I Bonds - buy now or wait for May?

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JustinR
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I Bonds - buy now or wait for May?

Post by JustinR » Mon Mar 10, 2014 12:54 am

Or wait for April to see the new inflation rate (does this matter?)

Or half now and half in May?
Last edited by JustinR on Mon Mar 10, 2014 10:58 am, edited 1 time in total.

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Re: I Bonds - buy now or wait for May?

Post by z3r0c00l » Mon Mar 10, 2014 5:50 am

Buy in full as soon as possible, eg. $10,000 around January 20th. Since you cannot predict the fixed rate, you may gain a bit or lose a bit. This is almost like a time in market thing, not that you will earn a fortune either way.

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Re: I Bonds - buy now or wait for May?

Post by sscritic » Mon Mar 10, 2014 7:38 am


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TheTimeLord
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Re: I Bonds - buy now or wait for May?

Post by TheTimeLord » Mon Mar 10, 2014 7:55 am

I like to buy $5,000 every 6 months. So I would be half now, half later.
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Re: I Bonds - buy now or wait for May?

Post by Angst » Mon Mar 10, 2014 9:43 am

Well, people are usually comparing current inflation payments vs. the next (May) reset, but since last fall we now also have the fixed component to speculate upon. People seemed generally surprised that there was any fixed component at all, so the .20% was something of a gift. Will the treasury keep the .20%? Cut it? Increase it? I wish I knew. That would affect when I decided to buy my bonds more than inflation predictions. I figure the fixed rate will stay the same, but God knows, I have no good justification or credibility for making such a prediction. Anyone else have a strong opinion about the fixed component?

The current annualized inflation rate of 1.18%, plus the fixed .20% has given us 1.38% since November. Someone I'm sure has been tracking inflation numbers since then. I'm a little lazy to figure it out and expect someone else is already tracking this... yes?

Unless I hear some convincing arguments to the contrary, I'm probably going to buy my I-bonds after the reset in May, which is to say I might even put the decision off until November, or buy 1/2 in May and 1/2 later on. I basically put all of my spare $ into a PenFed CD in January so I'm already being pushed to delay my I-bond purchasing this spring.

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Re: I Bonds - buy now or wait for May?

Post by surfer1 » Mon Mar 10, 2014 9:51 am

I'm buying, but here's my take on it.

Ibonds are paying 1.38% for the first 6 months. The next 6 months they could very well go negative, which is capped at 0. In that case, you can break it after a year with no penalty (2 months * $0 interest = $0 penalty). That roughly means you could end up with 0.69% for the year. That's a little less than an online savings account, with the added benefit of a tax deferral and state tax break. So, worst-case scenario, it does no worse than an online savings. The average-case or best-case scenario is "some" kind of interest for the next 6 months, let's say 0.25% (0.59 + 0.25 + 0.2 = 1.04% or if you include the EWP ((.0983 + .0167) * 6) + (.04167 + .0167) * 4 + (0 * 2)) = .69 + .23) = 0.92%, in which case, it will beat an online savings.

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Jay69
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Re: I Bonds - buy now or wait for May?

Post by Jay69 » Mon Mar 10, 2014 1:35 pm

Whatever #cruncher says :wink:
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Re: I Bonds - buy now or wait for May?

Post by Clever_Username » Mon Mar 10, 2014 3:45 pm

Does the rate of existing bonds change in May/Nov, or just new issues?
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Re: I Bonds - buy now or wait for May?

Post by Mel Lindauer » Mon Mar 10, 2014 4:17 pm

Clever_Username wrote:Does the rate of existing bonds change in May/Nov, or just new issues?
The fixed rate at the date of issue is the rate for the life of that I Bond. Old bonds will get the newly-announced inflation adjustment on their next six-month anniversary after the May/Nov. announcement.
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Re: I Bonds - buy now or wait for May?

Post by Clever_Username » Mon Mar 10, 2014 6:18 pm

Mel Lindauer wrote:
Clever_Username wrote:Does the rate of existing bonds change in May/Nov, or just new issues?
The fixed rate at the date of issue is the rate for the life of that I Bond. Old bonds will get the newly-announced inflation adjustment on their next six-month anniversary after the May/Nov. announcement.
Ah! So if the current fixed rate is 0.20%, then for the lifetime of that bond, it pays 0.20% per year + inflation (min 0%/year)?

Edit : Follow-up question: I know I can't buy through Vanguard, but is there a way within Vanguard to track my I-Bonds (or, for that matter, existing EE bonds)?
"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.

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Re: I Bonds - buy now or wait for May?

Post by fareastwarriors » Tue Mar 11, 2014 5:56 pm

I bought $1000 yesterday after seeing this thread.

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Re: I Bonds - buy now or wait for May?

Post by pjstack » Tue Mar 11, 2014 6:31 pm

Clever_Username wrote:
Edit : Follow-up question: I know I can't buy through Vanguard, but is there a way within Vanguard to track my I-Bonds (or, for that matter, existing EE bonds)?
Here's a link to the savings bond calculator: http://www.treasurydirect.gov/BC/SBCPrice
pjstack

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Re: I Bonds - buy now or wait for May?

Post by Mel Lindauer » Tue Mar 11, 2014 9:13 pm

Clever_Username wrote:
Mel Lindauer wrote:
Clever_Username wrote:Does the rate of existing bonds change in May/Nov, or just new issues?
The fixed rate at the date of issue is the rate for the life of that I Bond. Old bonds will get the newly-announced inflation adjustment on their next six-month anniversary after the May/Nov. announcement.
Ah! So if the current fixed rate is 0.20%, then for the lifetime of that bond, it pays 0.20% per year + inflation (min 0%/year)?

Edit : Follow-up question: I know I can't buy through Vanguard, but is there a way within Vanguard to track my I-Bonds (or, for that matter, existing EE bonds)?
You can download the Savings Bond Wizard here: http://www.treasurydirect.gov/indiv/too ... wizard.htm

Then, each month when you calculate the new redemption value, you can add that manually to your Vanguard account under outside investments.
Best Regards - Mel | | Semper Fi

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Re: I Bonds - buy now or wait for May?

Post by Clever_Username » Wed Mar 12, 2014 12:28 am

No way to have it automatically follow them? Oh well, it doesn't appear too tough to do manually.

Thanks for the information!
"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.

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Re: I Bonds - buy now or wait for May?

Post by z3r0c00l » Wed Mar 12, 2014 5:29 am

P.S. If you didn't buy in 2013, as soon as possible was last November, not January.
This seems like a 2014 post, no?

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dratkinson
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Re: I Bonds - buy now or wait for May?

Post by dratkinson » Wed Mar 12, 2014 1:35 pm

Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).



I devote two sheets in my Excel investment tracking workbook to the output of the Saving Bond Calculator (could never get the Savings Bond Wizard to work for me) and TreasuryDirect. Each month, in addition to adding my Vanguard eStatement entries, I also copy/paste my current Savings Bond information.

It gives me something to do a the start of each new month and helps to keep me off the street and out of trouble.
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Re: I Bonds - buy now or wait for May?

Post by Mel Lindauer » Wed Mar 12, 2014 3:32 pm

Sorta like doing the monthly P&L statement back in the business days, huh? :-)
dratkinson wrote:Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).



I devote two sheets in my Excel investment tracking workbook to the output of the Saving Bond Calculator (could never get the Savings Bond Wizard to work for me) and TreasuryDirect. Each month, in addition to adding my Vanguard eStatement entries, I also copy/paste my current Savings Bond information.

It gives me something to do a the start of each new month and helps to keep me off the street and out of trouble.
Best Regards - Mel | | Semper Fi

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Re: I Bonds - buy now or wait for May?

Post by Phineas J. Whoopee » Thu Mar 13, 2014 1:04 pm

dratkinson wrote:Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).
...
Quibbling just for fun, the issue month is when your refund is sent to the Bureau of the Public Debt. If you file on paper somewhere around the 15 April deadline it's all but certain the bonds will be issued with the May rate. :happy
PJW

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Re: I Bonds - buy now or wait for May?

Post by dratkinson » Thu Mar 13, 2014 3:58 pm

Phineas J. Whoopee wrote:
dratkinson wrote:Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).
...
Quibbling just for fun, the issue month is when your refund is sent to the Bureau of the Public Debt. If you file on paper somewhere around the 15 April deadline it's all but certain the bonds will be issued with the May rate. :happy
PJW
Was going to disagree with you, then re-read your post and noticed the "file on paper" catch. As I'm planning to free efile this year, will not be testing your theory. But you could, and let us know the outcome. :)
http://www.irs.gov/Individuals/Using-Yo ... ings-Bonds

19. How long will it take to get my savings bonds?

Your savings bonds are ordered after the IRS completes processing your tax return. Once ordered, it may take up to three weeks for your savings bonds to arrive in the mail. If you’re having a portion of your refund deposited directly into your bank account, you may receive your refund before your savings bonds arrive by mail.
Would think that if we efiled by 15 April an accepted return that IRS could certainly order our bonds within 2 weeks and so would get an April issue date. But I've been wrong before.
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Phineas J. Whoopee
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Re: I Bonds - buy now or wait for May?

Post by Phineas J. Whoopee » Thu Mar 13, 2014 5:16 pm

dratkinson wrote:...
Was going to disagree with you, then re-read your post and noticed the "file on paper" catch. As I'm planning to free efile this year, will not be testing your theory. But you could, and let us know the outcome. :)
Too late for me this here year. :wink:
dratkinson wrote:...
Would think that if we efiled by 15 April an accepted return that IRS could certainly order our bonds within 2 weeks and so would get an April issue date. But I've been wrong before.
Well, you see, that's the issue in a nutshell. Quoting from Where's My Refund:
You requested that part or all of your refund be used for a US Savings Bond(s) purchase.

It may take up to three weeks from the date your refund was sent for your Savings Bonds to arrive in the mail. The Bureau of the Public Debt will mail your bonds to the address shown on your tax return.

If you do not receive the savings bond(s) you should contact Treasury Retail Securities in Minneapolis at 1-800-553-2663.
It isn't the accepted date which matters. That date is only when the IRS agrees your return is internally consistent. What matters, for this purpose, is the date the refund is sent.

PJW

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Re: I Bonds - buy now or wait for May?

Post by dratkinson » Fri Mar 14, 2014 3:15 pm

Phineas J. Whoopee wrote:...
It isn't the accepted date which matters. That date is only when the IRS agrees your return is internally consistent. What matters, for this purpose, is the date the refund is sent. ...
The verbiage used when efiling is:
"received", which *seems to mean "we have received your return, but have not yet processed it", and
"accepted", which seem to mean "we have processed your return, find no errors, and accept it as correct."
  • * No I have not searched the IRS website for the exact meanings.
From above, my understanding is refund request should then be sent almost immediately to Treasury, because that happens "...after the IRS completes processing your tax return...", meaning it was "accepted" as correct.

So the "accepted" date should be almost the same as the "sent to Treasure" date.
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Re: I Bonds - buy now or wait for May?

Post by jeffyscott » Sat Mar 15, 2014 9:02 am

dratkinson wrote:Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).
Only if you overpaid your taxes by $5000 during 2013.
Time is your friend; impulse is your enemy. - John C. Bogle

placeholder
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Re: I Bonds - buy now or wait for May?

Post by placeholder » Sat Mar 15, 2014 11:54 am

I thought some people reported success by filing an extension with payment.

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dratkinson
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Re: I Bonds - buy now or wait for May?

Post by dratkinson » Sat Mar 15, 2014 3:15 pm

jeffyscott wrote:
dratkinson wrote:Don't forget you can also buy $5K I bonds (paper) with your fed tax return (before May).
Only if you overpaid your taxes by $5000 during 2013.
Easily done with form 4868 (request for filing extension...) earlier, and efiled this week. Received fed notice same day that return was accepted, so bonds should arrive within 21 days. (Knock wood.)

Earlier I'd done a draft return to determine how much I needed to send in with 4868. ($5K - draft refund due = overpayment needed with 4868.)
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

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jeffyscott
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Re: I Bonds - buy now or wait for May?

Post by jeffyscott » Sun Mar 16, 2014 9:17 am

Did not know about that method for creating a refund. I'm satisfied with getting $20K per year but, maybe if there are ever 3% I-bonds again...

Anyway, I'm buying now to get the 0.2%. I was shocked when I found out they went above 0, but had bought early last year and missed out (I think that cost me $1200 30 years from now).
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: I Bonds - buy now or wait for May?

Post by fareastwarriors » Mon Mar 17, 2014 5:18 pm

placeholder wrote:I thought some people reported success by filing an extension with payment.

I just did that a week and half ago. My check was cashed last week. I'm planning to get 5k in paper ibonds.

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