Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
Woodshop2300
Posts: 15
Joined: Tue Jun 10, 2014 8:27 pm

Hi All,

When buying I Bonds you can choose the value to buy, \$25 and up in penny increments.

1x 1K
2x 500
4x 250
8x 125
...
40x 25

mathematics would tell me that the interest return in all those situations is identical, unless there is loss due to fractions of a penny.

If you know with absolute certainty the bonds will make it the full 30 years, then buying the largest value saves you clicks.
But if you know they won't make it to 30, or think they won't make it to 30 years.
Then you get the benefit of only cashing out exactly what you need in better and better granularty.

The only real trade off i see to 100's of \$25 bonds vs 1 large bond is the amount of clicks it takes to buy them, and the length of the account statement for the attached bank account cause of all the ACH transfers.

Thoughts?
Anything i'm missing?
What are people doing?

pjstack
Posts: 1308
Joined: Tue Feb 20, 2007 5:03 am
Location: Harbor City, CA

Well, when you buy via Treasury Direct, it's just a lump amount (as far as I know, not having done it), but you can redeem any amount you choose.

(Someone correct me if I'm wrong.)

The only way you can buy paper bonds in discrete amounts (now) is through income tax refund.
The amounts are \$1,000, \$500, \$200, \$100, and \$50. (No \$250 or \$125 denominations.)
pjstack

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

A bond is a multiple of the corresponding \$25 bond. The minimum purchase is one \$25 bond. A \$1,234.56 bond is the equivalent of 49.3824 \$25 bonds. If you don't redeem all of your bond, you must keep \$25 of your bond. The first statement is about any I bond; the others apply to holdings at TreasuryDirect.
§359.19 How is interest calculated?
We base all calculations of interest on a \$25 unit.

§363.53 What is the minimum amount of book-entry savings bonds that I may purchase in any transaction?
Each bond purchase must be in a minimum amount of \$25, with additional one-cent increments above that amount, in any one transaction. For example, a purchase may be \$25.00, \$25.01, \$25.02, or \$25.03, and so forth.

§363.54 What is the minimum amount of a book-entry savings bond that I must hold in my account?
Each bond held in your account must have a redemption value of at least \$25. If you request a transaction that would reduce the remaining redemption value of the bond to an amount less than \$25, we will not permit the transaction to occur.
I haven't done it, but I presume that if you buy \$256.47 one day and \$639.23 the next, still in the same month, they will be recorded as two separate bonds. Can anyone speak from experience?

beardsworth
Posts: 2135
Joined: Fri Jun 15, 2007 4:02 pm

pjstack wrote:The only way you can buy paper bonds in discrete amounts (now) is through income tax refund.
The amounts are \$1,000, \$500, \$200, \$100, and \$50. (No \$250 or \$125 denominations.)
And if you intentionally overpay your taxes in order to take the refund--up to a maximum of \$5,000 per return--as paper I-Bonds, you still don't get to choose the denominations of the specific paper bonds. Treasury does that, choosing from the available denominations, and just sends them to you without asking about any preference.

donaldfair71
Posts: 547
Joined: Wed Mar 06, 2013 4:15 pm

sscritic wrote:A bond is a multiple of the corresponding \$25 bond. The minimum purchase is one \$25 bond. A \$1,234.56 bond is the equivalent of 49.3824 \$25 bonds. If you don't redeem all of your bond, you must keep \$25 of your bond. The first statement is about any I bond; the others apply to holdings at TreasuryDirect.
§359.19 How is interest calculated?
We base all calculations of interest on a \$25 unit.

§363.53 What is the minimum amount of book-entry savings bonds that I may purchase in any transaction?
Each bond purchase must be in a minimum amount of \$25, with additional one-cent increments above that amount, in any one transaction. For example, a purchase may be \$25.00, \$25.01, \$25.02, or \$25.03, and so forth.

§363.54 What is the minimum amount of a book-entry savings bond that I must hold in my account?
Each bond held in your account must have a redemption value of at least \$25. If you request a transaction that would reduce the remaining redemption value of the bond to an amount less than \$25, we will not permit the transaction to occur.
I haven't done it, but I presume that if you buy \$256.47 one day and \$639.23 the next, still in the same month, they will be recorded as two separate bonds. Can anyone speak from experience?
Yes, they will be recorded separately. I buy bonds of different amounts on the same day once a month for accounting purposes (one is a New Car account, one is for emergency savings) and they are recorded separately.

Topic Author
Woodshop2300
Posts: 15
Joined: Tue Jun 10, 2014 8:27 pm

sscritic wrote:. If you don't redeem all of your bond, you must keep \$25 of your bond.
There is the key I was missing.
In my own ignorance, and having never redeemed my bonds. I simply assumed my options were all of the bond or non of the bond.
Since you can redeem partials, so long as you buy in \$25 steps, the individual value of each doesn't really matter.

Phineas J. Whoopee
Posts: 9139
Joined: Sun Dec 18, 2011 6:18 pm