Buying I bonds - what is the purpose of Registration on TD website

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pkay
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Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Wed May 16, 2018 6:17 pm

I've been reading several posts on the pros and cons of buying I bonds...seems like most of the cons is associated with Treasury Direct's customer service and website itself and not necessarily disadvantages of holding I bonds. So we're thinking about moving ahead to purchase I bonds, $10,000 each for myself and spouse. We want to do this mostly to help us with tax savings as the money is sitting in a savings bank and we pay state income tax.

I opened an account for myself. When I tried to buy I bonds, I noticed that the page asks for Registration Information; I have options to register other people. Why would I do this? Does it mean I can buy I bonds registered in someone else's name, such as my spouse?

When I registered my name in my account, I didn't include my middle name. Does anyone know if this will be a problem later on when I redeem the bond or if the bond passes to a beneficiary when I die?

How does one add a Beneficiary? I've read some complications about giving someone access to my account if I am incapacitated.. is it really that complicated or is it only because no one knew the account # and password?

Should my husband open his on TD account and buy his own I bonds, then we link our accounts together for easier management?

Would holding I bonds make our tax returns extra complicated during the holding period? Do we need to report/include on tax return the amount and interest accrued during the holding period? Is it pretty straight forward when we redeem it and report the 1099 on our tax return?

I've also contacted TD customer services about some of these questions, but I also heard that their customer service is terrible. Thanks for your time in advance.

Grt2bOutdoors
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Grt2bOutdoors » Wed May 16, 2018 7:05 pm

pkay wrote:
Wed May 16, 2018 6:17 pm
I've been reading several posts on the pros and cons of buying I bonds...seems like most of the cons is associated with Treasury Direct's customer service and website itself and not necessarily disadvantages of holding I bonds. So we're thinking about moving ahead to purchase I bonds, $10,000 each for myself and spouse. We want to do this mostly to help us with tax savings as the money is sitting in a savings bank and we pay state income tax.

I opened an account for myself. When I tried to buy I bonds, I noticed that the page asks for Registration Information; I have options to register other people. Why would I do this? Does it mean I can buy I bonds registered in someone else's name, such as my spouse?
You may register (purchase) your bonds as an individual (in your name only), you may purchase bonds jointly (you and your husband) as joint tenants with right of survivorship but the lead social security number will be the primary account holder (you) that tax statement will show when you ultimately cash in the bond. Your name will always be listed as an owner unless you select the gift option which will then need to be electronically delivered into the TD account of the recipient.
When I registered my name in my account, I didn't include my middle name. Does anyone know if this will be a problem later on when I redeem the bond or if the bond passes to a beneficiary when I die?
You can register the bond as you (primary owner) pod (payable on death) insert name and persons social security number.The beneficiary will need to provide a certified death certificate to claim the bond and TD account number. Because it is registered payable on death, it passes outside of a will.

Redeeming a bond should not be an issue, you are the account holder, you have established ownership proving your identity with your drivers license and taxpayer identification and linkage to your bank account.

How does one add a Beneficiary? I've read some complications about giving someone access to my account if I am incapacitated.. is it really that complicated or is it only because no one knew the account # and password?

Select registration as primary owner (you) payable on death (insert name). The registration will be saved in the drop down box enabling you to use it in the future for registering new bonds and/or redemption.

Should my husband open his on TD account and buy his own I bonds, then we link our accounts together for easier management?
He can open his own account, I am not sure if you can link two separate individuals accounts, I know you can link a minors account to their parent.

Would holding I bonds make our tax returns extra complicated during the holding period? Do we need to report/include on tax return the amount and interest accrued during the holding period? Is it pretty straight forward when we redeem it and report the 1099 on our tax return?
You have the choice of deferring the interest until redemption or declaring the interest each year, but once you start declaring the accrued interest you need to continue each year thereafter on Schedule B. However, the IRS does permit you to stop reporting the interest but you must submit a request to the IRS using a specific format which can be found I believe in Publication 590 - Interest and Dividends, under Savings Bonds.
I've also contacted TD customer services about some of these questions, but I also heard that their customer service is terrible. Thanks for your time in advance.
Good Luck!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

pkay
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Joined: Wed Jan 17, 2018 11:04 am

Re: Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Wed May 16, 2018 9:16 pm

Grt2bOutdoors wrote:
Wed May 16, 2018 7:05 pm
pkay wrote:
Wed May 16, 2018 6:17 pm
I've been reading several posts on the pros and cons of buying I bonds...seems like most of the cons is associated with Treasury Direct's customer service and website itself and not necessarily disadvantages of holding I bonds. So we're thinking about moving ahead to purchase I bonds, $10,000 each for myself and spouse. We want to do this mostly to help us with tax savings as the money is sitting in a savings bank and we pay state income tax.

I opened an account for myself. When I tried to buy I bonds, I noticed that the page asks for Registration Information; I have options to register other people. Why would I do this? Does it mean I can buy I bonds registered in someone else's name, such as my spouse?
You may register (purchase) your bonds as an individual (in your name only), you may purchase bonds jointly (you and your husband) as joint tenants with right of survivorship but the lead social security number will be the primary account holder (you) that tax statement will show when you ultimately cash in the bond. Your name will always be listed as an owner unless you select the gift option which will then need to be electronically delivered into the TD account of the recipient.
When I registered my name in my account, I didn't include my middle name. Does anyone know if this will be a problem later on when I redeem the bond or if the bond passes to a beneficiary when I die?
You can register the bond as you (primary owner) pod (payable on death) insert name and persons social security number.The beneficiary will need to provide a certified death certificate to claim the bond and TD account number. Because it is registered payable on death, it passes outside of a will.

Redeeming a bond should not be an issue, you are the account holder, you have established ownership proving your identity with your drivers license and taxpayer identification and linkage to your bank account.

How does one add a Beneficiary? I've read some complications about giving someone access to my account if I am incapacitated.. is it really that complicated or is it only because no one knew the account # and password?

Select registration as primary owner (you) payable on death (insert name). The registration will be saved in the drop down box enabling you to use it in the future for registering new bonds and/or redemption.

Should my husband open his on TD account and buy his own I bonds, then we link our accounts together for easier management?
He can open his own account, I am not sure if you can link two separate individuals accounts, I know you can link a minors account to their parent.

Would holding I bonds make our tax returns extra complicated during the holding period? Do we need to report/include on tax return the amount and interest accrued during the holding period? Is it pretty straight forward when we redeem it and report the 1099 on our tax return?
You have the choice of deferring the interest until redemption or declaring the interest each year, but once you start declaring the accrued interest you need to continue each year thereafter on Schedule B. However, the IRS does permit you to stop reporting the interest but you must submit a request to the IRS using a specific format which can be found I believe in Publication 590 - Interest and Dividends, under Savings Bonds.
I've also contacted TD customer services about some of these questions, but I also heard that their customer service is terrible. Thanks for your time in advance.
Good Luck!
Thank you for this. When/where does TD ask me if I want to defer interest until redemption or declare interest every year? Do you personally own I bonds or another bond via TD? What's your reason for buying and holding them?

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Mel Lindauer
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Mel Lindauer » Wed May 16, 2018 10:05 pm

pkay wrote:
Wed May 16, 2018 9:16 pm
Grt2bOutdoors wrote:
Wed May 16, 2018 7:05 pm
pkay wrote:
Wed May 16, 2018 6:17 pm
I've been reading several posts on the pros and cons of buying I bonds...seems like most of the cons is associated with Treasury Direct's customer service and website itself and not necessarily disadvantages of holding I bonds. So we're thinking about moving ahead to purchase I bonds, $10,000 each for myself and spouse. We want to do this mostly to help us with tax savings as the money is sitting in a savings bank and we pay state income tax.

I opened an account for myself. When I tried to buy I bonds, I noticed that the page asks for Registration Information; I have options to register other people. Why would I do this? Does it mean I can buy I bonds registered in someone else's name, such as my spouse?
You may register (purchase) your bonds as an individual (in your name only), you may purchase bonds jointly (you and your husband) as joint tenants with right of survivorship but the lead social security number will be the primary account holder (you) that tax statement will show when you ultimately cash in the bond. Your name will always be listed as an owner unless you select the gift option which will then need to be electronically delivered into the TD account of the recipient.
When I registered my name in my account, I didn't include my middle name. Does anyone know if this will be a problem later on when I redeem the bond or if the bond passes to a beneficiary when I die?
You can register the bond as you (primary owner) pod (payable on death) insert name and persons social security number.The beneficiary will need to provide a certified death certificate to claim the bond and TD account number. Because it is registered payable on death, it passes outside of a will.

Redeeming a bond should not be an issue, you are the account holder, you have established ownership proving your identity with your drivers license and taxpayer identification and linkage to your bank account.

How does one add a Beneficiary? I've read some complications about giving someone access to my account if I am incapacitated.. is it really that complicated or is it only because no one knew the account # and password?

Select registration as primary owner (you) payable on death (insert name). The registration will be saved in the drop down box enabling you to use it in the future for registering new bonds and/or redemption.

Should my husband open his on TD account and buy his own I bonds, then we link our accounts together for easier management?
He can open his own account, I am not sure if you can link two separate individuals accounts, I know you can link a minors account to their parent.

Would holding I bonds make our tax returns extra complicated during the holding period? Do we need to report/include on tax return the amount and interest accrued during the holding period? Is it pretty straight forward when we redeem it and report the 1099 on our tax return?
You have the choice of deferring the interest until redemption or declaring the interest each year, but once you start declaring the accrued interest you need to continue each year thereafter on Schedule B. However, the IRS does permit you to stop reporting the interest but you must submit a request to the IRS using a specific format which can be found I believe in Publication 590 - Interest and Dividends, under Savings Bonds.
I've also contacted TD customer services about some of these questions, but I also heard that their customer service is terrible. Thanks for your time in advance.
Good Luck!
Thank you for this. When/where does TD ask me if I want to defer interest until redemption or declare interest every year? Do you personally own I bonds or another bond via TD? What's your reason for buying and holding them?
By default the I Bonds interest is tax-deferred anđ you'll only get a 1099 anđ owe taxes when you redeem them.
Best Regards - Mel | | Semper Fi

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Grt2bOutdoors » Thu May 17, 2018 6:15 am

The reason for buying them is for a shot at a higher rate of return for a relatively liquid (after 1 year) high quality security that is currently beating savings account rates. The interest is tax free on a state and local level, you will owe federal tax when you redeem them. You can hold them as short as one year with a small penalty, after 5 years - no penalty, or as long as 30 years. Folks have all kinds of reasons for purchasing them including as a bridge to retirement, emergency fund, part of fixed income allocation.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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BL
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by BL » Thu May 17, 2018 6:56 am

You should be aware that the rate changes every 6 months, depending on the CPI-U (one of the several consumer price indexes the government publishes). The nice thing is the I-Bond helps keep up with inflation, but can never drop below zero in return. There is a second part of the rate (which has been 0-0.1 lately, currently 0.3) which stays with the bond until you cash it in, and is essentially added to the changing CPI-U rate each 6 month period.

I bought them with spouse as co-owner. I had no trouble cashing in a trial amount after one year, even after adding a different bank for convenience of spouse. Have heard it is a bit of a hassle to have heirs cash them in. It is nice to buy them with less than 30 years until retirement so they could be cashed in and pay federal tax when income is usually lower. Some parents qualify to use for their child's college tax-free, depending on income. In some emergencies, your income would be lower anyway, such as if you lost your job.

I decided to buy in 5-10k amounts to simplify keeping track of them and their changing rates. You can sell in smaller amounts (I think in $25 multiples.)

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Jack FFR1846 » Thu May 17, 2018 7:50 am

There is a way to buy limited amounts of bonds without having to deal with TD. As a Federal tax refund up to $5k. As the holder of over $350k in paper bonds, I have no electronic bonds and never will. When I want to cash the bonds, I simply bring the paper bonds to my credit union, sign them, show ID and watch the proceeds immediately show up in my account, available with no hold.
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Gadget
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Gadget » Thu May 17, 2018 9:09 am

Are there any common factors or situations where people decide that I bonds make sense? I currently have no I bonds, but I see some appeal. Is this for people who have all tax advantaged space filled with bonds? If so, is an extra 20k a year enough to move the needle? Aren't muni bonds in taxable easier and similar enough?

Looking at www.bogleheads.org/wiki/I_savings_bonds it answers a lot of my questions. Like not redeeming or maturing in a high tax bracket. But it still seems like there is a higher proportion of bogleheads that buy I bonds than what fits in the narrow scope of appeal listed in the wiki. When combined with the headache everyone says the treasury direct site is, I don't understand the broad appeal. It seems like I'm missing something.

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by DaftInvestor » Thu May 17, 2018 9:32 am

Gadget wrote:
Thu May 17, 2018 9:09 am
Are there any common factors or situations where people decide that I bonds make sense? I currently have no I bonds, but I see some appeal. Is this for people who have all tax advantaged space filled with bonds? If so, is an extra 20k a year enough to move the needle? Aren't muni bonds in taxable easier and similar enough?

Looking at www.bogleheads.org/wiki/I_savings_bonds it answers a lot of my questions. Like not redeeming or maturing in a high tax bracket. But it still seems like there is a higher proportion of bogleheads that buy I bonds than what fits in the narrow scope of appeal listed in the wiki. When combined with the headache everyone says the treasury direct site is, I don't understand the broad appeal. It seems like I'm missing something.
I have never experienced a headache with the treasury direct site - has been simple and straight-forward to me. Also - their own satisfaction survey has very favorable results (the results were posted to another thread on this comment - as I recall - 67% felt the TD experience "Excellent" - Many Great or Good - a low percentage, apparently many of the Bogleheads here, rated the experience poor).
I like iBonds because they are inflation-protected and tax-deferred and, unlike muni bonds, there is little/no risk.
For education use, if you are under a certain income-limit - they could also be tax-free. (I thought this might come in as a benefit for me should my income drop and my 529 come up short).

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Darth Xanadu » Thu May 17, 2018 9:52 am

DaftInvestor wrote:
Thu May 17, 2018 9:32 am

For education use, if you are under a certain income-limit - they could also be tax-free.
I believe IRS Form 8815 indicates that the AGI limits to use I-Bonds tax free for qualified education expenses is $147,250 (MFJ) and $93,150 (single). I imagine this will increase over time but have not looked at historical limits.

I also started buying I-Bonds for the reasons DaftInvestor alluded to. After 1 year, they can serve in a number of capacities within my portfolio. I like the flexibility, and in the mean-time, totally tax-deferred. TD website is fine.

Edit: I think it's MAGI not AGI.
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by BogleMelon » Thu May 17, 2018 10:00 am

In addition to buy the I bonds jointly as other explained, you may need to do the following to enable your spouse to have full access to view and sell the I bonds from his own account login:
2 days later when the bonds is in your holdings, go to your account> ManageDirect menu > Manage My Securities subtitle > Assign View or Transact rights > Select Series I Savings Bond then click submit > Select the bond you number you want to give your spouse access to it then click submit Select > Click Add > And follow the prompts
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

sbaywriter
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by sbaywriter » Thu May 17, 2018 8:18 pm

OP had question about what happens if the owner of the bond is incapacitated and another question on what happens in event of death - these are 2 different situations.

I don't think the "incapacitated" question was answered - I don't know the answer and would be interested. On the other question, adding more info to what was stated earlier about the death cert - I just emailed TreasuryDirect from their website asking what happens if I die and my POD beneficiary wants to either redeem the bonds or transfer them to her name. This was their answer:

"Upon your death, the beneficiary would need to send us a copy of your death certificate.
If she wishes to redeem the bonds, she may complete the attached Redemption and Bank Change Request (FS F 5512).
If she wishes to transfer the bonds into her name, she will need to open a TreasuryDirect account in her name at www.treasurydirect.gov and complete the attached Transfer Request (FS F 5511).
She must sign the form(s) in the presence of an authorized certifying officer, available at most financial institutions.
She would then mail the death certificate and form(s) to the address listed in the instruction pages of the forms."

The transfer form was written as though primary owner was transferring the bonds and did not mention anything about the scenario in question (death of owner, POD beneficiary). So I emailed and confirmed - that is the correct form and also the beneficiary does not pay tax upon transfer of the bonds.

They responded to both my emails within 24 hours and were clear and concise. It was the forms I found unclear.

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Ice-9 » Fri May 18, 2018 11:46 am

For more than a decade, I've used I-bonds as (a) upper tier of my emergency fund, (b) alternative to 1-yr CD in April and October when the rate for the next year is known, and (c) even as part of my bond allocation, after I-bonds purchased in 2003 with 1.6% real yield started outperforming bond funds available in my retirement accounts.

Some specific things you should know about the Treasury Direct website:

(1) No statements. When I had to provide statements to prove my net worth on an adoption application, I was lucky the adoption agency understood and accepted a screenshot.

(2) No tax documents mailed to you. You have to log in and print yourself. And while all of your other 1099s follow a standard format with box 1, box 2, etc, the one from the Treasury annoyingly is presented slightly differently and requires a little study to figure out which number your tax software wants.

(3) Also, if you have multiple accounts tied to one Treasury Direct login, there will be separate tax documents for each TD account. For example, the savings bonds I converted from paper to electronic were given a separate account, and one year when a formerly paper bond had matured, I didn't realize I had to click on the link for the other account and get that 1099 as well. IRS sent me a friendly notice three years later, I paid the penalty, and all is good again, but check any other accounts on your login at tax time just in case.

pkay
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Tue May 22, 2018 1:20 pm

BogleMelon wrote:
Thu May 17, 2018 10:00 am
In addition to buy the I bonds jointly as other explained, you may need to do the following to enable your spouse to have full access to view and sell the I bonds from his own account login:
2 days later when the bonds is in your holdings, go to your account> ManageDirect menu > Manage My Securities subtitle > Assign View or Transact rights > Select Series I Savings Bond then click submit > Select the bond you number you want to give your spouse access to it then click submit Select > Click Add > And follow the prompts
thanks for this! I plan to link accounts soon.

pkay
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Wed May 23, 2018 8:51 am

sbaywriter wrote:
Thu May 17, 2018 8:18 pm
OP had question about what happens if the owner of the bond is incapacitated and another question on what happens in event of death - these are 2 different situations.

I don't think the "incapacitated" question was answered - I don't know the answer and would be interested. On the other question, adding more info to what was stated earlier about the death cert - I just emailed TreasuryDirect from their website asking what happens if I die and my POD beneficiary wants to either redeem the bonds or transfer them to her name. This was their answer:

"Upon your death, the beneficiary would need to send us a copy of your death certificate.
If she wishes to redeem the bonds, she may complete the attached Redemption and Bank Change Request (FS F 5512).
If she wishes to transfer the bonds into her name, she will need to open a TreasuryDirect account in her name at www.treasurydirect.gov and complete the attached Transfer Request (FS F 5511).
She must sign the form(s) in the presence of an authorized certifying officer, available at most financial institutions.
She would then mail the death certificate and form(s) to the address listed in the instruction pages of the forms."

The transfer form was written as though primary owner was transferring the bonds and did not mention anything about the scenario in question (death of owner, POD beneficiary). So I emailed and confirmed - that is the correct form and also the beneficiary does not pay tax upon transfer of the bonds.

They responded to both my emails within 24 hours and were clear and concise. It was the forms I found unclear.
Thank you for writing TD and providing their response.

pkay
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Wed May 23, 2018 8:57 am

Ice-9 wrote:
Fri May 18, 2018 11:46 am

(2) No tax documents mailed to you. You have to log in and print yourself. And while all of your other 1099s follow a standard format with box 1, box 2, etc, the one from the Treasury annoyingly is presented slightly differently and requires a little study to figure out which number your tax software wants.

(3) Also, if you have multiple accounts tied to one Treasury Direct login, there will be separate tax documents for each TD account. For example, the savings bonds I converted from paper to electronic were given a separate account, and one year when a formerly paper bond had matured, I didn't realize I had to click on the link for the other account and get that 1099 as well. IRS sent me a friendly notice three years later, I paid the penalty, and all is good again, but check any other accounts on your login at tax time just in case.
Ice-9: thanks for your feedback. Do I need to include I-bonds investment in my tax return every year during holding years or only the year that I redeem it?

Is the reason you have multiple accounts tied in your TD account due to paper to electronic bond conversion? I hope I don’t end up with multiple accounts I don’t know about.

How does it work when I buy another $10k I-bond next year under my account? Will next Year I-bond show as a different bond number in my account?

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Grt2bOutdoors » Wed May 23, 2018 12:39 pm

pkay wrote:
Wed May 23, 2018 8:57 am


How does it work when I buy another $10k I-bond next year under my account? Will next Year I-bond show as a different bond number in my account?
They don't show bond numbers, they show amount owned. You have to search the history to see that you purchased X bonds on Y date. It's not like a true paper bond with specific serial numbers. I miss the paper bonds.
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by donaldfair71 » Wed May 23, 2018 1:13 pm

Grt2bOutdoors wrote:
Thu May 17, 2018 6:15 am
The reason for buying them is for a shot at a higher rate of return for a relatively liquid (after 1 year) high quality security that is currently beating savings account rates. The interest is tax free on a state and local level, you will owe federal tax when you redeem them. You can hold them as short as one year with a small penalty, after 5 years - no penalty, or as long as 30 years. Folks have all kinds of reasons for purchasing them including as a bridge to retirement, emergency fund, part of fixed income allocation.

Yep, and to build on this, people who fall into certain income limitations (like me) can use them tax free to roll over into a 529. So I can put proceeds through with two benefits:

Tax free on the bond

5.75 state tax benefit

Makes them a no brainer for my particular situation vs CDs or other alternatives. They're not planned for college, per se, but it's nice having that option with them.

rgs92
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by rgs92 » Wed May 23, 2018 1:33 pm

All Savings Bonds require registration info. It has always been this way it seems. It is usually for you and optionally for a POD (pay on death) person, the beneficiary.

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by jpsc » Wed May 23, 2018 3:07 pm

BL wrote:
Thu May 17, 2018 6:56 am

I bought them with spouse as co-owner. I had no trouble cashing in a trial amount after one year, even after adding a different bank for convenience of spouse. Have heard it is a bit of a hassle to have heirs cash them in. It is nice to buy them with less than 30 years until retirement so they could be cashed in and pay federal tax when income is usually lower. Some parents qualify to use for their child's college tax-free, depending on income. In some emergencies, your income would be lower anyway, such as if you lost your job.
The nice thing about I-bonds, and when you retire and have no other income, is that the interest that the I-bonds earn is tax free, up to 30K per year tax free. So I highly recommend you buy a ladder of I-bonds

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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by pkay » Wed May 23, 2018 4:19 pm

jpsc wrote:
Wed May 23, 2018 3:07 pm
BL wrote:
Thu May 17, 2018 6:56 am

I bought them with spouse as co-owner. I had no trouble cashing in a trial amount after one year, even after adding a different bank for convenience of spouse. Have heard it is a bit of a hassle to have heirs cash them in. It is nice to buy them with less than 30 years until retirement so they could be cashed in and pay federal tax when income is usually lower. Some parents qualify to use for their child's college tax-free, depending on income. In some emergencies, your income would be lower anyway, such as if you lost your job.
The nice thing about I-bonds, and when you retire and have no other income, is that the interest that the I-bonds earn is tax free, up to 30K per year tax free. So I highly recommend you buy a ladder of I-bonds
Jpsc: thanks. I thought we still pay federal tax on I-bonds when we redeem them. How is interest tax free? Do we only pay tax on the principal?

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BL
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Re: Buying I bonds - what is the purpose of Registration on TD website

Post by BL » Wed May 23, 2018 5:03 pm

pkay wrote:
Wed May 23, 2018 4:19 pm
jpsc wrote:
Wed May 23, 2018 3:07 pm
BL wrote:
Thu May 17, 2018 6:56 am

I bought them with spouse as co-owner. I had no trouble cashing in a trial amount after one year, even after adding a different bank for convenience of spouse. Have heard it is a bit of a hassle to have heirs cash them in. It is nice to buy them with less than 30 years until retirement so they could be cashed in and pay federal tax when income is usually lower. Some parents qualify to use for their child's college tax-free, depending on income. In some emergencies, your income would be lower anyway, such as if you lost your job.
The nice thing about I-bonds, and when you retire and have no other income, is that the interest that the I-bonds earn is tax free, up to 30K per year tax free. So I highly recommend you buy a ladder of I-bonds
Jpsc: thanks. I thought we still pay federal tax on I-bonds when we redeem them. How is interest tax free? Do we only pay tax on the principal?
I don't understand, either, unless you qualify for education payment tax exemption.

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Ice-9
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Location: Rockville, MD

Re: Buying I bonds - what is the purpose of Registration on TD website

Post by Ice-9 » Wed May 23, 2018 6:37 pm

pkay wrote:
Wed May 23, 2018 8:57 am
Ice-9 wrote:
Fri May 18, 2018 11:46 am

(2) No tax documents mailed to you. You have to log in and print yourself. And while all of your other 1099s follow a standard format with box 1, box 2, etc, the one from the Treasury annoyingly is presented slightly differently and requires a little study to figure out which number your tax software wants.

(3) Also, if you have multiple accounts tied to one Treasury Direct login, there will be separate tax documents for each TD account. For example, the savings bonds I converted from paper to electronic were given a separate account, and one year when a formerly paper bond had matured, I didn't realize I had to click on the link for the other account and get that 1099 as well. IRS sent me a friendly notice three years later, I paid the penalty, and all is good again, but check any other accounts on your login at tax time just in case.
Ice-9: thanks for your feedback. Do I need to include I-bonds investment in my tax return every year during holding years or only the year that I redeem it?

Is the reason you have multiple accounts tied in your TD account due to paper to electronic bond conversion? I hope I don’t end up with multiple accounts I don’t know about.

How does it work when I buy another $10k I-bond next year under my account? Will next Year I-bond show as a different bond number in my account?
Unless you opted to do taxes every year instead of the default setting to defer taxes, you only need to include I-bonds info on your tax return for years where there was redemption. However, as I mentioned, this can sneak up on you, so I am in the habit of logging in to Treasury Direct at tax time, clicking on Manage Direct, clicking on the link below Manage My Taxes for the tax year, then clicking the link for my other account and repeating. If there's no 1099 information, instead of a link it will say "No Taxable Transactions" so you know you're all clear for that year.

Yes, the only reason I have a separate account under my login is because Treasury Direct automatically set that up for my converted bonds. The good news is, I do recall reading in another one of these I-Bond threads that after the paper bonds have been converted, there apparently is some way to then move the bonds to your main account. I haven't bothered to do so, so I probably shouldn't be complaining about it. :happy

One other warning about Treasury Direct. I don't know if you use any services like account aggregators (like Personal Capital) or password managers (like Last Pass) that log in automatically for you, but if you do I would opt to make Treasury Direct the one account you do manually instead. In Personal Capital, I manually update the numbers every so often, and in Last Pass I have a "secured note" with my credentials instead of the normal set up where you click a button and it logs you in automatically. The reason is occasionally automatic logins mess up, and in a normal bank or brokerage, it might result in locking you out until you go through the "forgot my password" process. I've read enough threads on people who had to go through an extraordinary "forgot my password" process with Treasury Direct (apparently including getting some sort of special guarantee from their bank) that I'm walking on egg shells with Treasury Direct and not risking it. So far, I've never been locked out, and I plan to keep it that way.

Edit to answer your last question: Yes, your account will list all of your bonds in the order they were purchased. They each are given a different five-letter "confirm #" that is unique.

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