Lower NW and I Bonds

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Nevaco
Posts: 15
Joined: Tue Aug 13, 2019 7:43 am

Lower NW and I Bonds

Post by Nevaco »

Hi all,

Lots of posts about Series I bonds lately, many of which seem to be focused on their role in a larger portfolio and with retirement in mind. I thought it might be useful to have a place for those of us with a lower net worth or savings rate (e.g., those of us who don't/can't max out other tax advantaged investment space) to discuss how we're thinking about I bonds and whether or not they are a good fit in our personal financial plan.

Personally, I'm planning to purchase a small amount (~$2.5-5k) of I bonds this year as part of my emergency fund and to purchase a similar amount each year for the next 4 years. Since DW and I won't be maxing out our purchase limits for I bonds, the plan is to re-evaluate the I bonds each year once they've hit the 5 year no-penalty withdrawal period to determine whether to (i) keep our existing I bonds or (ii) cash them out and use the cash to purchase new I bonds with a higher fixed interest rate. In this way, we get the inflation/deflation protection for part of our EF now, while maintaining flexibility to get better rates later on.

If we can, we'd like to start purchasing a small amount of I bonds for retirement purposes 5-10 years from now, as we like the security they provide in the event of a downturn right around when we plan to retire (we won't have a pension and don't want to be dependent on social security, given the potential for changes to occur in the next 30+ years). In any event, we won't get close to the annual limits but we figure a small amount provides a decent security blanket for those of us with smaller portfolios!

Anyone else looking to do something similar? Appreciate insights and thoughts from those thinking along these lines and those taking a wildly different approach! :sharebeer
IowaFarmWife
Posts: 293
Joined: Thu Nov 02, 2017 9:42 pm

Re: Lower NW and I Bonds

Post by IowaFarmWife »

My husband and I are in a similar situation. We both contribute to our pension plans, along with some additional monies to our HSA and 403B plans, but nothing is maxed out. I put a few thousand dollars a year into I bonds for an additional tier to our emergency fund. If not needed for an emergency, they will be available in the future for spending during retirement.
“The quickest way to double your money is to fold it in half and put it in your back pocket.” —Will Rogers
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anon_investor
Posts: 6820
Joined: Mon Jun 03, 2019 1:43 pm

Re: Lower NW and I Bonds

Post by anon_investor »

Nevaco wrote: Thu Jun 10, 2021 11:38 am Hi all,

Lots of posts about Series I bonds lately, many of which seem to be focused on their role in a larger portfolio and with retirement in mind. I thought it might be useful to have a place for those of us with a lower net worth or savings rate (e.g., those of us who don't/can't max out other tax advantaged investment space) to discuss how we're thinking about I bonds and whether or not they are a good fit in our personal financial plan.

Personally, I'm planning to purchase a small amount (~$2.5-5k) of I bonds this year as part of my emergency fund and to purchase a similar amount each year for the next 4 years. Since DW and I won't be maxing out our purchase limits for I bonds, the plan is to re-evaluate the I bonds each year once they've hit the 5 year no-penalty withdrawal period to determine whether to (i) keep our existing I bonds or (ii) cash them out and use the cash to purchase new I bonds with a higher fixed interest rate. In this way, we get the inflation/deflation protection for part of our EF now, while maintaining flexibility to get better rates later on.

If we can, we'd like to start purchasing a small amount of I bonds for retirement purposes 5-10 years from now, as we like the security they provide in the event of a downturn right around when we plan to retire (we won't have a pension and don't want to be dependent on social security, given the potential for changes to occur in the next 30+ years). In any event, we won't get close to the annual limits but we figure a small amount provides a decent security blanket for those of us with smaller portfolios!

Anyone else looking to do something similar? Appreciate insights and thoughts from those thinking along these lines and those taking a wildly different approach! :sharebeer
At today's interest rates, I think I Bonds are an excellent place to put your emergency fund. To me I view I Bonds almost like a CD which a 1 year minimum holding period and an interest rate penalty if redeemed before 5 years. I personally started shifting my EF into I Bonds last year. I wish I had known abou them earlier when the fixed interest rate was 0.5% (back in 2019!), I probably would have bought some I Bonds instead of CDs!

I think your plan sounds great! :sharebeer
exodusNH
Posts: 214
Joined: Wed Jan 06, 2021 8:21 pm

Re: Lower NW and I Bonds

Post by exodusNH »

Nevaco wrote: Thu Jun 10, 2021 11:38 am Hi all,

Lots of posts about Series I bonds lately, many of which seem to be focused on their role in a larger portfolio and with retirement in mind. I thought it might be useful to have a place for those of us with a lower net worth or savings rate (e.g., those of us who don't/can't max out other tax advantaged investment space) to discuss how we're thinking about I bonds and whether or not they are a good fit in our personal financial plan.

Personally, I'm planning to purchase a small amount (~$2.5-5k) of I bonds this year as part of my emergency fund and to purchase a similar amount each year for the next 4 years. Since DW and I won't be maxing out our purchase limits for I bonds, the plan is to re-evaluate the I bonds each year once they've hit the 5 year no-penalty withdrawal period to determine whether to (i) keep our existing I bonds or (ii) cash them out and use the cash to purchase new I bonds with a higher fixed interest rate. In this way, we get the inflation/deflation protection for part of our EF now, while maintaining flexibility to get better rates later on.

If we can, we'd like to start purchasing a small amount of I bonds for retirement purposes 5-10 years from now, as we like the security they provide in the event of a downturn right around when we plan to retire (we won't have a pension and don't want to be dependent on social security, given the potential for changes to occur in the next 30+ years). In any event, we won't get close to the annual limits but we figure a small amount provides a decent security blanket for those of us with smaller portfolios!

Anyone else looking to do something similar? Appreciate insights and thoughts from those thinking along these lines and those taking a wildly different approach! :sharebeer
I sold out of a bond fund I had with Capital Group and used the proceeds to buy I bonds. I want to use them in retirement to cover property taxes and home insurance. Once my mortgage is done, those will be the base housing expenses. (Ignoring maintenance obviously.)
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