I Bonds Mega Thread (I Bond Heads Rejoice!)

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FactualFran
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by FactualFran »

Mel Lindauer wrote: Wed Oct 13, 2021 5:33 pm Has it ever gone down or not gone up? Not that I can recall.
According to a table on page 79 of the 2020 Medicare Trustees Report, the standard medicare Part B premium was lower in 2012 ($99.90) than it was in 2011 ($115.40), and it was the same in 2014 and 2015 as in 2013 ($104.90).

Interesting. Even though I was in Medicare at that time, it felt as if the total Medicare costs were always higher. Probably because the other things went up (Part D, Supplemental).
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Ron Ronnerson »

Jags4186 wrote: Wed Oct 13, 2021 1:40 pm Can someone give a quick primer on iBonds for those of us who’s entire investing life have not had interesting iBond rates? 7.12% guaranteed is quite good compared to even savings account bonuses…

I know I need to open an account at Treasury Direct.

What is the iBond purchase limit? Is it an annual limit? (I.E. I can buy $X in December and then $X again in January?)
For a married couple can you each purchase the same amount or is it lumped together?
How long do you have to hold iBonds before you can cash them in? Is it like buying and selling a bond fund?
Tax exempt/implications?
I’ve heard I can overpay my income taxes and receive refund as iBonds. Is that still true?
I’ll try to answer your questions. Someone please correct me if I provide incorrect information.

You can purchase $10k per year electronically per person. You can also purchase another $10k per year if you have a trust. You can apply an IRS tax refund toward the purchase of paper I bonds of up to $5k per year.

Yes, you can purchase the max in December and then do the max again in January. It is per year.

A married couple would open two separate accounts; it’s not lumped together.

You must hold I Bonds for at least 1 year. If you sell before 5 years, you lose out on 3 months-worth of interest. You can essentially cut this down to a 2-month penalty by purchasing I Bonds near the end of a month. If you purchase at the end of October, for instance, you earn interest for the entire month of October, despite having made the purchase near the end of the month.

As a side note, some people have difficulty establishing an account or linking a bank account at Treasury Direct so it’s a good idea to get the process going a few weeks before you plan to make a purchase in case you happen to encounter problems. I personally have not had any issues.

You pay federal taxes upon withdrawal though you also can opt to pay taxes on the interest each year if you want to do it that way for some reason. There are no state or local taxes to pay. If you withdraw the money during the same year that you have qualified education expenses, you don’t pay any federal tax on the growth either. I happen to like that part a lot.

Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

If you purchase before November 1st, you'll get 3.54% for six months (starting on October 1st) and then earn 7.12% for the six months after that. If you purchase more I Bonds in January, that will earn 7.12% for six months and then some other rate for the six months after that. Since the rate on I Bonds can't go below 0%, even if rates did dip all the way to 0% in another six months, the I Bonds you acquire in January would still earn 3.56% for the year - not too shabby even in the worst case scenario.
Kinkajou82
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Kinkajou82 »

I just made a Treasury Direct account. Is this what chasing returns feels like? :shock:
LK2012
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LK2012 »

Ron Ronnerson wrote: Wed Oct 13, 2021 7:10 pm
whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
Situations can vary. I’m definitely happy about this. We (my wife and I) bought $20k of I Bonds last month and are planning to purchase another $20k-$30k in January ...
You are limited to $10K each every year, plus $5K as a couple through the tax refund method, so $25K max per year. Unless other family members buy some, or you buy some for a trust.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Ron Ronnerson »

LK2012 wrote: Wed Oct 13, 2021 11:07 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 7:10 pm
whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
Situations can vary. I’m definitely happy about this. We (my wife and I) bought $20k of I Bonds last month and are planning to purchase another $20k-$30k in January ...
You are limited to $10K each every year, plus $5K as a couple through the tax refund method, so $25K max per year. Unless other family members buy some, or you buy some for a trust.
My wife and I have a trust. So from late-2021 to early-2022, we can buy $60k between the 3 accounts. We could also buy for our kid and use a tax refund to increase the limit further but likely will not bother with all that. So far, we’ve kept it simple and just bought $20k ($10k for me and $10k for my wife) and will likely repeat in January for a total purchase of $40k between our two accounts over a course of about 4 months. With rates so high, though, I’m thinking of opening accounts under the name of our trust too.
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ApeAttack
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by ApeAttack »

BogleTails wrote: Wed Oct 13, 2021 1:26 pm I purchased $5000 each for myself and wife at the end of September my from cash allocation that has been in HYSA.

Does it make sense to add $5000 each before the end of October or wait until the end of Nov for the change in rate?

I know we can't predict the future rates but I'm thinking I may make more interest over the next year with 6 months at the current rate and then 6 months at the new rate. I plan to buy more I Bonds next year as well.
I filled up in September and will buy more before May 2022.
Just another lazy index investor who recently found out about I-Bonds (https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm).
LK2012
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LK2012 »

Ron Ronnerson wrote: Wed Oct 13, 2021 11:26 pm
LK2012 wrote: Wed Oct 13, 2021 11:07 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 7:10 pm
whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
Situations can vary. I’m definitely happy about this. We (my wife and I) bought $20k of I Bonds last month and are planning to purchase another $20k-$30k in January ...
You are limited to $10K each every year, plus $5K as a couple through the tax refund method, so $25K max per year. Unless other family members buy some, or you buy some for a trust.
My wife and I have a trust. So from late-2021 to early-2022, we can buy $60k between the 3 accounts. We could also buy for our kid and use a tax refund to increase the limit further but likely will not bother with all that. So far, we’ve kept it simple and just bought $20k ($10k for me and $10k for my wife) and will likely repeat in January for a total purchase of $40k between our two accounts over a course of about 4 months. With rates so high, though, I’m thinking of opening accounts under the name of our trust too.
Go for it!
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tomsense76
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

Kinkajou82 wrote: Wed Oct 13, 2021 10:42 pm I just made a Treasury Direct account. Is this what chasing returns feels like? :shock:
At least the price isn't higher :wink:

Though you are right inflation could be a short-term blip. However it could also be sustained. We don't really know
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by truenorth418 »

I own a lot of i bonds. I’ve been buying the maximum every year since 2001. I’m glad I have them.

But they are a small % of my overall portfolio. At this rate of inflation the value of my other bonds and the cash in my portfolio is declining substantially. Maybe my stocks will help me keep up, maybe not.

Sorry but I am not going to rejoice over a 7%+ rate of inflation.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by SuperTrooper87 »

truenorth418 wrote: Thu Oct 14, 2021 2:27 am Sorry but I am not going to rejoice over a 7%+ rate of inflation.
EXACTLY! I like that I can use I-bonds to help keep the purchasing power of my EF / cash relevant. However, everyone glosses over the fact that the cost of everything is SOARING and the real value of other assets isn't as impressive.

Our health insurance premiums are going up 7% at work. Yet the state is arguing for our 2 year contract that 1-2% COLA is what they are willing to offer - evidently inflation only exists for their costs, not ours.

I'd rather the 1-3% inflation range the fed said they're working towards.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Ron Ronnerson »

SuperTrooper87 wrote: Thu Oct 14, 2021 6:45 am
truenorth418 wrote: Thu Oct 14, 2021 2:27 am Sorry but I am not going to rejoice over a 7%+ rate of inflation.
EXACTLY! I like that I can use I-bonds to help keep the purchasing power of my EF / cash relevant. However, everyone glosses over the fact that the cost of everything is SOARING and the real value of other assets isn't as impressive.

Our health insurance premiums are going up 7% at work. Yet the state is arguing for our 2 year contract that 1-2% COLA is what they are willing to offer - evidently inflation only exists for their costs, not ours.

I'd rather the 1-3% inflation range the fed said they're working towards.
Costs aren’t going up evenly, though. Someone in the market for a used car and with a long commute will see double digit inflation on those expenses. But not everything is soaring. If you’re in a house that you plan to stay in and have a mortgage that’s fixed at a low rate, it’s a very different situation on that cost. I have a $500k mortgage with an income that’s a bit over $100k. Housing makes up about half my expenses and the payments aren’t changing.

I’m not exactly gleeful about rising inflation but a weary celebration beats plain old sadness. And the title of the thread orders us to rejoice. Yay for I Bonds!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Whakamole »

Ron Ronnerson wrote: Thu Oct 14, 2021 8:35 am Costs aren’t going up evenly, though. Someone in the market for a used car and with a long commute will see double digit inflation on those expenses. But not everything is soaring. If you’re in a house that you plan to stay in and have a mortgage that’s fixed at a low rate, it’s a very different situation on that cost. I have a $500k mortgage with an income that’s a bit over $100k. Housing makes up about half my expenses and the payments aren’t changing.

I’m not exactly gleeful about rising inflation but a weary celebration beats plain old sadness. And the title of the thread orders us to rejoice. Yay for I Bonds!
All true, and there are people who can also say that higher grocery prices do not affect them because they grow their own food; that higher gas prices don't affect them because they use a bike; that higher home heating costs don't affect them because they live in a temperate climate; etc.

Inflation is still high. I'm glad at least some of my fixed income is keeping up with the actual inflation rate, but I take little joy in knowing that most people are impacted by high inflation in a negative way.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by azanon »

Ron Ronnerson wrote: Thu Oct 14, 2021 8:35 am
SuperTrooper87 wrote: Thu Oct 14, 2021 6:45 am
truenorth418 wrote: Thu Oct 14, 2021 2:27 am Sorry but I am not going to rejoice over a 7%+ rate of inflation.
EXACTLY! I like that I can use I-bonds to help keep the purchasing power of my EF / cash relevant. However, everyone glosses over the fact that the cost of everything is SOARING and the real value of other assets isn't as impressive.

Our health insurance premiums are going up 7% at work. Yet the state is arguing for our 2 year contract that 1-2% COLA is what they are willing to offer - evidently inflation only exists for their costs, not ours.

I'd rather the 1-3% inflation range the fed said they're working towards.
Costs aren’t going up evenly, though. Someone in the market for a used car and with a long commute will see double digit inflation on those expenses. But not everything is soaring. If you’re in a house that you plan to stay in and have a mortgage that’s fixed at a low rate, it’s a very different situation on that cost. I have a $500k mortgage with an income that’s a bit over $100k. Housing makes up about half my expenses and the payments aren’t changing.

I’m not exactly gleeful about rising inflation but a weary celebration beats plain old sadness. And the title of the thread orders us to rejoice. Yay for I Bonds!
Yeah and often to quite a big extent, simply shunning those items that are seeing outsized inflation is a strong defense. Sure, that doesn't work on everything (e.g. health insurance), but it certainly does on anything that's discretionary.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by drk »

whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
I'm celebrating the tangible example of base effects, personally.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by donaldfair71 »

tomsense76 wrote: Wed Oct 13, 2021 1:33 pm
donaldfair71 wrote: Wed Oct 13, 2021 10:01 am
sapphire96 wrote: Wed Oct 13, 2021 8:32 am
goodenyou wrote: Wed Oct 13, 2021 8:27 am This thread has run its course.

The new thread will be "I Bonds Variable Rate @ 7.12% in November"
Or just rename it to “I Bonds Mega Thread.”
"I Bond Heads Rejoice!"
This thread really has taken on a life of its own since providing the original update.

By popular demand it has been renamed :D
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by yeahman »

  1. Transitory inflation is still real inflation.
  2. Inflation never affects all goods and services equally at the same time. Inflation always begins with a single price increase that can be explained by some unique factor. It's only in hindsight that we can see whether it spread or not.
  3. Non-transitory inflation doesn't need any cause other than higher inflation expectations. 5 year breakeven is currently the highest since 2008.
  4. Transitory inflation can co-exist with non-transitory inflation. How certain are you that ALL of the inflation is transitory? Sure, 7% was transitory but 3%?
  5. This chip shortage is lasting an awfully long time isn't it? Longer than inflation skeptics thought it would. TSMC said today that they expect the shortage to last throughout 2022, that they expect sustained high demand, and that new capacity won't come online until 2024. Again, even though some the demand was transitory, a lot of it is a new normal.
  6. The possibility, even if unlikely, of this not being transitory should be taken very very seriously.
  7. Many people mistakenly believe that all inflation is always bad. We're currently around the Fed's inflation target, which is a good place to be if it stops here. Any lower and we risk higher unemployment as wages rise faster than revenue and businesses shed workers.
  8. Even more mistakenly, many people think savers are hit especially hard by inflation. Savers can easily hedge against inflation.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by donaldfair71 »

whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
In my own case, I fall under income levels where I can use proceeds for education, and have in the past offset the sales proceeds with 529 contributions. A free lunch, which takes the effective rate for these more into the 8% range, comparing to similar products.

But I agree with your sentiment just the same. It is kind of a sad state of affairs at present, all things considered.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by langelgjm »

Two things:

First, to all the newcomers interested in I bonds due to the attractiveness of a 7.12% rate, please keep in mind that the expected real return of new I bonds is 0% (and less than 0% after taxes).

That shouldn't dissuade you from purchasing them (I have been buying them for 8 years, they are the largest component of my bond holdings). And it's possible to get a positive real return, given that inflation in affecting certain sectors much more than others, so the return may be more than your personal inflation. (E.g., if you have solar power and don't need to purchase a car anytime soon, you're insulated from two of the main drivers of high inflation right now). But don't get too excited about the headline number, it's just running to stand still.

Second, understand that the 7.12% rate is annualized, but is based on a 6 month change in CPI-U and only applies for 6 months. So it sounds higher than it really is. It's like a bank offering a teaser APR (annual percentage rate) on deposits, but only for 6 months, so you'll never actually earn that APR.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by FinancialDave »

Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm

If you sell before 5 years, you lose out on 3 months-worth of interest. You can essentially cut this down to a 2-month penalty by purchasing I Bonds near the end of a month. If you purchase at the end of October, for instance, you earn interest for the entire month of October, despite having made the purchase near the end of the month.

I don't quite follow your logic, no matter when you buy the I Bonds if you sell before 5 years, the last 3 interest payments will be deducted and they will have nothing to do with the interest you earned or didn't earn in the month you bought the bonds.

TD actually gets some money back when you sell because no interest is earned in the month you sell. So it would be prudent to sell early in the month.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by papito23 »

I already maxed out my $10K of purchases for the year, so seeing the nice new rate I just signed my wife up for an account. Using the same joint bank account I use for mine.

I was never prompted for any bank account verification, certain no medallion signature.

I went to go purchase a $1,000 I-bond and... it let me. Scheduled for tomorrow. I was expecting lots of paperwork/delay, and so was wondering if I could get purchases in before 11/1... looks like I might! (Yes, I'm aware that'd be 3.5% for the 1st 6 months and then the >7%).
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mary1492 »

papito23 wrote: Thu Oct 14, 2021 2:32 pm I already maxed out my $10K of purchases for the year, so seeing the nice new rate I just signed my wife up for an account. Using the same joint bank account I use for mine.

I was never prompted for any bank account verification, certain no medallion signature.

I went to go purchase a $1,000 I-bond and... it let me. Scheduled for tomorrow. I was expecting lots of paperwork/delay, and so was wondering if I could get purchases in before 11/1... looks like I might! (Yes, I'm aware that'd be 3.5% for the 1st 6 months and then the >7%).
I did the same yesterday for spouse - no issues at all. Just went back to schedule $5k to go tomorrow, and I'll do the other $5k at end of November. Registered with same bank account as mine - no problem, 1-2-3.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grt2bOutdoors »

mary1492 wrote: Thu Oct 14, 2021 3:41 pm
papito23 wrote: Thu Oct 14, 2021 2:32 pm I already maxed out my $10K of purchases for the year, so seeing the nice new rate I just signed my wife up for an account. Using the same joint bank account I use for mine.

I was never prompted for any bank account verification, certain no medallion signature.

I went to go purchase a $1,000 I-bond and... it let me. Scheduled for tomorrow. I was expecting lots of paperwork/delay, and so was wondering if I could get purchases in before 11/1... looks like I might! (Yes, I'm aware that'd be 3.5% for the 1st 6 months and then the >7%).
I did the same yesterday for spouse - no issues at all. Just went back to schedule $5k to go tomorrow, and I'll do the other $5k at end of November. Registered with same bank account as mine - no problem, 1-2-3.
Isn't the same bank account joint?
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by protagonist »

Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm
Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

Good summary of how I-bonds work!
As for your point above, all you have to do is overpay before you file your return, and then request your refund in I-bonds on your return...if you use tax filing software the option should be available before you finalize.
One point- you can only get paper I-bonds this way. The IRS mails them to you. Unfortunately you cannot have the refund directly deposited to your Treasury Direct account, so if you have been doing it for years as I have, you wind up with a pile of paper I-bonds. Theoretically they are replaceable if something happens to them, so I keep a record of their numbers on my computer.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

SantaClaraSurfer wrote: Wed Oct 13, 2021 7:00 pm
whodidntante wrote: Wed Oct 13, 2021 5:43 pm Does anyone else find it ironic that we are basically celebrating rampant inflation and paying a lot of tax?
By "a lot of tax" are you referring to this?

Tax Advantages of Series I and EE Savings Bonds
I think what s/he is saying is that 25% tax on 7% will be more tax dollars than 25% tax on 3.5%. More income from higher inflation equals more taxes on that higher income.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by anon_investor »

protagonist wrote: Thu Oct 14, 2021 4:01 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm
Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

Good summary of how I-bonds work!
As for your point above, all you have to do is overpay before you file your return, and then request your refund in I-bonds on your return...if you use tax filing software the option should be available before you finalize.
One point- you can only get paper I-bonds this way. The IRS mails them to you. Unfortunately you cannot have the refund directly deposited to your Treasury Direct account, so if you have been doing it for years as I have, you wind up with a pile of paper I-bonds. Theoretically they are replaceable if something happens to them, so I keep a record of their numbers on my computer.
You can also fill out paper work and mail in the paper I Bonds to be added to your Treasury Direct account, but some people like the paper I-Bonds because they can be immediately redeemed at some banks.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Mel Lindauer »

anon_investor wrote: Thu Oct 14, 2021 4:42 pm
protagonist wrote: Thu Oct 14, 2021 4:01 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm
Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

Good summary of how I-bonds work!
As for your point above, all you have to do is overpay before you file your return, and then request your refund in I-bonds on your return...if you use tax filing software the option should be available before you finalize.
One point- you can only get paper I-bonds this way. The IRS mails them to you. Unfortunately you cannot have the refund directly deposited to your Treasury Direct account, so if you have been doing it for years as I have, you wind up with a pile of paper I-bonds. Theoretically they are replaceable if something happens to them, so I keep a record of their numbers on my computer.
You can also fill out paper work and mail in the paper I Bonds to be added to your Treasury Direct account, but some people like the paper I-Bonds because they can be immediately redeemed at some banks.
Precisely. They could really come in handy if/when your TD account gets locked and you need cash for any reason. Simply go to your bank and redeem one or more I Bonds, as needed.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by anon_investor »

Mel Lindauer wrote: Thu Oct 14, 2021 4:50 pm
anon_investor wrote: Thu Oct 14, 2021 4:42 pm
protagonist wrote: Thu Oct 14, 2021 4:01 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm
Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

Good summary of how I-bonds work!
As for your point above, all you have to do is overpay before you file your return, and then request your refund in I-bonds on your return...if you use tax filing software the option should be available before you finalize.
One point- you can only get paper I-bonds this way. The IRS mails them to you. Unfortunately you cannot have the refund directly deposited to your Treasury Direct account, so if you have been doing it for years as I have, you wind up with a pile of paper I-bonds. Theoretically they are replaceable if something happens to them, so I keep a record of their numbers on my computer.
You can also fill out paper work and mail in the paper I Bonds to be added to your Treasury Direct account, but some people like the paper I-Bonds because they can be immediately redeemed at some banks.
Precisely. They could really come in handy if/when your TD account gets locked and you need cash for any reason. Simply go to your bank and redeem one or more I Bonds, as needed.
Mel, do you still keep a stack of paper I Bonds? I am actually more concerned about trying to find a place to redeem paper I Bonds than being locked out of my TD account! But I am considering getting paper I Bonds with my tax refund this year. I am kind of hitting myself for not doing it this year!
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mary1492 »

Grt2bOutdoors wrote: Thu Oct 14, 2021 3:55 pm
mary1492 wrote: Thu Oct 14, 2021 3:41 pm
papito23 wrote: Thu Oct 14, 2021 2:32 pm I already maxed out my $10K of purchases for the year, so seeing the nice new rate I just signed my wife up for an account. Using the same joint bank account I use for mine.

I was never prompted for any bank account verification, certain no medallion signature.

I went to go purchase a $1,000 I-bond and... it let me. Scheduled for tomorrow. I was expecting lots of paperwork/delay, and so was wondering if I could get purchases in before 11/1... looks like I might! (Yes, I'm aware that'd be 3.5% for the 1st 6 months and then the >7%).
I did the same yesterday for spouse - no issues at all. Just went back to schedule $5k to go tomorrow, and I'll do the other $5k at end of November. Registered with same bank account as mine - no problem, 1-2-3.
Isn't the same bank account joint?
Yes, the account has both our names on it.
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Ron Ronnerson »

FinancialDave wrote: Thu Oct 14, 2021 12:35 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm

If you sell before 5 years, you lose out on 3 months-worth of interest. You can essentially cut this down to a 2-month penalty by purchasing I Bonds near the end of a month. If you purchase at the end of October, for instance, you earn interest for the entire month of October, despite having made the purchase near the end of the month.

I don't quite follow your logic, no matter when you buy the I Bonds if you sell before 5 years, the last 3 interest payments will be deducted and they will have nothing to do with the interest you earned or didn't earn in the month you bought the bonds.

TD actually gets some money back when you sell because no interest is earned in the month you sell. So it would be prudent to sell early in the month.
Let me try explaining it with an example. Let’s say it’s November 2005 and you have your emergency fund at GMAC Bank (which will be known as Ally Bank in the future) earning about 6%. Near the end of the month, you take a bunch of that emergency fund cash and buy I Bonds with it and earn another 6% (or thereabouts) for the month on it. In May of 2009, during deflationary times, you decide to sell these I bonds, which are now not paying much at all, to rebalance into stocks which have plummeted in value. You must pay 3 months of penalty. However, back in November of 2005, you sort of “doubled-dipped” and got almost a full month’s worth of interest from GMAC Bank and then got paid a full month’s worth of interest on the same money when you bought the I Bonds. So that freebie sort of cancels out the penalty for one of the months.

I agree that selling early in the month makes sense.
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US Treasury Bonds Rate Set To Increase To 7.12% Rate (I Bonds)

Post by MikeZ »

[Thread merged into here --admin LadyGeek]

From https://www.doctorofcredit.com/us-treas ... e-i-bonds/

Multiple people have been asking us to write about buying US Treasury Series I Savings Bonds, known as I Bonds. The rate adjusts on these bonds every six months. The current rate for May – October 2021 is 3.54%. The rate is set to change in November to 7.12%. You are limited to buying $10,000 per calendar year per SSN. The rate locks for 6 months from your purchase date and then updates to the new rate for the following 6 months, etc, etc.

You have to lock the money in for a year; after that you can pull the funds out with a 3-month penalty. If you leave the money in for 5 years there is no penalty.

Wanted to start a thread on this. Im getting ready along with my DW to move some of our cash from Ally to this. The math seems strongly to point to even an early withdrawal beating any bank account.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by LadyGeek »

I merged MikeZ's thread into the ongoing discussion.

(Thanks to the member who reported the post.)
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by frugalor »

Is 7.12% for real? Good thing I only purchased my first $100 yesterday :)
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by Mel Lindauer »

anon_investor wrote: Thu Oct 14, 2021 5:00 pm
Mel Lindauer wrote: Thu Oct 14, 2021 4:50 pm
anon_investor wrote: Thu Oct 14, 2021 4:42 pm
protagonist wrote: Thu Oct 14, 2021 4:01 pm
Ron Ronnerson wrote: Wed Oct 13, 2021 8:05 pm
Yes, you can overpay your income taxes and receive a refund in I Bonds of up to $5k. I haven’t done this myself so maybe someone else can chime in on the details for that.

Good summary of how I-bonds work!
As for your point above, all you have to do is overpay before you file your return, and then request your refund in I-bonds on your return...if you use tax filing software the option should be available before you finalize.
One point- you can only get paper I-bonds this way. The IRS mails them to you. Unfortunately you cannot have the refund directly deposited to your Treasury Direct account, so if you have been doing it for years as I have, you wind up with a pile of paper I-bonds. Theoretically they are replaceable if something happens to them, so I keep a record of their numbers on my computer.
You can also fill out paper work and mail in the paper I Bonds to be added to your Treasury Direct account, but some people like the paper I-Bonds because they can be immediately redeemed at some banks.
Precisely. They could really come in handy if/when your TD account gets locked and you need cash for any reason. Simply go to your bank and redeem one or more I Bonds, as needed.
Mel, do you still keep a stack of paper I Bonds? I am actually more concerned about trying to find a place to redeem paper I Bonds than being locked out of my TD account! But I am considering getting paper I Bonds with my tax refund this year. I am kind of hitting myself for not doing it this year!
I only own paper bonds and have had no problem redeeming some of my maturing EE Bonds each year over the past three or four years. However, I do find that since the banks don't sell them any longer, there are fewer and fewer people who know how to handle them. Nevertheless, I have found that there seems to be at least one or two folks in the banks who do know how to handle them. Usually when you get a teller who doesn't know what to do, they'll call out the name of someone who does and you're good to go. You can always mail to the Federal Reserve Bank and they'll take care of the redemption, but that will take a bit longer than just redeeming them at a local bank.
Best Regards - Mel | | Semper Fi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

frugalor wrote: Thu Oct 14, 2021 6:42 pm Is 7.12% for real? Good thing I only purchased my first $100 yesterday :)
Yes. Would encourage you to buy the rest of your I Bonds this month. So you can enjoy both the current rate of 3.54% and the new rate of 7.12%. Please see this article from David Enna

https://tipswatch.com/2021/10/14/i-bond ... -november/
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by whodidntante »

Mel Lindauer wrote: Thu Oct 14, 2021 8:28 pm I only own paper bonds and have had no problem redeeming some of my maturing EE Bonds each year over the past three or four years. However, I do find that since the banks don't sell them any longer, there are fewer and fewer people who know how to handle them. Nevertheless, I have found that there seems to be at least one or two folks in the banks who do know how to handle them. Usually when you get a teller who doesn't know what to do, they'll call out the name of someone who does and you're good to go. You can always mail to the Federal Reserve Bank and they'll take care of the redemption, but that will take a bit longer than just redeeming them at a local bank.
viewtopic.php?f=2&t=289517&p=4762125&hi ... s#p4762125
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Re: New I Bond Variable Rate 7.12% for November 2021

Post by anon_investor »

whodidntante wrote: Thu Oct 14, 2021 8:58 pm
Mel Lindauer wrote: Thu Oct 14, 2021 8:28 pm I only own paper bonds and have had no problem redeeming some of my maturing EE Bonds each year over the past three or four years. However, I do find that since the banks don't sell them any longer, there are fewer and fewer people who know how to handle them. Nevertheless, I have found that there seems to be at least one or two folks in the banks who do know how to handle them. Usually when you get a teller who doesn't know what to do, they'll call out the name of someone who does and you're good to go. You can always mail to the Federal Reserve Bank and they'll take care of the redemption, but that will take a bit longer than just redeeming them at a local bank.
viewtopic.php?f=2&t=289517&p=4762125&hi ... s#p4762125
Ha, I read your old post, I am stuck with some 20+ year old Thomas Cook issued travelers checks that are way too much of a hassle to redeem. I have to mail them to the UK with a copy of my passport to some random office of some company that acquired the debt... no thanks, I will eat the ~$100 instead of sending some random people in the UK a copy of my passport.

If I were to get the paper I Bonds, I think I would mail them in to get them added to my TD account. I can't imagine trying to redeem paper I Bonds in 30 years, or worse my spouse trying to...
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by marco1910 »

I already maxed out on this years iBond allocation. What about VTIP? Are tips (or tip funds) enjoying the same kind of returns? Would I get the same type of returns if I invested in VTIP?

thanks
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

marco1910 wrote: Thu Oct 14, 2021 9:46 pm I already maxed out on this years iBond allocation. What about VTIP? Are tips (or tip funds) enjoying the same kind of returns? Would I get the same type of returns if I invested in VTIP?

thanks
What duration are you looking for? When would the money be used? Retirement? Nearer term?

VTIP might make sense if this is a short-term holding. Though if it is for longer term needs, longer term TIPS might be better (and are less expensive relatively speaking). Wrote up a few thoughts in this comment ( viewtopic.php?f=1&t=360070&p=6273682#p6273682 ).
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by frugalor »

tomsense76 wrote: Thu Oct 14, 2021 8:53 pm
frugalor wrote: Thu Oct 14, 2021 6:42 pm Is 7.12% for real? Good thing I only purchased my first $100 yesterday :)
Yes. Would encourage you to buy the rest of your I Bonds this month. So you can enjoy both the current rate of 3.54% and the new rate of 7.12%. Please see this article from David Enna

https://tipswatch.com/2021/10/14/i-bond ... -november/
Why should I buy this month? I am limited to 10K for calendar year right? So I should just buy the rest of 10K, which is $9900 in November to get the higher rate, right?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tomsense76 »

frugalor wrote: Thu Oct 14, 2021 10:13 pm
tomsense76 wrote: Thu Oct 14, 2021 8:53 pm
frugalor wrote: Thu Oct 14, 2021 6:42 pm Is 7.12% for real? Good thing I only purchased my first $100 yesterday :)
Yes. Would encourage you to buy the rest of your I Bonds this month. So you can enjoy both the current rate of 3.54% and the new rate of 7.12%. Please see this article from David Enna

https://tipswatch.com/2021/10/14/i-bond ... -november/
Why should I buy this month? I am limited to 10K for calendar year right? So I should just buy the rest of 10K, which is $9900 in November to get the higher rate, right?
If you buy now, you will get the current rate for 6 months and the new higher rate for 6 months

If you buy in November, you will only get the new higher rate for 6 months

IOW either way you get the new higher rate. Only buying now will give you the current (frankly quite good) rate as well

David Enna does a great job outlining the pros & cons of either choice depending on what your plans are for the money in the article linked above. Though if you are ok hang onto the I Bonds for more than a year, buying now is a no brainer IMO.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by invester123 »

Anyone know how to add beneficiaries? Am I doing this right? It looks like it has to be done individually for every bond.

I go into Manage Direct, Edit Security Registration and Add New Registration. In dropdown I have my own name by default listed.

I then added a "new registration." I select Beneficiary. It makes me put in First named registrant (I entered my name) then Second Name registrant (entered beneficiary's info). After submitting, I have a new entry in my dropdown now showing my name, POD below my name, and beneficiary's name below POD. I have now set this as my default registration of the bond. Does this sound correct?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

tomsense76 wrote: Thu Oct 14, 2021 8:53 pm
frugalor wrote: Thu Oct 14, 2021 6:42 pm Is 7.12% for real? Good thing I only purchased my first $100 yesterday :)
Yes. Would encourage you to buy the rest of your I Bonds this month. So you can enjoy both the current rate of 3.54% and the new rate of 7.12%. Please see this article from David Enna

https://tipswatch.com/2021/10/14/i-bond ... -november/
Agree that you should go ahead and buy all of your intended purchase now. There's no reason to wait, IMO, since you'll enjoy the current high 3.54% for the first six months on ALL your money and then the higher 7.12% on your money for the next six months. Why would you want to pass up 3.54% for six months when you can only get a pittance on any other risk-free (and local and state tax-free) bond
Best Regards - Mel | | Semper Fi
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by calwatch »

I got my sole proprietors entity account which I forgot the password to unlocked by calling TreasuryDirect. Hold time was less than five minutes so much less than any bank I've ever dealt with. If you can deal with their limited hours (8 am-6 pm Eastern Time Monday-Friday) they are friendly and helpful. Just bought $100 to test the waters to make sure it works and will drop the other $9,900 before October 29. I had maxed out on my normal account earlier in the year.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mary1492 »

invester123 wrote: Thu Oct 14, 2021 10:27 pm Anyone know how to add beneficiaries? Am I doing this right? It looks like it has to be done individually for every bond.

I go into Manage Direct, Edit Security Registration and Add New Registration. In dropdown I have my own name by default listed.

I then added a "new registration." I select Beneficiary. It makes me put in First named registrant (I entered my name) then Second Name registrant (entered beneficiary's info). After submitting, I have a new entry in my dropdown now showing my name, POD below my name, and beneficiary's name below POD. I have now set this as my default registration of the bond. Does this sound correct?
That is correct.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BogleFanGal »

calwatch wrote: Fri Oct 15, 2021 12:21 am I got my sole proprietors entity account which I forgot the password to unlocked by calling TreasuryDirect.
Anyone aware of restrictions to the sole proprietor account?
- Are you required to earn income annually to maintain it or just in the year you open?
- Do you have to stop purchases if you don't earn income one year or retire?
- Anyone have a link that might answer above, even if they don't know?

I already searched this thread + TreasuryDirect IBond FAQs: didn't see anything.
Last edited by BogleFanGal on Fri Oct 15, 2021 10:15 am, edited 1 time in total.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tipswatcher »

I have an I Bond question (and I should know this answer, but I don't, so ... )

I wrote an article about purchasing I Bonds in October versus November, and I noted that as a shortest-possible-term term investment, a November purchase might be more attractive. I was using 12 months minus the last 3 months as the interest earned. But a reader pointed out that you can't actually redeem an I Bond until it enters its 13th month, so this calculation would actually be 10 months minus the last 3 months. This makes sense to me, given that if you purchase late in a month (say, October 2021) you get full credit for that month.

Under this logic, an I Bond purchased in October 2021 can't be redeemed until October 2022, when it has completed its 12 months, and has entered its 13th month. So then if I redeemed early in October 2022, I'd get full credit for that 13th month, right? So that 13th month would be the last month of interest earned and it would be eliminated, along with the 11th and 12th month.

I've never used I Bonds as a short-term investment. This is new to me but makes sense. So is this reader's explanation correct? I can't find anything on TreasuryDirect with explicit language on this subject.

The alternative theory ... also a good one ... is that accrued interest for the 12th month is logged on the first day of the 13th month, and in that case redeeming in the 13th month wouldn't affect the 9 months interest + 3 month penalty equation. This is how I was assuming I Bonds worked.
Last edited by tipswatcher on Fri Oct 15, 2021 7:16 am, edited 1 time in total.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by withrye »

tipswatcher wrote: Fri Oct 15, 2021 7:03 am I have an I Bond question (and I should know this answer, but I don't, so ... )

I wrote an article about purchasing I Bonds in October versus November, and I noted that as a shortest-possible-term term investment, a November purchase might be more attractive. I was using 12 months minus the last 3 months as the interest earned. But a reader pointed out that you can't actually redeem an I Bond until it enters its 13th month, so this calculation would actually be 10 months minus the last 3 months. This makes sense to me, given that if you purchase late in a month (say, October 2021) you get full credit for that month.

Under this logic, an I Bond purchased in October 2021 can't be redeemed until October 2022, when it has completed its 12 months, and has entered its 13th month. So then if I redeemed early in October 2022, I'd get full credit for that 13th month, right? So that 13th month would be the last month of interest earned and it would be eliminated, along with the 11th and 12th month.

I've never used I Bonds as a short-term investment. This is new to me but makes sense. So is this reader's explanation correct? I can't find anything on TreasuryDirect with explicit language on this subject.
Interest accrues to bonds held at TD at the end beginning of the following month for the whole previous month, so you'd have to hold to Oct 31 Nov 1, 2022 to get the 13th month of interest. Buying late and selling early lets you "double dip" on one month, but you don't get a "triple dip" by getting credit for Oct 2022 interest by holding two days in Oct 2022.

https://www.bogleheads.org/wiki/I_savin ... ng_I_Bonds

Edited for corrections made by BrokerageZelda below.
Last edited by withrye on Fri Oct 15, 2021 7:43 am, edited 2 times in total.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by tipswatcher »

withrye wrote: Fri Oct 15, 2021 7:15 am
Interest accrues to bonds held at TD at the end of the month for the whole month, so you'd have to hold to Oct 31, 2022 to get the 13th month of interest. Buying late and selling early lets you "double dip" on one month, but you don't get a "triple dip" by getting credit for Oct 2022 interest by holding two days in Oct 2022.

https://www.bogleheads.org/wiki/I_savin ... ng_I_Bonds

Exactly the information I needed. Thank you.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by BrokerageZelda »

tipswatcher wrote: Fri Oct 15, 2021 7:03 am I have an I Bond question (and I should know this answer, but I don't, so ... )

I wrote an article about purchasing I Bonds in October versus November, and I noted that as a shortest-possible-term term investment, a November purchase might be more attractive. I was using 12 months minus the last 3 months as the interest earned. But a reader pointed out that you can't actually redeem an I Bond until it enters its 13th month, so this calculation would actually be 10 months minus the last 3 months. This makes sense to me, given that if you purchase late in a month (say, October 2021) you get full credit for that month.

Under this logic, an I Bond purchased in October 2021 can't be redeemed until October 2022, when it has completed its 12 months, and has entered its 13th month. So then if I redeemed early in October 2022, I'd get full credit for that 13th month, right? So that 13th month would be the last month of interest earned and it would be eliminated, along with the 11th and 12th month.

I've never used I Bonds as a short-term investment. This is new to me but makes sense. So is this reader's explanation correct? I can't find anything on TreasuryDirect with explicit language on this subject.
Hoping I understand your question:

TD backdates the official issue date to the first day of the month of purchase. On the 1st of a given month, the bond has finished earning interest for the entirety of the previous month, and is credited with the interest from the previous month. So, if you buy today (October 15), then the official date is October 1, and on November 1 you are credited with the interest earned from October 1 to October 31 (which is not shown on TD on November 1 because it falls under the three-month exclusion).

An I Bond purchased in October 2021 becomes eligible for redemption on October 1, 2022, which is when the interest for September 2022 is credited, i.e. the twelfth month of interest has been earned. The interest earned for September 2022 is the unknown rate for new issues beginning May 2022.

The dynamic is not that you 'get full credit for the 13th month' if you redeem early in the 13th month, it is that you earn no credit at all for the 13th month until the beginning of the 14th month.

From an interest rate perspective for a 1 year hold, if you assume that the fixed rate is not going up, there is an unknowable gamble between buying in October for 6 months of 3.54% and 6 months of 7.12% or buying in November for 6 months of 7.12% and 6 months of the mystery May 2022 variable rate.

However, a short term holder also has the consideration of wanting to get access to their money as soon as possible. Waiting until the next month effectively extends your "holding period" for up to one month in absolute terms from the current moment, and if you are entirely agnostic to future interest rate changes, that earlier access is theoretically worth paying a small premium for, and makes buying now slightly more appealing if you don't believe the May 2022 rate will be significantly higher than 3.54%.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by mall0c »

I have been buying ibonds for about ten years now and often take advantage of the tax refund method to get another $5k into the account. My personal experience with this transaction is that it can be quite stressful. They send you 12 paper bonds of varying denominations (6x$50, 1x$200, 1x$500, 4x$1k), each in a separate envelope. That is 12 opportunities for something to get lost. This year all my bonds but one showed up on the same day, guess which denomination was missing - on of the $1k bonds. Luckily 10 days later the missing $1k bond showed up. I figured for sure it was lost. Then you have to register them on TD and send them all back again. Luckily I have never actually had to get on the phone with the treasury and convince them to send me a new bond, but I fear that day will come someday. It makes me seriously consider every year whether I want to put myself through it again.
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