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neverknow
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Post by neverknow »

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jon-nyc
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Post by jon-nyc »

Very interesting.
dbr
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Post by dbr »

Is it possible that you can have $10K in paper, but not more than $5K electronically, and not more than a total of $10K?
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neverknow
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Post by neverknow »

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Opponent Process
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Post by Opponent Process »

a lot of people don't pay their taxes and get away with it too. just sayin'.
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Post by neverknow »

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Post by Sheepdog »

Neverknow, we should be more willing to borrow from you than a foreign entity.
Hope we have enough to pay them back, and you too.
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I BONDS

Post by antiqueman »

Re the 10k. Could the Treasury have changed the rules and now allow 10k?
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Post by VictoriaF »

neverknow,

Thank you for posting this. I have the same questions as you do. To add to your list of options -- I get $5k in paper I-Bonds through my payroll. What would have happened if I also went to a bank?

Victoria
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neverknow
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Post by neverknow »

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tarnation
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Post by tarnation »

VictoriaF wrote:neverknow,

Thank you for posting this. I have the same questions as you do. To add to your list of options -- I get $5k in paper I-Bonds through my payroll. What would have happened if I also went to a bank?

Victoria
I thought they were stopping (have stopped) Paper bonds through payroll deductions.
Edit: I see not till end of 2010, earlier for federal workers.
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Post by VictoriaF »

tarnation wrote:
VictoriaF wrote:neverknow,

Thank you for posting this. I have the same questions as you do. To add to your list of options -- I get $5k in paper I-Bonds through my payroll. What would have happened if I also went to a bank?

Victoria
I thought they were stopping (have stopped) Paper bonds through payroll deductions.
Edit: I see not till end of 2010, earlier for federal workers.
I received a notice that Federal payroll-based purchases will end on 30 September 2010. I am planning to do my annual purchase in August. My hypothetical question will be invalid next year, but in 2010 it still holds. ;)

Victoria
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interesting

Post by hollowcave2 »

Very interesting.

I searched Google and the Treasury Direct site for possible explanations or penalties with this situation, and I couldn't find any answer. Even the Treasury, issuing paper I-bonds in a single mailing that exceeds the purchase limit, doesn't have a check device?

Anyway, I guess you got a gift. Apparently, the Treasury is not that diligent on this issue. It's sort of like paying taxes..... the Treasury assumes most people are honest and wouldn't pose a widespread problem. They only go after the scoffers.

Very interesting. Any thoughts from Mel?

Steve
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neverknow
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Post by neverknow »

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Re: interesting

Post by Mel Lindauer »

hollowcave2 wrote:Very interesting.

I searched Google and the Treasury Direct site for possible explanations or penalties with this situation, and I couldn't find any answer. Even the Treasury, issuing paper I-bonds in a single mailing that exceeds the purchase limit, doesn't have a check device?

Anyway, I guess you got a gift. Apparently, the Treasury is not that diligent on this issue. It's sort of like paying taxes..... the Treasury assumes most people are honest and wouldn't pose a widespread problem. They only go after the scoffers.

Very interesting. Any thoughts from Mel?

Steve

FWIW, Treasury doesn't track paper I Bond purchase limits by SS#. Rather, they use the SS# to help locate lost or stolen I Bonds. The SS# is also the default SS# for the 1099 when bonds are redeemed.

Because of the lower purchase limits, the Treasury no longer issues the $10k I Bond. That's why you got the two $5k bonds. (They just haven't updated some of the old forms.)
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Post by MichaelCorleone »

Why is anyone surprised that Treasury doesn't have a security check in place for these types of things?

And getting "extra" I-Bonds at current rates isn't exactly a gift, either. If they went back to the fixed rates of 3%+ then it's a different conversation. But Treasury (government) incompetence doesn't surprise me at all.

Enjoy your extra I-Bonds :)
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Re: interesting

Post by VictoriaF »

hollowcave2 wrote: It's sort of like paying taxes..... the Treasury assumes most people are honest and wouldn't pose a widespread problem.
With taxes the rules are very clear, and one is responsible for misdeeds for years. The situation with I-Bonds is more akin to speeding: arbitrary rules and weak enforcement.

Victoria
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Post by Nermal »

Neverknow --

Something similar happened to me earlier this year. I went to my bank and asked for the maximum amount allowable in paper I bonds and EE bonds. The teller got confused because EE bonds have a face value that is twice the amount you pay for them, whereas I bonds don't. So she gave me both EE bonds and I bonds with 10k in face value. I told her that I thought she was making a mistake. But, pointing in her defense to the 10k box on the form for the discontinued I bond in that denomination, she insisted. So I thought "consider the possibility that ye be wrong."

When I got back home, I looked it up and I realized that I had not been wrong. But sure enough, a few weeks later, I received in the mail twice the amount of paper I bonds that I was entitled to. So I wrote a little note to the Treasury in Parkersburg WV, asking what I should do. A few weeks later I got a letter back saying: "As it does not appear you intentionally violated the annual purchase limits, you may keep the Series I savings bonds purchased in excess. Please remember the annual limitation, as future excess purchase amounts may be refunded." So there you have it.
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Re: interesting

Post by MichaelCorleone »

VictoriaF wrote:With taxes the rules are very clear, and one is responsible for misdeeds for years. The situation with I-Bonds is more akin to speeding: arbitrary rules and weak enforcement.

Victoria
You do live in the U.S., right? :D
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Post by neverknow »

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Re: interesting

Post by VictoriaF »

MichaelCorleone wrote:
VictoriaF wrote:With taxes the rules are very clear, and one is responsible for misdeeds for years. The situation with I-Bonds is more akin to speeding: arbitrary rules and weak enforcement.

Victoria
You do live in the U.S., right? :D
Right. I can walk to the IRS Headquarters on Pennsylvania Ave. But I get your point. ;)

Victoria
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Post by Live Free or Diehard »

I remember someone posting here that they had purchased more than $5000 of I Bonds during one year and they later received a letter from the Treasury telling them that they had exceeded the annual limit. I think it was paper I Bonds that they purchased; but I'm not 100% sure. That was several months ago. Apparently the Treasury does check for purchaeses over the limit; it just takes them awhile to figure it out. It doesn't seem like it would be that difficult to catch it if you exceeded the limit on one form.

I agree that the $5000 annual limit on paper I Bonds in pretty ridiculous.
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Post by neverknow »

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Post by sjb19 »

Here is the press release on the lowered limit.

http://www.treasurydirect.gov/news/pres ... elimit.htm

It waives its hand at a reason, but nothing really made sense to me.
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Mel

Post by hollowcave2 »

Mel wrote above:
FWIW, Treasury doesn't track paper I Bond purchase limits by SS#. Rather, they use the SS# to help locate lost or stolen I Bonds.
So does that mean that this limit is not enforced? Seems like anyone, if they wanted to do it, could just ignore the limits. But I would think that at some point, the Treasury would get after people who ignored the rule if they made very large purchases....... but why would the Treasury want to cancel large purchases, especially at these low fixed rates?

So this rule would need to be analyzed to see why the limits were changed in the first place, and the Treasury is notorious for not explaining itself.
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Re: Mel

Post by Opponent Process »

hollowcave2 wrote:Mel wrote above:
FWIW, Treasury doesn't track paper I Bond purchase limits by SS#. Rather, they use the SS# to help locate lost or stolen I Bonds.
So does that mean that this limit is not enforced? Seems like anyone, if they wanted to do it, could just ignore the limits. But I would think that at some point, the Treasury would get after people who ignored the rule if they made very large purchases....... but why would the Treasury want to cancel large purchases, especially at these low fixed rates?

So this rule would need to be analyzed to see why the limits were changed in the first place, and the Treasury is notorious for not explaining itself.
maybe they use a similar audit permutation system as the IRS? some get caught, some don't.

as for why the lower limits, they have to take the punch bowl away at some point and pay the bills. even at the current low rate, I Bonds are a pretty good deal, and dismantling the savings bond program is much less likely to set off worldwide panic versus tinkering with other lending mechanisms. I mean, as a middle class investor, I can tax shelter everything, everything. maybe that's silly or not, can't get into that here, but some argue it's unsustainable.
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Post by Mel Lindauer »

sjb19 wrote:Here is the press release on the lowered limit.

http://www.treasurydirect.gov/news/pres ... elimit.htm

It waives its hand at a reason, but nothing really made sense to me.
Here's a Forbes column I did on that subject:

http://www.forbes.com/2010/02/25/i-bond ... dauer.html
Best Regards - Mel | | Semper Fi
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Post by neverknow »

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Post by Mel Lindauer »

neverknow wrote:
Mel Lindauer wrote: Here's a Forbes column I did on that subject:

http://www.forbes.com/2010/02/25/i-bond ... dauer.html
Good article, Mel - this is precisely what I was looking at:
create a huge tax-deferred savings account and one that came with no expense ratio
Hence, why I decided a EE savings bond was a "good enough idea". And I am using my husbands SS to double what I can sock away (I give him the money, he goes down and buys one). But I won't go electronic. Maybe I am old fashioned?

So inch by inch, what began as a better place for emergency funds then MMF, back in 2003 - now is much bigger then this, and has tipped over to so large - perhaps I ought to include it's allocation in my investment portfolio percentages? I did try this once, just to see what it looked like - but holding these outside my investment portfolio helps keep my equity allocation from getting bigger and bigger (my Achilles heel).

So technically, I can still go purchase a EE bond myself, and my husband hasn't purchased any yet, this year. I'm planning for after the Nov announcement for any more. Perhaps I might know by then, whether anyone notices this happened - and retroactively takes it away? I suppose I will find out in due time.
neverknow
I stick with just the paper I Bonds, too. I've mentioned my reasons here before, so I won't go into them again.

There's nothing wrong with counting your Savings Bonds are short-term, IT or even LT bonds, depending on how long you plan to hold them. That doesn't have to affect how much you hold in equities, since there's no one number that's right for everyone. If you're only comfortable with 10 or 20% in equities, that's fine. Nothing says you have to own say 40% or any other number in equities.
Best Regards - Mel | | Semper Fi
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I Bonds

Post by Anikat »

Neverknow, thank you so much for posting your experience with the I Bonds. Since year 2000 we are holders of I Bonds exclusively in paper form.

I am finding the whole discussion hilarious and am fighting the temptation to test the system now too. Maybe just a little - at first........

Anikat
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Post by neverknow »

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Post by sjb19 »

Mel Lindauer wrote:
sjb19 wrote:Here is the press release on the lowered limit.

http://www.treasurydirect.gov/news/pres ... elimit.htm

It waives its hand at a reason, but nothing really made sense to me.
Here's a Forbes column I did on that subject:

http://www.forbes.com/2010/02/25/i-bond ... dauer.html
Thanks for the link (and article), Mel. Your conclusions match mine, which always makes me feel good.
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Post by Mel Lindauer »

neverknow wrote:
Mel Lindauer wrote:There's nothing wrong with counting your Savings Bonds are short-term, IT or even LT bonds, depending on how long you plan to hold them. That doesn't have to affect how much you hold in equities, since there's no one number that's right for everyone. If you're only comfortable with 10 or 20% in equities, that's fine. Nothing says you have to own say 40% or any other number in equities.
Bond mutual funds are not for me. I just can not hold them. I expect my fixed income to act like a piggy bank. Thus, these savings bonds are fine for me. Perhaps I am an equity addict, for keeping my percentage of equities down to my target (in a rational world) is very hard for me to do. It creeps up. Not necessarily because prices are rising, but because I like investing - and so, the number of different investments I hold grows. That is my Achilles heel.

So to use easy numbers ... lets say I have stashed away 20K in savings bonds - counted outside of my investment portfolio, and there is $100K in my investment portfolio -- and I want to target 30% in equities. 30% of 100K is 30K, but if I counted my savings bonds in - it would total 120K, 30% of which would be 36K at risk in equities. As my target creeps up from that 30% (because of my Achilles heel) - I can get in less trouble, by not counting in my savings bonds. So it is sort of an "on paper trick" to keep me out of deep trouble. Even so, it creeps up - presently 39%, but it makes no rational sense at all, to stuff any more on the fixed income side - at all (it's all full up) ... so my present mental trick is half of that 39% is utilities (so half risky equities, half less, but still risky equities). And all of that would be a much bigger absolute sum at risk, if I counted in those savings bonds - so I don't. There is something about 40% in equities, that makes me go find something to sell off. So this is working for me. (the majority of my fixed income is in CD ladders).

Goals, time horizon, and need for risk - and get it arranged so you can live with it, day in and day out.

I love my paper I Bonds. I plan to hold them until I need to spend them, if ever. I have no need to maximize every wiggle. Actually, in hindsight - the best place this "maximize" was ever accomplished was "on the job, doing real work". That human capital really was a blessing (now past tense).
neverknow
The point I was trying to make, neverknow, is that you set the $ amount you want in equities and it really doesn't matter if it's 10%, 15% or even 5% of your total portfolio. Only you can decide how much you're willing to risk, and a good rule of thumb is to figure you can lose around 50% of your equities in a bear market.
Best Regards - Mel | | Semper Fi
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Re: Paper I Bonds

Post by tetractys »

neverknow wrote:I figured I would get another phone call telling me I was right - and return to the original request of 1 each, an I bond & a EE bond, each $5K. That is not what happened. I received in the mail from the US Treasury 2 $5K I Bonds, both in my SS.
Neverknow,

Will you be worrying about discovering a fly in the ointment all the way up until redemption time? Or will you be confident for the next 30 years that upon redemption you will receive back the purchase price plus interest?

If it were me, I'd ask the treasury if they're ok with it, in a letter.

Best regards, Tet
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Post by neverknow »

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Post by neverknow »

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exigent
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Post by exigent »

I'm wandering slightly off topic here, but I have a different take on the savings bond purchase limit (vs. what Mel suggested in his excellent Forbes column).

It seems likely to me that they instituted the limit because they want to limit your ability to break and re-buy bonds if/when the fixed rate goes up (I'm thinking mainly of Series I Bonds here). By limiting you to $10k per year, you have a choice to make when the fixed rate goes up... Either break an old set of bonds and re-invest, or plug in new money.

If the limit didn't exist, then you'd be free to dump all of your lower rate bonds (at least those over 5 years old to avoid the penalty) and re-invest at the higher rate. In essence, this is a cost control measure, though I'm sure that Mel's view on limiting your ability time-shift your tax burden also played a role in their decision.
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Post by Mel Lindauer »

exigent wrote:I'm wandering slightly off topic here, but I have a different take on the savings bond purchase limit (vs. what Mel suggested in his excellent Forbes column).

It seems likely to me that they instituted the limit because they want to limit your ability to break and re-buy bonds if/when the fixed rate goes up (I'm thinking mainly of Series I Bonds here). By limiting you to $10k per year, you have a choice to make when the fixed rate goes up... Either break an old set of bonds and re-invest, or plug in new money.

If the limit didn't exist, then you'd be free to dump all of your lower rate bonds (at least those over 5 years old to avoid the penalty) and re-invest at the higher rate. In essence, this is a cost control measure, though I'm sure that Mel's view on limiting your ability time-shift your tax burden also played a role in their decision.
Just as with the rate-setting, everything's done behind closed doors and there never is any "true" reason given for any of their actions. They simply leave it to us to try to figure things out. Your explanation could be as reasonable as mine, or both could have been part of their decision.
Best Regards - Mel | | Semper Fi
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