Who's Buying I Bonds Now?

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Grt2bOutdoors
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Who's Buying I Bonds Now?

Post by Grt2bOutdoors » Fri May 01, 2015 9:57 am

The Treasury just announced the May-Oct 31 rates. Series I Bonds have a fixed rate of 0.00% and an variable rate of 0.00%. A big fat ZERO!!
Who's buying now?

Series EE bonds are paying 0.30% for the first 19 years and 11 months, 29 days. Year 20 the bond will be worth twice it's purchase price.
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tenkuky
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Re: Who's Buying I Bonds Now?

Post by tenkuky » Fri May 01, 2015 10:02 am

I bought in February and not worried about it
At least not paying tax on 0.06% from my savings account
Don't need the $ for 5 years

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Re: Who's Buying I Bonds Now?

Post by jhfenton » Fri May 01, 2015 10:09 am

I wouldn't buy any new I Bonds now. I'd wait until November. The real rate may not change from 0.0%, but at least you'd have another potential 6 months of interest at the 30-year back end, plus you'd have whatever return you get from your alternate investment for 6 months.

If I were buying EE Bonds, I'd buy as soon as possible to get the 20-year clock started, since I'd view them as a 20-year CD with an enormous early withdrawal penalty.

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Re: Who's Buying I Bonds Now?

Post by Ice-9 » Fri May 01, 2015 10:10 am

There appears to be no downside to putting what would have been I-Bond money into a savings account (or six-month CD) and waiting to see what happens November 1st.

Edit to add: jhfenton above beat me to it. :)

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Re: Who's Buying I Bonds Now?

Post by mikep » Fri May 01, 2015 10:50 am

I use reward checking accounts now instead of I-bonds. 5.09% taxable beats 0% tax deferred.

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Re: Who's Buying I Bonds Now?

Post by stevewolfe » Fri May 01, 2015 10:54 am

Grt2bOutdoors wrote:The Treasury just announced the May-Oct 31 rates. Series I Bonds have a fixed rate of 0.00% and an variable rate of 0.00%. A big fat ZERO!!
Who's buying now?

Series EE bonds are paying 0.30% for the first 19 years and 11 months, 29 days. Year 20 the bond will be worth twice it's purchase price.
We bought our limit of IBonds earlier this year. This too shall pass. I'll buy the limit again next year. Glad to see the EE get a bit of a bump from 0.10%. Now paying about the same as a 9 month no-penalty CD at my local bank.

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New I bond rates out - not good news

Post by fsrph » Fri May 01, 2015 6:57 pm

[Thread merged into here, see below. --admin LadyGeek]

New I bond composite rate = 0%.

From Depositaccounts.com -
"If you have old I Bonds, you'll have six months of rates that range from 0% (for I Bonds with a fixed rate of 1.60% or less) to 2.00% (for I Bonds with a 3.60% fixed rate).
https://www.depositaccounts.com/blog/20 ... rates.html

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Re: New I bond rates out - not good news

Post by letsgobobby » Fri May 01, 2015 7:08 pm

We still might buy our full I bonds this year (I already bought $5k from my tax refund) because it's not inflation this year I'm worried about: it's inflation in 20 years. And once I don't buy this year's I bonds, I can never buy them again. Am I thinking about this clearly?

Also, I don't see how the EE rates can be considered bad news by the author in your link. The 20 year doubling period remains intact. The rate went from 0.1 to 0.3%, so it's better than before. I'm planning to buy EE bonds for the first time ever, since 20 years from now I should be safely into some kind of early retirement.

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Re: New I bond rates out - not good news

Post by jhfenton » Fri May 01, 2015 8:19 pm

letsgobobby wrote:We still might buy our full I bonds this year (I already bought $5k from my tax refund) because it's not inflation this year I'm worried about: it's inflation in 20 years. And once I don't buy this year's I bonds, I can never buy them again. Am I thinking about this clearly?

Also, I don't see how the EE rates can be considered bad news by the author in your link. The 20 year doubling period remains intact. The rate went from 0.1 to 0.3%, so it's better than before. I'm planning to buy EE bonds for the first time ever, since 20 years from now I should be safely into some kind of early retirement.
If you want to buy them, you should still buy them. I'd just wait until November. The fixed rate cannot go lower, and the composite rate is 0.0% for the next 6 months, so you're getting nothing if you buy now versus November. All you're doing is giving up a potential 6 months of positive interest at the end of the 30 years.

EE bonds, I'd buy now to get the 20-year clocked started. If you hold for 20 years, it's not a bad deal.

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Re: New I bond rates out - not good news

Post by zaboomafoozarg » Fri May 01, 2015 8:39 pm

On the plus side, the CPI went down so stuff isn't more expensive.

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Re: New I bond rates out - not good news

Post by joe8d » Fri May 01, 2015 8:52 pm

zaboomafoozarg wrote:On the plus side, the CPI went down so stuff isn't more expensive.
Maybe "Stuff" isn't , but things like food is.
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Re: New I bond rates out - not good news

Post by JoMoney » Fri May 01, 2015 9:44 pm

joe8d wrote:
zaboomafoozarg wrote:On the plus side, the CPI went down so stuff isn't more expensive.
Maybe "Stuff" isn't , but things like food is.
Food was up (although eating at home less so than eating out) , energy/gasoline was WAY down
http://www.bls.gov/news.release/cpi.nr0.htm
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Re: New I bond rates out - not good news

Post by JDDS » Sat May 02, 2015 1:04 am

So with the fixed rate and thus the composite rate at 0, why would anyone buy an I bond? Especially given credit unions and online banks are paying nearly 1%?

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Re: New I bond rates out - not good news

Post by camaro327 » Sat May 02, 2015 8:08 am

There is no reason to buy I bonds between May and October. It is better to wait earn the 1% in a savings account and invest in November, assuming a positive CPI number.

If you're buying EEs then as a previous poster mentioned the sooner you buy them the sooner you get started on the holding period.

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Re: New I bond rates out - not good news

Post by nisiprius » Sat May 02, 2015 9:22 am

JDDS wrote:So with the fixed rate and thus the composite rate at 0, why would anyone buy an I bond? Especially given credit unions and online banks are paying nearly 1%?
1) Because inflation has been averaging more than 1%. 2) Because even given equal return, the pattern of return of I bonds (tracking inflation) reduces inflation risk and reduces uncertainty.
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Re: New I bond rates out - not good news

Post by jasonv » Sat May 02, 2015 9:09 pm

letsgobobby wrote:We still might buy our full I bonds this year (I already bought $5k from my tax refund) because it's not inflation this year I'm worried about: it's inflation in 20 years. And once I don't buy this year's I bonds, I can never buy them again. Am I thinking about this clearly?

Also, I don't see how the EE rates can be considered bad news by the author in your link. The 20 year doubling period remains intact. The rate went from 0.1 to 0.3%, so it's better than before. I'm planning to buy EE bonds for the first time ever, since 20 years from now I should be safely into some kind of early retirement.
I might be contrarian to most users on this forum, but I would actually consider January 2016 to be an ideal time to dump all of my I bonds, since that is when the early withdrawal penalty of three months interest for most of them would effectively be zero. Real yields of TIPS in the 20 to 30 year range have been consistently holding above zero percent, so I simply don't see any compelling long term advantages of I bonds over TIPS besides tax deferral. There is also no purchase limit on TIPS, and a liability matching ladder could be purchased in order to provide inflation protected income for the future.
jhfenton wrote:If you want to buy them, you should still buy them. I'd just wait until November. The fixed rate cannot go lower, and the composite rate is 0.0% for the next 6 months, so you're getting nothing if you buy now versus November. All you're doing is giving up a potential 6 months of positive interest at the end of the 30 years.

EE bonds, I'd buy now to get the 20-year clocked started. If you hold for 20 years, it's not a bad deal.
For anyone able to hold for 20 years, I think the long term expected return of EE bonds is higher than both TIPS and I bonds. Earning a return of 3.5% risk free is exceedingly rare these days aside from a few reward checking accounts. Anyone who is in a position to take advantage of the qualifying education expenses benefits should definitely do so:

http://www.bogleheads.org/wiki/EE_savin ... n_Expenses

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Re: New I bond rates out - not good news

Post by JBaumgart » Sun May 03, 2015 12:09 am

From reading the above posts I guess I'm one of the fortunate ones who purchased I-Bonds when the paid very good interest, at least by today's standards. I invested a total of $104,000, in various denominations, from 12/99 to 10/01, and the current total value has grown to $248,266.80. The latest calculator shows current interest rates of 4.50% to 5.11%. My plan now is to hold these bonds until they start to mature, beginning 12/29 and ending 10/31. Assuming my spouse or I don't need the money before then, would anyone here advise me to cash them in before they mature? Currently they are part of a 50% 'bond and fixed income" allocation that my spouse and I have. We are both in our mid-60's.

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Re: New I bond rates out - not good news

Post by BrandonBogle » Sun May 03, 2015 12:47 am

I am thinking of using this opportunity to cash in my I-Bonds in December or January. I only 0.2% and 0.1% fixed rates bonds. The Treasury Direct website is a pain to deal with and I figure I could just roll these into my bond holdings (likely in addition to my munis).

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Re: New I bond rates out - not good news

Post by sawhorse » Sun May 03, 2015 2:49 am

JBaumgart wrote:From reading the above posts I guess I'm one of the fortunate ones who purchased I-Bonds when the paid very good interest, at least by today's standards. I invested a total of $104,000, in various denominations, from 12/99 to 10/01, and the current total value has grown to $248,266.80. The latest calculator shows current interest rates of 4.50% to 5.11%. My plan now is to hold these bonds until they start to mature, beginning 12/29 and ending 10/31. Assuming my spouse or I don't need the money before then, would anyone here advise me to cash them in before they mature? Currently they are part of a 50% 'bond and fixed income" allocation that my spouse and I have. We are both in our mid-60's.
You got the deal of the century! (the century only being 15 years so far)

The only reason to redeem them early would be to avoid a big tax bill on all that interest at the end. You can make annual tax payments on accrued interest to avoid the big bill at the end. If you do that one year, you have to continue doing it for the life of the bond so if your income is currently high then it may not be a good idea.

How did you buy so much in just a few years? I thought they're limited to $10k a year.

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Re: New I bond rates out - not good news

Post by Mudpuppy » Sun May 03, 2015 4:14 am

sawhorse wrote:How did you buy so much in just a few years? I thought they're limited to $10k a year.
The limit is 10k per year now, but note when they were purchased... 1999 to 2001. Back then, the annual limit per person was $30k, and JBaumgart mentioned a spouse, which means their household annual limit was $60k.

Also, the fixed rate back then was in the 3% or higher range, so JBaumgart will be one of the I Bond owners who will earn more than 0% when this rate period hits. The new composite rate only hits 0% for I Bonds that do not have a fixed rate "large enough" to cancel out the -1.6% inflationary rate.

So I would advise JBaumgart to hold on to those I Bonds until they mature, since I Bonds from that era have such a good fixed rate.

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Re: New I bond rates out - not good news

Post by z3r0c00l » Sun May 03, 2015 5:36 am

And they could be purchased with credit cards too, no?

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Re: New I bond rates out - not good news

Post by north2016 » Sun May 03, 2015 7:26 am

I take a long term view on inflation and will keep maximizing I bond purchases despite the current low rates. In the long run, I-bonds (and TIPS) are the only risk-free way of keeping up with inflation.

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Re: New I bond rates out - not good news

Post by Grt2bOutdoors » Sun May 03, 2015 7:45 am

north2016 wrote:I take a long term view on inflation and will keep maximizing I bond purchases despite the current low rates. In the long run, I-bonds (and TIPS) are the only risk-free way of keeping up with inflation.
Only if long term inflation adjusted rates exceeds 3.53 percent otherwise the EE's will be the I-bonds and TIPS.
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Re: New I bond rates out - not good news

Post by JBaumgart » Sun May 03, 2015 11:20 am

Mudpuppy wrote:So I would advise JBaumgart to hold on to those I Bonds until they mature, since I Bonds from that era have such a good fixed rate.
That's my take as well. Hold them until they mature, or possibly cash them in over several years at the end to avoid moving into a significantly higher tax bracket. Hopefully the tax rates 15 years from now won't be too much higher than they are now.

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Re: New I bond rates out - not good news

Post by Spirit Rider » Sun May 03, 2015 1:58 pm

Mudpuppy wrote:
sawhorse wrote:How did you buy so much in just a few years? I thought they're limited to $10k a year.
The limit is 10k per year now, but note when they were purchased... 1999 to 2001. Back then, the annual limit per person was $30k, and JBaumgart mentioned a spouse, which means their household annual limit was $60k.
And in 2002, it went to $60K/person. In 2002, they added the electronic versions and allowed each person to purchase $30K electronic and $30K paper. That lasted until 2008 when they limited the total to $10K/person.

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Re: New I bond rates out - not good news

Post by Spirit Rider » Sun May 03, 2015 2:30 pm

z3r0c00l wrote:And they could be purchased with credit cards too, no?
In 1999 it started with a maximum transaction of $500 and in 2000 went to a max of $1000. In 2003 they doubled the minimum hold length to 12 months and ended credit card purchases, because of the flippers. However, the joke is on them. They might have made good immediate returns, be we will get 30 years of compounded and deferred returns.

The website just couldn't handle the traffic. If you waited to the last week it was often a nightmare. I would set the alarm clock for 4am to try and get the transactions in. Remember, you might need to do tens of transactions. You would get transactions rejected, transactions that went thru with no confirmation, and times you couldn't even get into the site.

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Re: New I bond rates out - not good news

Post by #Cruncher » Sun May 03, 2015 3:44 pm

nisiprius in [url=https://www.bogleheads.org/forum/viewtopic.php?p=2478640#p2478640]this post[/url] wrote:
JDDS wrote:So with the fixed rate and ... the composite rate at 0, why would anyone buy an I bond? Especially given [that] credit unions and online banks are paying nearly 1%?
1) Because inflation has been averaging more than 1%. ...
The [non-seasonally adjusted] CPI fell 0.8% over the past six months and 0.1% over the past year. But over the past five years it has averaged an annual increase of 1.6%. (See 5yr column on right side of CPI since 1961.) I agree with you, Nisi, that this latter figure is a better estimate of what it will do in the future. And this makes I Bonds with a 0% fixed rate generally a better investment than a 1% savings account -- but not for the next six months. Because the composite rate as well as the fixed rate will be 0% for I Bonds purchased from May through October, if one hasn't yet made his 2015 purchase, it is better to wait until November to do so.
jasonv in [url=https://www.bogleheads.org/forum/viewtopic.php?p=2479048#p2479048]this post[/url] wrote:... I would actually consider January 2016 to be an ideal time to dump all of my I bonds, since that is when the early withdrawal penalty of three months interest for most of them would effectively be zero.
I don't think interest rates have risen enough to warrant redeeming I Bonds -- even ones with a 0% fixed rate. But if one does redeem some of them and if they are less than five years old, a period when they are earning at a 0% composite rate is a good time, as this will make the 3-month's forfeiture of interest have no cost. But be careful in choosing when to redeem. January 2016 would be the best month only for I Bonds purchased in April or October. See my post, Re: new i-bond rate?, for more information.
jasonv in same post wrote:Real yields of TIPS in the 20 to 30 year range have been consistently holding above zero percent, so I simply don't see any compelling long term advantages of I bonds over TIPS besides tax deferral.
30-year TIPS yields are indeed positive. (+0.75% according to WSJ TIPS Quotes 5/1/2015.) But these are not the TIPS to compare I Bonds against. Even though an I Bond can be held for up to 30-years, it can be redeemed without penalty and (more importantly) without market price risk any time after five years. In my opinion, it is therefore better to compare their yields against TIPS maturing in five or ten years. And these are currently about -0.25% and +0.15% respectively.
jasonv in same post wrote:There is also no purchase limit on TIPS, and a liability matching ladder could be purchased in order to provide inflation protected income for the future.
I Bonds do indeed have an annual limit on purchases while TIPS do not. But it makes no sense to use this as an argument for redeeming I Bonds one already holds in order to buy TIPS. And while a 30-year TIPS would be good for the upper end of a 30-year inflation-protected "bond" ladder, 0% fixed rate I Bonds currently provide a better return for the near term rungs of the ladder.

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Re: New I bond rates out - not good news

Post by Browser » Sun May 03, 2015 5:45 pm

Thanks #Cruncher. Informative as always. I set up a TIPs ladder back in 2008 when the real rates bumped up to 2% - 3%. Since then the real rates have steadily dropped and you have to go out to 10 years or so to get a positive real rate. So, I adopted a strategy of gradually selling off the rungs in my TIPs ladder with negative real rates and replacing them with I-Bonds, which have a 0% real rate floor. Provides the same inflation protection with no term risk whenever I need to liquidate them; whereas TIPS carry term risk if they are not held to maturity. Also, a big negative with TIPs as a long term inflation-protected asset is that they keep paying out interest that has to be managed and reinvested. There are no zero-coupon TIPS. However, I-Bonds are like zero-coupon bonds and you don't have the nuisance of handling the interest payments. In short, I-Bonds are better than TIPs for the purpose of providing long-term inflation protection. The limitation is that you can only invest $10K per year and you must invest outside your tax-deferred retirement accounts. They can certainly play a role, and I wouldn't forego investing in them if your goal is to provide an inflation-protected income source down the road.
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Re: New I bond rates out - not good news

Post by rob » Sun May 03, 2015 6:03 pm

z3r0c00l wrote:And they could be purchased with credit cards too, no?
Yeah... The only time I have ever got to the top of my 2% cash back credit card limit :D Wish I bought far more in hindsight :(
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Re: New I bond rates out - not good news

Post by jj » Sun May 03, 2015 7:50 pm

letsgobobby wrote: We still might buy our full I bonds this year (I already bought $5k from my tax refund) because it's not inflation this year I'm worried about: it's inflation in 20 years. And once I don't buy this year's I bonds, I can never buy them again. Am I thinking about this clearly?
Yes. This is my plan i.e. to use I bonds as a ladder of inflation protected income for the final 25 to 30 years of our retirement. I am still building the ladder in early retirement and intend to start spending it down in about 10 to 12 years. At that point we will have been buying I bonds for just over 20 years, with the first two years at more than the $10k each per annum rate. I have not bought our 2015 allocation yet and will now wait until November. Whatever the rate turns out to be in November, I will buy our $20k. The 30 year inflation protection is their selling point.
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Re: New I bond rates out - not good news

Post by protagonist » Sun May 03, 2015 8:32 pm

fsrph wrote:New I bond composite rate = 0%.

From Depositaccounts.com -
"If you have old I Bonds, you'll have six months of rates that range from 0% (for I Bonds with a fixed rate of 1.60% or less) to 2.00% (for I Bonds with a 3.60% fixed rate).
https://www.depositaccounts.com/blog/20 ... rates.html

Francis
Not bad news either.
You have positive real return combined with tax deferral in a nearly risk-free investment. So you will essentially make money. Could be a lot worse.

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Re: New I bond rates out - not good news

Post by Noobvestor » Sun May 03, 2015 10:50 pm

I still love and will continue to buy I Bonds every year at the beginning of the year. Beats TIPS, and may yet beat nominals. Only time will tell.
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Re: New I bond rates out - not good news

Post by Browser » Mon May 04, 2015 10:24 am

According to the latest from Bill Gross, we are entering a period in which you'll be lucky to eke out returns a little better than money market returns from stocks and bonds. And to get that you'll have to live with years in which there are negative returns. So maybe the returns from I-Bonds won't look too bad compared with the alternatives.
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Re: New I bond rates out - not good news

Post by Quickfoot » Mon May 04, 2015 10:31 am

Browser wrote:According to the latest from Bill Gross, we are entering a period in which you'll be lucky to eke out returns a little better than money market returns from stocks and bonds. And to get that you'll have to live with years in which there are negative returns. So maybe the returns from I-Bonds won't look too bad compared with the alternatives.
And fortunately Bill Gross doesn't know what is going to happen so what he thinks can be safely ignored. People should select a well diversified asset allocation they are comfortable with, can stick with during an downturn and stop worrying about what people think they know (they are almost always wrong). Even if bond yields were negative I'd still hold them just as I'd hold equities even if they lose money for multiple years in a row.

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Re: Who's Buying I Bonds Now?

Post by Clever_Username » Mon May 04, 2015 4:08 pm

Ice-9 wrote:There appears to be no downside to putting what would have been I-Bond money into a savings account (or six-month CD) and waiting to see what happens November 1st.

Edit to add: jhfenton above beat me to it. :)
There's a minor benefit to buying now versus November: it's six months earlier that it becomes liquid, if you're intending it as a sizable part of your emergency fund.

That having been said, I plan to finish my 2015 iBond purchases around Thanksgiving.
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Re: Who's Buying I Bonds Now?

Post by Dutch » Mon May 04, 2015 4:29 pm

Nobody is buying now. We're all waiting to see what will happen in November :P

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Re: Who's Buying I Bonds Now?

Post by LadyGeek » Mon May 04, 2015 6:50 pm

FYI - I moved fsrph's thread into here.
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Re: Who's Buying I Bonds Now?

Post by englishgirl » Mon May 04, 2015 10:17 pm

I am continuing to buy I bonds. Haha, I guess I am the contrarian. But I am buying a whopping $40 a month, and it's for part of my emergency fund. I didn't see any reason to stop buying. Sure, I would like to earn more than 0% but at least even these bonds will keep pace with inflation.

And at least I have some I bonds currently earning 0.4%. Thanks to Mel. I wasn't around early enough to catch those 3%+ fixed rates, but I snapped up quite a few at 2%.
Sarah

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Re: Who's Buying I Bonds Now?

Post by pascalwager » Tue May 05, 2015 11:50 am

I buy the max every January 1 for some small protection in the event of unexpected inflation.

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Re: Who's Buying I Bonds Now?

Post by Noobvestor » Thu May 07, 2015 11:08 pm

Re: I Bonds vs. EE Bonds - I do expect EE bonds will beat I Bonds over 20 years, but one other advantage of I Bond is that they aren't effectively 20-year bonds - unlike EE Bonds, which only make sense to sell after exactly 20 years, I Bonds are much more flexible could be sold sooner or later. Not sure what price to put on that advantage, but I will gladly hold both, regardless.
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Re: Who's Buying I Bonds Now?

Post by sperry8 » Sun Dec 13, 2015 9:31 am

So I'm trying to understand the iBonds I bought in the past (and if it's worthwhile to hold them).

According to the website here is what I have:

Issue Date Interest Rate Amount Current Value
01-01-2013 0.00% $10,000.00 $10,376.00
01-01-2012 0.00% $10,000.00 $10,652.00
05-01-2011 1.54% $5,000.00 $5,452.00
Totals: $25,000.00 $26,480.00

It appears to me that even though there is 0% interest rate on the 2012 and 2013 iBonds that I am earning interest (1.25 - 2% per year) even though two of the iBonds show 0% as the interest rate. Why do I earn interest on the 2012 & 2013 ones?

Do the new iBond interest rates matter to me? Or are my old rates locked in for the life of those iBonds? And how do I identify what these rates are? Are they the composite rates shown here? http://www.treasurydirect.gov/indiv/res ... rms.htm#ex Which if I read correctly are 1.54% for all my bonds (even though the website shows 0% for some).

A bit confused here :confused Any help would be appreciated :)
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Ice-9
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Re: Who's Buying I Bonds Now?

Post by Ice-9 » Sun Dec 13, 2015 10:08 am

sperry8 wrote:So I'm trying to understand the iBonds I bought in the past (and if it's worthwhile to hold them).

According to the website here is what I have:

Issue Date Interest Rate Amount Current Value
01-01-2013 0.00% $10,000.00 $10,376.00
01-01-2012 0.00% $10,000.00 $10,652.00
05-01-2011 1.54% $5,000.00 $5,452.00
Totals: $25,000.00 $26,480.00

It appears to me that even though there is 0% interest rate on the 2012 and 2013 iBonds that I am earning interest (1.25 - 2% per year) even though two of the iBonds show 0% as the interest rate. Why do I earn interest on the 2012 & 2013 ones?

Do the new iBond interest rates matter to me? Or are my old rates locked in for the life of those iBonds? And how do I identify what these rates are? Are they the composite rates shown here? http://www.treasurydirect.gov/indiv/res ... rms.htm#ex Which if I read correctly are 1.54% for all my bonds (even though the website shows 0% for some).

A bit confused here :confused Any help would be appreciated :)
Two important pieces of info that you don't get out of that table you posted from their website:

1. Your different I-bonds can have different fixed portions of the rate based on the six-month period (between May and November) that you bought them. You can view the entire fixed rate history under the Fixed Rates heading here:
https://www.treasurydirect.gov/indiv/re ... dterms.htm
However, all three of your particular I-bonds happened to be purchased during 0.00% fixed rate periods. (I-bonds bought between now and April 30, 2016 have a 0.10% fixed rate portion.)

2. The inflation-indexed variable portion of the rate, and thus the composite rate, changes every six months on the six-month anniversary of the issue date. So, those January issue I-bonds should change next month from zero to 1.54%.

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Re: Who's Buying I Bonds Now?

Post by beardsworth » Sun Dec 13, 2015 10:28 am

sperry8 wrote:So I'm trying to understand the iBonds I bought in the past (and if it's worthwhile to hold them).

According to the website here is what I have:

Issue Date Interest Rate Amount Current Value
01-01-2013 0.00% $10,000.00 $10,376.00
01-01-2012 0.00% $10,000.00 $10,652.00
05-01-2011 1.54% $5,000.00 $5,452.00
Totals: $25,000.00 $26,480.00

It appears to me that even though there is 0% interest rate on the 2012 and 2013 iBonds that I am earning interest (1.25 - 2% per year) even though two of the iBonds show 0% as the interest rate. Why do I earn interest on the 2012 & 2013 ones?

Do the new iBond interest rates matter to me? Or are my old rates locked in for the life of those iBonds? And how do I identify what these rates are? Are they the composite rates shown here? http://www.treasurydirect.gov/indiv/res ... rms.htm#ex Which if I read correctly are 1.54% for all my bonds (even though the website shows 0% for some).

A bit confused here :confused Any help would be appreciated :)
Your main question seems to be about rate themselves. But concerning your listed dollar figures, also remember that I Bonds redeemed before five years of age are subject to forfeiture of the most recent three months of interest earnings. I assume that you're getting the dollar figures above from the Savings Bond Value Calculator feature on the Treasury Direct web site. Unless I'm mistaken, for I Bonds less than five years old, the Calculator shows the current value as if they were going to be redeemed right now, without the last three months of earnings. As each of these bonds reaches its fifth anniversary since purchase, there will be a small bump-up in its dollar value, reflecting the absence of the three-months-interest penalty.

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Re: Who's Buying I Bonds Now?

Post by #Cruncher » Sun Dec 13, 2015 1:15 pm

sperry8 in [url=https://www.bogleheads.org/forum/viewtopic.php?p=2717862#p2717862]this post[/url] wrote:Do the new iBond interest rates matter to me? Or are my old rates locked in for the life of those iBonds?
The new fixed rate of 0.1% announced Nov 1st is not relevant to previously purchased I Bonds. Their fixed rates were set at the time they were purchased and will apply for the life of the bonds. However, the 0.77% semi-annual inflation rate also announced Nov 1st is relevant. It was or will be applied to the 0% fixed rates on your bonds to produce a 1.54% annual composite rate. Your bond bought in May will earn at this rate for six months from Nov 1 2015 through April 30 2016. Your bonds bought in January will earn at this rate for six months from Jan 1 2016 through June 30 2016.

You can see the complete earnings history of your three bonds on these web pages:
$5,000 I Bond with 0.00% Fixed Rate Purchased May 2011
$10,000 I Bond with 0.00% Fixed Rate Purchased January 2012
$10,000 I Bond with 0.00% Fixed Rate Purchased January 2013
Since these three bonds were issued less than five years ago, they are subject to a three month interest forfeiture if redeemed. Therefore the December values shown by the TreasuryDirect Savings Bond Calculator are actually for September.

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