Keep buying I Bonds or switch to Treas / BND?

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Topic Author
Pomegranate
Posts: 91
Joined: Mon Oct 01, 2018 4:42 pm

Keep buying I Bonds or switch to Treas / BND?

Post by Pomegranate » Wed May 15, 2019 10:03 am

I was slowly buying I Bonds during the year (invested 4k so far for 2019) but I checked the comp rate today and it's just 1.9% :(
I'm planning to invest ~11k more in bonds till the EOY so I'm thinking if it would make sense to max out I Bonds or just start spending 11k for Treas / BND?

fabdog
Posts: 561
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Keep buying I Bonds or switch to Treas / BND?

Post by fabdog » Wed May 15, 2019 10:40 am

I Bonds have some very specific advantages over Treas/BND

Inflation adjustment
Tax deferred

these may or may not have value to you. I fill up my $10K allocation each year since they have value to me. If they do not have value for you then go ahead with Treas/BND

I am not saying those are bad, just make sure you are looking at more than the current yield in your decision process

Mike

dcabler
Posts: 948
Joined: Wed Feb 19, 2014 11:30 am

Re: Keep buying I Bonds or switch to Treas / BND?

Post by dcabler » Wed May 15, 2019 10:54 am

Pomegranate wrote:
Wed May 15, 2019 10:03 am
I was slowly buying I Bonds during the year (invested 4k so far for 2019) but I checked the comp rate today and it's just 1.9% :(
I'm planning to invest ~11k more in bonds till the EOY so I'm thinking if it would make sense to max out I Bonds or just start spending 11k for Treas / BND?
Why "or"? Why not "and"?

I have both.
- In what I call my "regular" portfolio I have stocks and treasury mutual funds/etfs. There, I use treasury bonds primarily as an uncorrelated-to-stocks diversifier.
- Then I use ibonds for two different reasons. First, I max out my tax advantaged space every year. In my situation, that really leaves me with muni bonds (no tax) or Ibonds (tax deferred) if I want something with tax advantages. I've chosen ibonds and I use them, along with TIPs funds in my tax advantaged accounts to create an inflation adjusted income ladder that I will start to cash out when I start social security at age 70.

If inflation stays tame, then I've purchased expensive insurance. But I can't predict that and I still have memories of the early 1970's.

Just one example among many of how somebody might use ibonds. Oh, and don't forget the annual purchase limits for ibonds! My wife and I each purchase the max $10K per year and the additional $5K per IRS tax filing.

Cheers.

aristotelian
Posts: 5672
Joined: Wed Jan 11, 2017 8:05 pm

Re: Keep buying I Bonds or switch to Treas / BND?

Post by aristotelian » Wed May 15, 2019 11:23 am

The fixed rate of 0.5% is still pretty high. I did sell some of my 0% fixed rate I Bonds to switch to better yield but then again I would be buying new I Bonds if I hadn't already maxed my annual limit.

dcabler
Posts: 948
Joined: Wed Feb 19, 2014 11:30 am

Re: Keep buying I Bonds or switch to Treas / BND?

Post by dcabler » Wed May 15, 2019 2:50 pm

aristotelian wrote:
Wed May 15, 2019 11:23 am
The fixed rate of 0.5% is still pretty high. I did sell some of my 0% fixed rate I Bonds to switch to better yield but then again I would be buying new I Bonds if I hadn't already maxed my annual limit.
Yep, that's one of the downsides with ibonds, unlike other interest bearing instruments. No matter what, the max amount you can purchase each year stays the same. So jumping ship to sell low-interest bonds to purchase higher-interest bonds means that year's allotted purchase gets used up.

For me, at some point I'm going to consider the amount I have "enough" for my purposes. Then it becomes a math question whether I should sell some to purchase others. Too bad they don't at least inflation index the dollar amount you can purchase in any given year.

Topic Author
Pomegranate
Posts: 91
Joined: Mon Oct 01, 2018 4:42 pm

Re: Keep buying I Bonds or switch to Treas / BND?

Post by Pomegranate » Wed May 15, 2019 2:58 pm

dcabler wrote:
Wed May 15, 2019 10:54 am
Pomegranate wrote:
Wed May 15, 2019 10:03 am
I was slowly buying I Bonds during the year (invested 4k so far for 2019) but I checked the comp rate today and it's just 1.9% :(
I'm planning to invest ~11k more in bonds till the EOY so I'm thinking if it would make sense to max out I Bonds or just start spending 11k for Treas / BND?

If inflation stays tame, then I've purchased expensive insurance. But I can't predict that and I still have memories of the early 1970's.


Cheers.
Yeah I think it's a very valid point. I have a big hedge against inflation (mortgage) so I think 5k/year in I Bonds will be enough in my case :sharebeer

smectym
Posts: 377
Joined: Thu May 26, 2011 5:07 pm

Re: Keep buying I Bonds or switch to Treas / BND?

Post by smectym » Wed May 15, 2019 4:27 pm

We have a pile of I bonds that earn an average 3.73%. Not selling those, barring some emergency, prior to maturity, still 15-20 years away. But quit buying more years ago. Meanwhile we started buying treasuries, mainly in the 181-day-2 yr range. Living in a high income state treasuries are a pretty good buy.

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