Consensus on I Bonds for 2019?

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sophie1
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Consensus on I Bonds for 2019?

Post by sophie1 » Sat Feb 02, 2019 8:51 am

I had planned to hold off on buying I Bonds, but now I'm rethinking that.

Between the Fed's decision to pause interest rate hikes and the inflation rate falling to near zero for the past few months, it seems unlikely the fixed rate will rise in May, and it might even drop. It's currently 0.5%, the best it's been in >10 years. If the rate stays the same, it's definitely better for me to buy early due to the tax advantages.

Just wondering what everyone else is doing!

AlwaysaQ
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Re: Consensus on I Bonds for 2019?

Post by AlwaysaQ » Sat Feb 02, 2019 11:46 am

I bought half my allowed amount last month and I think I will buy the remainder in April.

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CardinalRule
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Re: Consensus on I Bonds for 2019?

Post by CardinalRule » Sat Feb 02, 2019 11:55 am

Similar for me. I'm planning to buy $5,000 next week and the remainder in April, after the March inflation report comes out.
AlwaysaQ wrote:
Sat Feb 02, 2019 11:46 am
I bought half my allowed amount last month and I think I will buy the remainder in April.

dh
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Re: Consensus on I Bonds for 2019?

Post by dh » Sat Feb 02, 2019 1:21 pm

sophie1 wrote:
Sat Feb 02, 2019 8:51 am
I had planned to hold off on buying I Bonds, but now I'm rethinking that.

Between the Fed's decision to pause interest rate hikes and the inflation rate falling to near zero for the past few months, it seems unlikely the fixed rate will rise in May, and it might even drop. It's currently 0.5%, the best it's been in >10 years. If the rate stays the same, it's definitely better for me to buy early due to the tax advantages.

Just wondering what everyone else is doing!
Obviously, no one knows the next fixed rate going forward in 2019. I did buy in January; I simply decided that 0.5% was "good enough." Especially given the last few years have been lower (0.3% when I bought in 2018). Good luck to you.

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knpstr
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Re: Consensus on I Bonds for 2019?

Post by knpstr » Sat Feb 02, 2019 1:45 pm

not a buyer.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

Thesaints
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Re: Consensus on I Bonds for 2019?

Post by Thesaints » Sat Feb 02, 2019 1:52 pm

As things are now, the fixed rate is more likely to be reduced than increased on May 1st. On the other hand, the 6-month inflation data will likely be very low.
Unsure whether I’ll use next April window to buy my 10k. Will probably not make sense as a short term investment; just got a 2.90% rate on a 14 month CD from Ally.
Yet, I-bonds should also be viewed as a long term investment and the 0.5% fixed rate feels pretty good, compared to the sub-1% rate of the 20-year TIPS.
It will probably be a last minute decision, but I already know that I won’t be making an extra ES tax payment to get 5k as a refund.

Steve K
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Re: Consensus on I Bonds for 2019?

Post by Steve K » Sun Feb 03, 2019 1:04 pm

Bought our full allotment at end of January.

cousindan
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Re: Consensus on I Bonds for 2019?

Post by cousindan » Sun Feb 03, 2019 11:16 pm

Just curious as to why you would buy a 0.5% bond when 2+% money market, bond and CD investments are available. Some long term CDs like 10-20 years are available from the brokerages paying 3+%.

I would think a good CD ladder would beat 0.5% tax deferred any day of the week.

Not criticizing just winding what I'm missing.

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whodidntante
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Re: Consensus on I Bonds for 2019?

Post by whodidntante » Sun Feb 03, 2019 11:20 pm

cousindan wrote:
Sun Feb 03, 2019 11:16 pm
Just curious as to why you would buy a 0.5% bond when 2+% money market, bond and CD investments are available. Some long term CDs like 10-20 years are available from the brokerages paying 3+%.

I would think a good CD ladder would beat 0.5% tax deferred any day of the week.

Not criticizing just winding what I'm missing.
It's an inflation protected, tax deferred, state tax exempt, deflation protected bond. So you get the 0.5% + inflation, but the rate cannot fall below 0%.

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Clever_Username
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Re: Consensus on I Bonds for 2019?

Post by Clever_Username » Sun Feb 03, 2019 11:50 pm

whodidntante wrote:
Sun Feb 03, 2019 11:20 pm
cousindan wrote:
Sun Feb 03, 2019 11:16 pm
Just curious as to why you would buy a 0.5% bond when 2+% money market, bond and CD investments are available. Some long term CDs like 10-20 years are available from the brokerages paying 3+%.

I would think a good CD ladder would beat 0.5% tax deferred any day of the week.

Not criticizing just winding what I'm missing.
It's an inflation protected, tax deferred, state tax exempt, deflation protected bond. So you get the 0.5% + inflation, but the rate cannot fall below 0%.
Right. cousindan is missing that it isn't 0.5%, it's 0.5% + inflation, minimum zero, and the interest isn't taxed until the bond is redeemed, and even then it isn't taxed at the state level.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

tindel
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Re: Consensus on I Bonds for 2019?

Post by tindel » Mon Feb 04, 2019 10:02 am

I'm a buyer for my emergency fund. Not a buyer for any other reason.

I bought half my allotment in January. I will probably buy the other half of my allotment and am considering purchasing all of my SO's allotment before the May announcement. I think there's too much uncertainty in the next announcement, inflation rates have been near 0.0% the last few months, and it doesn't sound like the fed is going to keep increasing rates; therefore, it's unlikely they raise the fixed rate.

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Epsilon Delta
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Re: Consensus on I Bonds for 2019?

Post by Epsilon Delta » Mon Feb 04, 2019 3:28 pm

Some years ago I bought for my emergency fund. A few years later it turned out I'd locked in such a great rate it would be a crime to give it up, so I had to refund the e-fund. It is imporatant to reevaluate from time to time.

feh
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Re: Consensus on I Bonds for 2019?

Post by feh » Tue Feb 05, 2019 1:28 pm

Already bought the limit for 2019.

get_g0ing
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Re: Consensus on I Bonds for 2019?

Post by get_g0ing » Wed Feb 06, 2019 3:24 am

whodidntante wrote:
Sun Feb 03, 2019 11:20 pm
cousindan wrote:
Sun Feb 03, 2019 11:16 pm
Just curious as to why you would buy a 0.5% bond when 2+% money market, bond and CD investments are available. Some long term CDs like 10-20 years are available from the brokerages paying 3+%.

I would think a good CD ladder would beat 0.5% tax deferred any day of the week.

Not criticizing just winding what I'm missing.
It's an inflation protected, tax deferred, state tax exempt, deflation protected bond. So you get the 0.5% + inflation, but the rate cannot fall below 0%.
Clever_Username wrote:
Sun Feb 03, 2019 11:50 pm
whodidntante wrote:
Sun Feb 03, 2019 11:20 pm
cousindan wrote:
Sun Feb 03, 2019 11:16 pm
Just curious as to why you would buy a 0.5% bond when 2+% money market, bond and CD investments are available. Some long term CDs like 10-20 years are available from the brokerages paying 3+%.

I would think a good CD ladder would beat 0.5% tax deferred any day of the week.

Not criticizing just winding what I'm missing.
It's an inflation protected, tax deferred, state tax exempt, deflation protected bond. So you get the 0.5% + inflation, but the rate cannot fall below 0%.
Right. cousindan is missing that it isn't 0.5%, it's 0.5% + inflation, minimum zero, and the interest isn't taxed until the bond is redeemed, and even then it isn't taxed at the state level.
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.

tindel
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Re: Consensus on I Bonds for 2019?

Post by tindel » Wed Feb 06, 2019 8:45 am

get_g0ing wrote:
Wed Feb 06, 2019 3:24 am
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.
Right now the semi-annual inflation percentage is 1.16%. The treasury shows how to calculate the composite rate on this website:

The inflation rate is adjusted every 6 months you hold your I-bond. Your composite rate also adjusts every 6 months. Your fixed rate does not change for the life of the bond.

The inflation rate is determined by the non-seasonally adjusted CPI-U data published by the BLS in the 6 months preceding the rate adjustment. The index values can be found at this website. You'll have to calculate the numbers yourself - I haven't found a place that lists the last 6 month change anywhere.
November announcement uses the March to September change
May announcement uses the September to March change

The last 6 months (June to December) have seen 0.30% deflation. January's numbers come out a week from today. I'll be interested to see the change.

tindel
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Re: Consensus on I Bonds for 2019?

Post by tindel » Wed Feb 06, 2019 9:11 am

Epsilon Delta wrote:
Mon Feb 04, 2019 3:28 pm
Some years ago I bought for my emergency fund. A few years later it turned out I'd locked in such a great rate it would be a crime to give it up, so I had to refund the e-fund. It is imporatant to reevaluate from time to time.
What a great problem to have! :sharebeer

get_g0ing
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Re: Consensus on I Bonds for 2019?

Post by get_g0ing » Wed Feb 06, 2019 9:17 am

tindel wrote:
Wed Feb 06, 2019 8:45 am
get_g0ing wrote:
Wed Feb 06, 2019 3:24 am
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.
Right now the semi-annual inflation percentage is 1.16%. The treasury shows how to calculate the composite rate on this website:

The inflation rate is adjusted every 6 months you hold your I-bond. Your composite rate also adjusts every 6 months. Your fixed rate does not change for the life of the bond.

The inflation rate is determined by the non-seasonally adjusted CPI-U data published by the BLS in the 6 months preceding the rate adjustment. The index values can be found at this website. You'll have to calculate the numbers yourself - I haven't found a place that lists the last 6 month change anywhere.
November announcement uses the March to September change
May announcement uses the September to March change

The last 6 months (June to December) have seen 0.30% deflation. January's numbers come out a week from today. I'll be interested to see the change.
Okay, thanks for explaining. Really nice of you.

aristotelian
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Re: Consensus on I Bonds for 2019?

Post by aristotelian » Wed Feb 06, 2019 9:19 am

get_g0ing wrote:
Wed Feb 06, 2019 3:24 am
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.
It's determined every six months on an ongoing basis. You are always guaranteed to beat inflation by the amount of the fixed rate. That is what makes I Bonds so powerful. With CD's and nominal Treasuries, you are at risk of lagging inflation. Not so with I Bonds.

get_g0ing
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Re: Consensus on I Bonds for 2019?

Post by get_g0ing » Wed Feb 06, 2019 9:26 am

aristotelian wrote:
Wed Feb 06, 2019 9:19 am
get_g0ing wrote:
Wed Feb 06, 2019 3:24 am
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.
It's determined every six months on an ongoing basis. You are always guaranteed to beat inflation by the amount of the fixed rate. That is what makes I Bonds so powerful. With CD's and nominal Treasuries, you are at risk of lagging inflation. Not so with I Bonds.
Thanks for explaining. I've never understood I-bonds although I own some also.

I was going to make a thread but I'll post my query here (I hope it's not improper to do so):
If you are in your 30s-40s and have a 3 fund portfolio, does it make sense to buy the annual I-bond limits. Or is it better to invest that money in the total stock or total international Vanguard index fund. Because the return on those would be higher.

aristotelian
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Re: Consensus on I Bonds for 2019?

Post by aristotelian » Wed Feb 06, 2019 9:30 am

get_g0ing wrote:
Wed Feb 06, 2019 9:26 am
aristotelian wrote:
Wed Feb 06, 2019 9:19 am
get_g0ing wrote:
Wed Feb 06, 2019 3:24 am
How much is the +inflation %? Is that determined at the year you buy or at the time you redeem?

Thank you.
It's determined every six months on an ongoing basis. You are always guaranteed to beat inflation by the amount of the fixed rate. That is what makes I Bonds so powerful. With CD's and nominal Treasuries, you are at risk of lagging inflation. Not so with I Bonds.
Thanks for explaining. I've never understood I-bonds although I own some also.

I was going to make a thread but I'll post my query here (I hope it's not improper to do so):
If you are in your 30s-40s and have a 3 fund portfolio, does it make sense to buy the annual I-bond limits. Or is it better to invest that money in the total stock or total international Vanguard index fund. Because the return on those would be higher.
I have been adding I Bonds although I am starting to get pickier and only buying when there is a good fixed rate. My approach is to maintain my overall allocation, considering I Bonds as part of the bond allocation, so I am using I Bonds to diversify the bond side rather than to substitute for stocks. I also consider I bonds to be part of my emergency fund.

tindel
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Re: Consensus on I Bonds for 2019?

Post by tindel » Wed Feb 06, 2019 10:12 am

get_g0ing wrote:
Wed Feb 06, 2019 9:26 am
I was going to make a thread but I'll post my query here (I hope it's not improper to do so):
If you are in your 30s-40s and have a 3 fund portfolio, does it make sense to buy the annual I-bond limits. Or is it better to invest that money in the total stock or total international Vanguard index fund. Because the return on those would be higher.
Buy with purpose.

There are many reasons to buy I-bonds. Some people like the additional tax deferred space. Others like the inflation and deflation protection. Still others like the yields. But those are all reasons.

My purpose for buying I-bonds is to hold my 6-12 mo emergency fund in I-bonds. When I decided I wanted my efund to be this deep, I did some research and found I bonds were the perfect vehicle for this because the inflation and deflation protection and the tax-deferred space.

Similarly, I have a purpose when I buy stock to eventually save enough to retire. I will never save enough on my own to retire in my desired time frame. The only chance I have to do this is to buy stock. I also hold conventional bonds to help smooth out my portfolio ride - again, my bonds have purpose.

What is your purpose in buying I-bonds?

phisher4
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Re: Consensus on I Bonds for 2019?

Post by phisher4 » Wed Feb 06, 2019 10:19 am

Thesaints wrote:
Sat Feb 02, 2019 1:52 pm
As things are now, the fixed rate is more likely to be reduced than increased on May 1st. On the other hand, the 6-month inflation data will likely be very low.
Unsure whether I’ll use next April window to buy my 10k. Will probably not make sense as a short term investment; just got a 2.90% rate on a 14 month CD from Ally.
Yet, I-bonds should also be viewed as a long term investment and the 0.5% fixed rate feels pretty good, compared to the sub-1% rate of the 20-year TIPS.
It will probably be a last minute decision, but I already know that I won’t be making an extra ES tax payment to get 5k as a refund.
Your prediction of a reduction in the fixed rate certainly "feels" right, but other than that, does anyone have additional insight (or hard data) to support this feeling?

get_g0ing
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Re: Consensus on I Bonds for 2019?

Post by get_g0ing » Wed Feb 06, 2019 10:45 am

tindel wrote:
Wed Feb 06, 2019 10:12 am
get_g0ing wrote:
Wed Feb 06, 2019 9:26 am
I was going to make a thread but I'll post my query here (I hope it's not improper to do so):
If you are in your 30s-40s and have a 3 fund portfolio, does it make sense to buy the annual I-bond limits. Or is it better to invest that money in the total stock or total international Vanguard index fund. Because the return on those would be higher.
Buy with purpose.

There are many reasons to buy I-bonds. Some people like the additional tax deferred space. Others like the inflation and deflation protection. Still others like the yields. But those are all reasons.

My purpose for buying I-bonds is to hold my 6-12 mo emergency fund in I-bonds. When I decided I wanted my efund to be this deep, I did some research and found I bonds were the perfect vehicle for this because the inflation and deflation protection and the tax-deferred space.

Similarly, I have a purpose when I buy stock to eventually save enough to retire. I will never save enough on my own to retire in my desired time frame. The only chance I have to do this is to buy stock. I also hold conventional bonds to help smooth out my portfolio ride - again, my bonds have purpose.

What is your purpose in buying I-bonds?
Really liked how you said it here. Excellent quality post and very helpful.

To be honest I didn't really have a purpose in mind because I didn't/don't understand them. I just thought:
Since the government puts a limit on them, so it must be something good.

aristotelian
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Re: Consensus on I Bonds for 2019?

Post by aristotelian » Wed Feb 06, 2019 10:54 am

phisher4 wrote:
Wed Feb 06, 2019 10:19 am
Thesaints wrote:
Sat Feb 02, 2019 1:52 pm
As things are now, the fixed rate is more likely to be reduced than increased on May 1st. On the other hand, the 6-month inflation data will likely be very low.
Unsure whether I’ll use next April window to buy my 10k. Will probably not make sense as a short term investment; just got a 2.90% rate on a 14 month CD from Ally.
Yet, I-bonds should also be viewed as a long term investment and the 0.5% fixed rate feels pretty good, compared to the sub-1% rate of the 20-year TIPS.
It will probably be a last minute decision, but I already know that I won’t be making an extra ES tax payment to get 5k as a refund.
Your prediction of a reduction in the fixed rate certainly "feels" right, but other than that, does anyone have additional insight (or hard data) to support this feeling?
Short term rates haven't really gone down, even if CPI has. Crystall ball says .3% with a lower moving rate.

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DaftInvestor
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Re: Consensus on I Bonds for 2019?

Post by DaftInvestor » Wed Feb 06, 2019 12:48 pm

Thesaints wrote:
Sat Feb 02, 2019 1:52 pm
just got a 2.90% rate on a 14 month CD from Ally.
The rate I see for their 14-month CD is 2.85% - and this is what I saw the last couple of times I checked over the last couple of weeks. Did you get the 2.9% rate by calling or some other special promotion?

Here's where I see 2.85: https://www.ally.com/learn/selectcd-14m/

Thesaints
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Re: Consensus on I Bonds for 2019?

Post by Thesaints » Thu Feb 07, 2019 8:22 pm

DaftInvestor wrote:
Wed Feb 06, 2019 12:48 pm
Thesaints wrote:
Sat Feb 02, 2019 1:52 pm
just got a 2.90% rate on a 14 month CD from Ally.
The rate I see for their 14-month CD is 2.85% - and this is what I saw the last couple of times I checked over the last couple of weeks. Did you get the 2.9% rate by calling or some other special promotion?

Here's where I see 2.85: https://www.ally.com/learn/selectcd-14m/
I got an extra 0.05% by rolling over a maturing CD (you can add on top of it, which I did).

Thesaints
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Re: Consensus on I Bonds for 2019?

Post by Thesaints » Thu Feb 07, 2019 8:26 pm

phisher4 wrote:
Wed Feb 06, 2019 10:19 am
Thesaints wrote:
Sat Feb 02, 2019 1:52 pm
As things are now, the fixed rate is more likely to be reduced than increased on May 1st. On the other hand, the 6-month inflation data will likely be very low.
Unsure whether I’ll use next April window to buy my 10k. Will probably not make sense as a short term investment; just got a 2.90% rate on a 14 month CD from Ally.
Yet, I-bonds should also be viewed as a long term investment and the 0.5% fixed rate feels pretty good, compared to the sub-1% rate of the 20-year TIPS.
It will probably be a last minute decision, but I already know that I won’t be making an extra ES tax payment to get 5k as a refund.
Your prediction of a reduction in the fixed rate certainly "feels" right, but other than that, does anyone have additional insight (or hard data) to support this feeling?
The fixed rate will never be higher than the current 5-year TIPS and some suggest it will be around half of the 10-year TIPS.

Hillview
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Re: Consensus on I Bonds for 2019?

Post by Hillview » Fri Feb 08, 2019 8:27 pm

get_g0ing wrote:
Wed Feb 06, 2019 9:26 am

I was going to make a thread but I'll post my query here (I hope it's not improper to do so):
If you are in your 30s-40s and have a 3 fund portfolio, does it make sense to buy the annual I-bond limits. Or is it better to invest that money in the total stock or total international Vanguard index fund. Because the return on those would be higher.
echoing others. I purchased iBonds (and decided to do so going forward) to (slowly) move our EF to iBonds AND to have some extra for kids college if needed. That said I max out my other tax deferred space and this is "extra" at low/no risk and LOW return (like what I'd want for an Emergency Fund).

mindboggling
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Re: Consensus on I Bonds for 2019?

Post by mindboggling » Fri Feb 08, 2019 8:31 pm

I buy my 10k limit in January regardless. Not worth trying to predict interest rates. Not worth trying to over-think this.
In broken mathematics, We estimate our prize, --Emily Dickinson

J295
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Re: Consensus on I Bonds for 2019?

Post by J295 » Fri Feb 08, 2019 9:54 pm

When we bought we just bought every year regardless of markets, and stopped when we reached a certain amount.
If I were OP I'd just buy on a set schedule until intended amount obtained and not try and "time" the purchases.
We take the same attitude with just about all of our investment decisions and it works out fine for us over the long haul (40 years investing at this point).

othermike27
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Re: Consensus on I Bonds for 2019?

Post by othermike27 » Sat Feb 09, 2019 6:34 am

David Enna's articles at
https://tipswatch.com/about/
are a good source of info on I-bonds and TIPS

grok87
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Re: Consensus on I Bonds for 2019?

Post by grok87 » Sat Feb 09, 2019 8:06 am

sophie1 wrote:
Sat Feb 02, 2019 8:51 am
I had planned to hold off on buying I Bonds, but now I'm rethinking that.

Between the Fed's decision to pause interest rate hikes and the inflation rate falling to near zero for the past few months, it seems unlikely the fixed rate will rise in May, and it might even drop. It's currently 0.5%, the best it's been in >10 years. If the rate stays the same, it's definitely better for me to buy early due to the tax advantages.

Just wondering what everyone else is doing!
i bought my full annual allowance in january
RIP Mr. Bogle.

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Mel Lindauer
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Re: Consensus on I Bonds for 2019?

Post by Mel Lindauer » Sat Feb 09, 2019 8:29 am

Don't forget that I Bonds can be used tax-free for qualifying educational expenses.
Best Regards - Mel | | Semper Fi

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Vulcan
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Re: Consensus on I Bonds for 2019?

Post by Vulcan » Sat Feb 09, 2019 8:43 am

Mel Lindauer wrote:
Sat Feb 09, 2019 8:29 am
Don't forget that I Bonds can be used tax-free for qualifying educational expenses.
There are income limits to be aware of

https://www.treasurydirect.gov/indiv/pl ... cation.htm
For single taxpayers, the tax exclusion income limit is an adjusted gross income of $93,150 and above. For married taxpayers filing jointly, the tax exclusion income limit is an adjusted gross income of $147,250 and above.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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Mel Lindauer
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Re: Consensus on I Bonds for 2019?

Post by Mel Lindauer » Sun Feb 10, 2019 7:33 pm

Vulcan wrote:
Sat Feb 09, 2019 8:43 am
Mel Lindauer wrote:
Sat Feb 09, 2019 8:29 am
Don't forget that I Bonds can be used tax-free for qualifying educational expenses.
There are income limits to be aware of

https://www.treasurydirect.gov/indiv/pl ... cation.htm
For single taxpayers, the tax exclusion income limit is an adjusted gross income of $93,150 and above. For married taxpayers filing jointly, the tax exclusion income limit is an adjusted gross income of $147,250 and above.
Thanks for adding that qualifying AGI. That's important to know and keep in mind.

If someone finds themselves approaching the AGI limit before their children are heading off to college, remember that they can still use the I Bonds tax-free, while they still qualify, by redeeming the I Bonds and putting ALL of the proceeds into a 529 plan. (The 529 is a qualifying educational expense.)
Best Regards - Mel | | Semper Fi

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Re: Consensus on I Bonds for 2019?

Post by jj » Sun Feb 10, 2019 10:57 pm

https://www.irs.gov/pub/irs-pdf/f8815.pdf

Form 8815 linked above shows the updated income limits for using I Bonds tax-free for education in 2018.

For Single filers the limit is a MAGI of $79,500 and phases out completely at $94,550. For MFJ the MAGI limits are $119,300, phasing out at $149,300.

In other words, to be able to take full advantage of I Bond interest tax-free for educational expenses, the lower income limits are required.
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

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