:47 am
mangorunner wrote: Mon Jun 21, 2021 7:24 pm
RedDog wrote: Wed Apr 14, 2021 3:40 pm I bought both DW’s and my maximum allocation in January for one reason...my asset allocation said to buy bonds.
What are DWs? (I presume it's not dishwashers. :D )
Am I the only one who has been making Roth IRA contributions for my Whirlpool? I haven’t found the mega backdoor on it yet.
You're looking in the wrong place. The door is either on the front or the top, not the back. :D
Best Regards - Mel | | Semper Fi
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Re: I Bonds variable rate @ 3.54% in May

Post by HueyLD »

I would like to thank Mel for introducing me to I bond investment.

I was aware of I bonds, but never considered them for my portfolio. However, Mel’s comments and recommendations gave me motivation to learn about I bonds.
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Re: I Bonds variable rate @ 3.54% in May

Post by Bulgogi Head »

anon_investor wrote: Tue Jun 22, 2021 10:22 pm
tomsense76 wrote: Tue Jun 22, 2021 9:39 pm
Bulgogi Head wrote: Tue Jun 22, 2021 9:20 pm
tomsense76 wrote: Tue Jun 22, 2021 8:29 pm
Bulgogi Head wrote: Tue Jun 22, 2021 7:25 pm From reading the thread, it sounds like I won’t see any interest in TD until after month 3 (because of the 3-month penalty)?
Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
I suppose my question is how TD handles the 3-month penalty for cashing out before 5 years. Does TD withhold the first 3 months of interest, and then give that interest at the 5 year mark?
They say the last 3months of interest is withheld ( https://treasurydirect.gov/indiv/resear ... m.htm#when ). So one would compute the interest all the way up to 3months prior to the redemption
The balance that TD shows is what you would get if redeemed. No guess work (TD doesn't show the interest that you would lose if you redeemed early, which is the 3 more recent months).
Thank you! From the link above I think I figured out why my ibonds still show the original balance. It looks like I won’t see the balance change until 6 months in.
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Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Bulgogi Head wrote: Wed Jun 23, 2021 1:46 pm
anon_investor wrote: Tue Jun 22, 2021 10:22 pm
tomsense76 wrote: Tue Jun 22, 2021 9:39 pm
Bulgogi Head wrote: Tue Jun 22, 2021 9:20 pm
tomsense76 wrote: Tue Jun 22, 2021 8:29 pm

Not sure I follow the question. The first 12 months the money is locked up (like a CD). One still gets interest during that 12 month period

Is the plan you are considering to then cash in the I Bonds after 12 months? If so, one would only get 9 months of interest due to the 3 month penalty (though others should feel free to correct me)
I suppose my question is how TD handles the 3-month penalty for cashing out before 5 years. Does TD withhold the first 3 months of interest, and then give that interest at the 5 year mark?
They say the last 3months of interest is withheld ( https://treasurydirect.gov/indiv/resear ... m.htm#when ). So one would compute the interest all the way up to 3months prior to the redemption
The balance that TD shows is what you would get if redeemed. No guess work (TD doesn't show the interest that you would lose if you redeemed early, which is the 3 more recent months).
Thank you! From the link above I think I figured out why my ibonds still show the original balance. It looks like I won’t see the balance change until 6 months in.
No, you will see the balance change after 3 months. So if you bought in May, you will have to wait until August 1 to see the change.
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Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

HueyLD wrote: Wed Jun 23, 2021 1:23 pm I would like to thank Mel for introducing me to I bond investment.

I was aware of I bonds, but never considered them for my portfolio. However, Mel’s comments and recommendations gave me motivation to learn about I bonds.
Hopefully you got a truckload of those good old I Bonds with fixed rates from 3.0% all the way up to 3.6%. Those babies are now paying in the high 6% to over 7% range. :moneybag :moneybag
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