The I Bond Manifesto

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Bulgogi Head
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Re: The I Bond Manifesto

Post by Bulgogi Head »

Is there a way in TD direct to see how much you’ve earned each month in interest? For some reason, I see the total value of the bond, but cannot see each month’s interest earned.
SnowBog
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Re: The I Bond Manifesto

Post by SnowBog »

Bulgogi Head wrote: Fri Oct 01, 2021 4:16 pm Is there a way in TD direct to see how much you’ve earned each month in interest? For some reason, I see the total value of the bond, but cannot see each month’s interest earned.
Not that I've noticed. But does it matter?

There are some "unique" ways that interest is handled and displayed. For example, what's shown does not include the prior 3 months interest (aka the interest penalty), until you get to year 5 where one month you'll end up seeing 4 months of interest show up together (as the penalty no longer applies, so you get the previously missing 3 months).
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Mel Lindauer
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Re: The I Bond Manifesto

Post by Mel Lindauer »

SnowBog wrote: Fri Oct 01, 2021 1:51 pm Agreed - there's a "balance" in there somewhere... But my working theory is - assuming I'm OK keeping my TD account [as you point out] - then its really a question of do I Bonds make sense at that point for your needs? I'm assuming the answer is yes [assuming you are OK keeping TD account].

I just don't see the relevance of 5 years. (I didn't think you were stating that as a reason for or against... Again I just don't see the relevance...)

If they are paying out out more than alternatives, I'll keep them for as long as makes sense (based on when I need the money, tax optimization, and if/when I want to shut down TD account and/or simplify my holdings). If they are paying out less (or my priority becomes simplification/eliminating accounts), then sell them and be done. I just don't see how the 5 year timeline - and avoiding the interest penalty is relevant... I mean if I had an I Bond that was in its 4th year, I'd probably wait... But if I get to the point I Bonds aren't "adding" to my needs anymore, I'd be willing to liquidate 1-4 year old bonds as well - I can't imagine "waiting"...
If one were considering selling their I Bonds because the composite rates had dropped to an unacceptable level prior to the five-year mark, they shouldn't fear the loss of the last three month's interest. With low composite rates, the last three month's interest would be minimal. Just hold long enough to insure that they're not losing a prior good month or two or three by redeeming before they had gone through three months of the lower rate.
Best Regards - Mel | | Semper Fi
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beyou
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Re: The I Bond Manifesto

Post by beyou »

Mel Lindauer wrote: Fri Oct 01, 2021 11:39 pm
SnowBog wrote: Fri Oct 01, 2021 1:51 pm Agreed - there's a "balance" in there somewhere... But my working theory is - assuming I'm OK keeping my TD account [as you point out] - then its really a question of do I Bonds make sense at that point for your needs? I'm assuming the answer is yes [assuming you are OK keeping TD account].

I just don't see the relevance of 5 years. (I didn't think you were stating that as a reason for or against... Again I just don't see the relevance...)

If they are paying out out more than alternatives, I'll keep them for as long as makes sense (based on when I need the money, tax optimization, and if/when I want to shut down TD account and/or simplify my holdings). If they are paying out less (or my priority becomes simplification/eliminating accounts), then sell them and be done. I just don't see how the 5 year timeline - and avoiding the interest penalty is relevant... I mean if I had an I Bond that was in its 4th year, I'd probably wait... But if I get to the point I Bonds aren't "adding" to my needs anymore, I'd be willing to liquidate 1-4 year old bonds as well - I can't imagine "waiting"...
If one were considering selling their I Bonds because the composite rates had dropped to an unacceptable level prior to the five-year mark, they shouldn't fear the loss of the last three month's interest. With low composite rates, the last three month's interest would be minimal. Just hold long enough to insure that they're not losing a prior good month or two or three by redeeming before they had gone through three months of the lower rate.
Good point about timing, waiting 3 more months past a sudden drop in interest to at least capture what is worth capturing.
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tetractys
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Re: The I Bond Manifesto

Post by tetractys »

This part of the I Bond Manifesto is confusing to me:
Redeeming electronic I Bonds. You can redeem your I Bonds (or any portion of your bond holdings, so long as you leave at least $25 in your account) using your online account. The money is then transferred into your linked bank account.
I think “any portion” refers to an individual I bond; but the way it’s written, it could refer to an I bond account. I believe an I bond account can be liquidated to $0, and it is not required to break an individual I bond to leave $25 in an account.
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Re: The I Bond Manifesto

Post by SnowBog »

tetractys wrote: Sat Oct 02, 2021 8:02 am This part of the I Bond Manifesto is confusing to me:
Redeeming electronic I Bonds. You can redeem your I Bonds (or any portion of your bond holdings, so long as you leave at least $25 in your account) using your online account. The money is then transferred into your linked bank account.
I think “any portion” refers to an individual I bond; but the way it’s written, it could refer to an I bond account. I believe an I bond account can be liquidated to $0, and it is not required to break an individual I bond to leave $25 in an account.
When you purchase electronic I Bonds, you do so by purchasing at least $25. For example, let's say you make 4 purchases throughout the year for $1000, $2000, $3000, $4000.

When you go to sell, you will first select one of those purchases - let's say the $1000 purchase (which at that point is worth $1200).

You can sell any amount of that particular purchase, provided it's at least $25 and if you don't sell the full amount you leave a balance of at least $25.. Which means you can sell any amount between $25 - $1175, or the full about of $1200.

The same would be true for all other I Bonds purchased as well.

Basically, if you don't sell the entire bond purchase (aka our $1000 example) you need to leave a residual balance of $25, which is the minimum that can be sold in the future. If you sell the entire bond purchase, it does not matter.
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tetractys
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Re: The I Bond Manifesto

Post by tetractys »

SnowBog wrote: Sat Oct 02, 2021 12:00 pm
tetractys wrote: Sat Oct 02, 2021 8:02 am This part of the I Bond Manifesto is confusing to me:
Redeeming electronic I Bonds. You can redeem your I Bonds (or any portion of your bond holdings, so long as you leave at least $25 in your account) using your online account. The money is then transferred into your linked bank account.
I think “any portion” refers to an individual I bond; but the way it’s written, it could refer to an I bond account. I believe an I bond account can be liquidated to $0, and it is not required to break an individual I bond to leave $25 in an account.
When you purchase electronic I Bonds, you do so by purchasing at least $25. For example, let's say you make 4 purchases throughout the year for $1000, $2000, $3000, $4000.

When you go to sell, you will first select one of those purchases - let's say the $1000 purchase (which at that point is worth $1200).

You can sell any amount of that particular purchase, provided it's at least $25 and if you don't sell the full amount you leave a balance of at least $25.. Which means you can sell any amount between $25 - $1175, or the full about of $1200.

The same would be true for all other I Bonds purchased as well.

Basically, if you don't sell the entire bond purchase (aka our $1000 example) you need to leave a residual balance of $25, which is the minimum that can be sold in the future. If you sell the entire bond purchase, it does not matter.
Correct; but as I am pointing out, the wording in the manifesto is ambiguous. It leaves that question or a chance interpretation with the reader. Treasury Direct doesn’t charge admin fees; but the Manifesto might lead one to wonder.
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Re: The I Bond Manifesto

Post by SnowBog »

tetractys wrote: Sat Oct 02, 2021 2:03 pm
SnowBog wrote: Sat Oct 02, 2021 12:00 pm
tetractys wrote: Sat Oct 02, 2021 8:02 am This part of the I Bond Manifesto is confusing to me:
Redeeming electronic I Bonds. You can redeem your I Bonds (or any portion of your bond holdings, so long as you leave at least $25 in your account) using your online account. The money is then transferred into your linked bank account.
I think “any portion” refers to an individual I bond; but the way it’s written, it could refer to an I bond account. I believe an I bond account can be liquidated to $0, and it is not required to break an individual I bond to leave $25 in an account.
When you purchase electronic I Bonds, you do so by purchasing at least $25. For example, let's say you make 4 purchases throughout the year for $1000, $2000, $3000, $4000.

When you go to sell, you will first select one of those purchases - let's say the $1000 purchase (which at that point is worth $1200).

You can sell any amount of that particular purchase, provided it's at least $25 and if you don't sell the full amount you leave a balance of at least $25.. Which means you can sell any amount between $25 - $1175, or the full about of $1200.

The same would be true for all other I Bonds purchased as well.

Basically, if you don't sell the entire bond purchase (aka our $1000 example) you need to leave a residual balance of $25, which is the minimum that can be sold in the future. If you sell the entire bond purchase, it does not matter.
Correct; but as I am pointing out, the wording in the manifesto is ambiguous. It leaves that question or a chance interpretation with the reader. Treasury Direct doesn’t charge admin fees; but the Manifesto might lead one to wonder.
Well, as written, here's how I would interpret it:
  • You can redeem your I Bonds: meaning you can sell 100% if you want...
  • (or any portion of your bond holdings, so long as you leave at least $25 in your account): meaning you can sell less than 100%, provided you leave at least $25 to be sold later...
To me it seems clear... So long as you understand that 2 distinct statements are being made.
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Re: The I Bond Manifesto

Post by TropikThunder »

JBTX wrote: Fri Sep 24, 2021 11:48 am My understanding is the social security number can be the same. Hope so, because that is what I did. Yes, if you have 2 RLTs a married couple could put in $40k per year.

https://thefinancebuff.com/buy-more-i-b ... trust.html
Tax ID

A revocable living trust typically uses the grantor’s Social Security Number as its Tax ID. The trust account at TreasuryDirect can still use the grantor’s Social Security Number even though the grantor also has a personal account with TreasuryDirect under the same Social Security Number.
Is there another source that agrees with Finance Buff? That's the only place I've seen suggesting the $10k personal, $10k in a trust strategy. Everywhere else says "$10,000 per year per social security number".
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Re: The I Bond Manifesto

Post by JBTX »

TropikThunder wrote: Thu Nov 04, 2021 7:34 pm
JBTX wrote: Fri Sep 24, 2021 11:48 am My understanding is the social security number can be the same. Hope so, because that is what I did. Yes, if you have 2 RLTs a married couple could put in $40k per year.

https://thefinancebuff.com/buy-more-i-b ... trust.html
Tax ID

A revocable living trust typically uses the grantor’s Social Security Number as its Tax ID. The trust account at TreasuryDirect can still use the grantor’s Social Security Number even though the grantor also has a personal account with TreasuryDirect under the same Social Security Number.
Is there another source that agrees with Finance Buff? That's the only place I've seen suggesting the $10k personal, $10k in a trust strategy. Everywhere else says "$10,000 per year per social security number".
Here are a couple of sources.

https://www.govinfo.gov/content/pkg/CFR ... 359-29.pdf

viewtopic.php?t=77395

It may not give you the level of warm and fuzzy you are looking for. The CFR link clearly states that ibonds purchased individual are counted separately from other entities as to the maximum. The wording is "name and social security".

I've also seen elsewhere that if the trust doesn't have a specific tax ID to use the grantor’s SS#.
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Re: The I Bond Manifesto

Post by TropikThunder »

JBTX wrote: Thu Nov 04, 2021 9:31 pm
TropikThunder wrote: Thu Nov 04, 2021 7:34 pm
JBTX wrote: Fri Sep 24, 2021 11:48 am My understanding is the social security number can be the same. Hope so, because that is what I did. Yes, if you have 2 RLTs a married couple could put in $40k per year.

https://thefinancebuff.com/buy-more-i-b ... trust.html
Tax ID

A revocable living trust typically uses the grantor’s Social Security Number as its Tax ID. The trust account at TreasuryDirect can still use the grantor’s Social Security Number even though the grantor also has a personal account with TreasuryDirect under the same Social Security Number.
Is there another source that agrees with Finance Buff? That's the only place I've seen suggesting the $10k personal, $10k in a trust strategy. Everywhere else says "$10,000 per year per social security number".
Here are a couple of sources.

https://www.govinfo.gov/content/pkg/CFR ... 359-29.pdf

viewtopic.php?t=77395

It may not give you the level of warm and fuzzy you are looking for. The CFR link clearly states that ibonds purchased individual are counted separately from other entities as to the maximum. The wording is "name and social security".

I've also seen elsewhere that if the trust doesn't have a specific tax ID to use the grantor’s SS#.
Thanks! That’s very helpful.
Greg in S. Carolina
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Re: The I Bond Manifesto

Post by Greg in S. Carolina »

Isn’t there an annual limit of $10,000 per person?
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Re: The I Bond Manifesto

Post by FoundingFather »

Greg in S. Carolina wrote: Thu Nov 04, 2021 10:35 pm Isn’t there an annual limit of $10,000 per person?
There is an annual purchase limit for $10,000 per person, plus an additional $5,000 using tax return/refund (either single or married filing jointly) creating yearly limits of $15,000 for single individuals and $25,000 for couples.

However, you can also use trusts to purchase more annually (there are many discussions and guides on this across bogleheads and the wider internet). Additionally, I was recently informed, via this board, that one can use gift purchases, with later transfer, to front load purchases. This gift approach does not allow one to exceed the $10,000 annual purchase limit, but does allow frontloading (as can be done in 529s). You can search for this as well - I am not as familiar with this approach.

The $20,000 max a year for couples is enough to suit my needs at this time, so I have not personally used the other approaches.

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Re: The I Bond Manifesto

Post by bogleyboo »

Has anyone with a treasurydirect revocable living trust entity account ever been asked for proof of the RLT? I'm asking because I am trying to find the easiest/cheapest way to create an RLT that would satisfy treasurydirect's criteria. I have read that an RLT doesn't actually need to be notarized to be valid (though it is recommended).

So I'm wondering if I just create a boilerplate RLT based on one of the free online forms without even notarizing it, would that pass muster for TD? Yes, I know it may not pass muster for probate and stuff like that, but I'm not planning for that at the moment. If I have more robust needs in the future, then I'll get a lawyer to do it at that time, but for now, all I need the RLT for is purchasing ibonds.
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Re: The I Bond Manifesto

Post by SnowBog »

bogleyboo wrote: Mon Nov 22, 2021 7:21 pm Has anyone with a treasurydirect revocable living trust entity account ever been asked for proof of the RLT? I'm asking because I am trying to find the easiest/cheapest way to create an RLT that would satisfy treasurydirect's criteria. I have read that an RLT doesn't actually need to be notarized to be valid (though it is recommended).

So I'm wondering if I just create a boilerplate RLT based on one of the free online forms without even notarizing it, would that pass muster for TD? Yes, I know it may not pass muster for probate and stuff like that, but I'm not planning for that at the moment. If I have more robust needs in the future, then I'll get a lawyer to do it at that time, but for now, all I need the RLT for is purchasing ibonds.
For my two cents - this isn't something I'd "cheap" out on... IMHO its simply not worth the risk to save a few minutes and the notary fee...

While I don't recall needing to send/prove anything to TD, technically the bonds belong to the trust.

I can't fathom buying $10k/year in bonds where there wasn't an "official" trust established first, with proper documentation, etc. Likewise, were you to die without clear definitions of what was supposed to happen with the funds/trust - that's going to create problems with your heirs.

My advice, either hire a lawyer and do it right from the start, or follow a DIY model such as here https://thefinancebuff.com/simple-livin ... bonds.html, but ensure you complete it by getting it notarized.
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Re: The I Bond Manifesto

Post by bogleyboo »

Thanks SnowBog for recommending that financebuff site and yes, those are good points.
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Re: The I Bond Manifesto

Post by ObiQuiet »

TropikThunder wrote: Thu Nov 04, 2021 7:34 pm Is there another source that agrees with Finance Buff? That's the only place I've seen suggesting the $10k personal, $10k in a trust strategy. Everywhere else says "$10,000 per year per social security number".
You can also/instead "front-load" by buying gifts for each other now, to be delivered in later years when you're not buying new iBonds.
viewtopic.php?t=306297
JohnDoh
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Re: The I Bond Manifesto

Post by JohnDoh »

TropikThunder wrote: Thu Nov 04, 2021 9:43 pm
JBTX wrote: Thu Nov 04, 2021 9:31 pm
TropikThunder wrote: Thu Nov 04, 2021 7:34 pm
JBTX wrote: Fri Sep 24, 2021 11:48 am My understanding is the social security number can be the same. Hope so, because that is what I did. Yes, if you have 2 RLTs a married couple could put in $40k per year.

https://thefinancebuff.com/buy-more-i-b ... trust.html
Tax ID

A revocable living trust typically uses the grantor’s Social Security Number as its Tax ID. The trust account at TreasuryDirect can still use the grantor’s Social Security Number even though the grantor also has a personal account with TreasuryDirect under the same Social Security Number.
Is there another source that agrees with Finance Buff? That's the only place I've seen suggesting the $10k personal, $10k in a trust strategy. Everywhere else says "$10,000 per year per social security number".
Here are a couple of sources.

https://www.govinfo.gov/content/pkg/CFR ... 359-29.pdf

viewtopic.php?t=77395

It may not give you the level of warm and fuzzy you are looking for. The CFR link clearly states that ibonds purchased individual are counted separately from other entities as to the maximum. The wording is "name and social security".

I've also seen elsewhere that if the trust doesn't have a specific tax ID to use the grantor’s SS#.
Thanks! That’s very helpful.
FWIW, I recently researched this issue and posted:

31 CFR 363.52 (Savings Bonds Trust Purchase Rules) Over the Years (2011 vs 2012-2020/2021)

in which I trace and quote what appear to be the relevant regulations. The CFR you linked is from 2009. I come to the same conclusion but perhaps have firmer ground to stand on. Nonetheless, I'd appreciate additional input on the matter from anyone who may have it. In particular, I'd really like to have a draft email response ready to go if/when I were to receive a notice of (alleged) violation. Any wordsmiths out there?
TxInjun
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Re: The I Bond Manifesto

Post by TxInjun »

Hello Boglehead friends,

I took the plunge on TreasuryDirect this weekend. I set up individual accounts for myself and DW, and also in the name of our RLT. In each, I bought $10K of I-Bonds. Feeling super accomplished!, especially as I should hit before end-month (today being the weekend, the withdrawal / purchase date will be Mon 11/29). Thanks for the various messages / threads that inspired me to action.

Question: I have a 11 year old DD. I'm not sure how to invest $10K in her name into the account. Should I just buy as myself and gift to her? Or should (can) I open an individual account in her name?

Best,

TxIn
ball241
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Re: The I Bond Manifesto

Post by ball241 »

TxInjun wrote: Sat Nov 27, 2021 8:06 pm Hello Boglehead friends,

I took the plunge on TreasuryDirect this weekend. I set up individual accounts for myself and DW, and also in the name of our RLT. In each, I bought $10K of I-Bonds. Feeling super accomplished!, especially as I should hit before end-month (today being the weekend, the withdrawal / purchase date will be Mon 11/29). Thanks for the various messages / threads that inspired me to action.

Question: I have a 11 year old DD. I'm not sure how to invest $10K in her name into the account. Should I just buy as myself and gift to her? Or should (can) I open an individual account in her name?

Best,

TxIn
That’s great, treasury direct is just fine. If you need switch banks it’s little hassle but no big deal.
SnowBog
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Re: The I Bond Manifesto

Post by SnowBog »

TxInjun wrote: Sat Nov 27, 2021 8:06 pm Hello Boglehead friends,

I took the plunge on TreasuryDirect this weekend. I set up individual accounts for myself and DW, and also in the name of our RLT. In each, I bought $10K of I-Bonds. Feeling super accomplished!, especially as I should hit before end-month (today being the weekend, the withdrawal / purchase date will be Mon 11/29). Thanks for the various messages / threads that inspired me to action.

Question: I have a 11 year old DD. I'm not sure how to invest $10K in her name into the account. Should I just buy as myself and gift to her? Or should (can) I open an individual account in her name?

Best,

TxIn
See https://www.treasurydirect.gov/indiv/he ... bMinor.htm

Keep in mind, the money will be considered the child's money. Much like money in any other form of custodial account - it's no longer "your" money - and needs to be treated as "their" money.
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Re: The I Bond Manifesto

Post by Mel Lindauer »

SnowBog wrote: Sat Nov 27, 2021 8:15 pm
TxInjun wrote: Sat Nov 27, 2021 8:06 pm Hello Boglehead friends,

I took the plunge on TreasuryDirect this weekend. I set up individual accounts for myself and DW, and also in the name of our RLT. In each, I bought $10K of I-Bonds. Feeling super accomplished!, especially as I should hit before end-month (today being the weekend, the withdrawal / purchase date will be Mon 11/29). Thanks for the various messages / threads that inspired me to action.

Question: I have a 11 year old DD. I'm not sure how to invest $10K in her name into the account. Should I just buy as myself and gift to her? Or should (can) I open an individual account in her name?

Best,

TxIn
See https://www.treasurydirect.gov/indiv/he ... bMinor.htm

Keep in mind, the money will be considered the child's money. Much like money in any other form of custodial account - it's no longer "your" money - and needs to be treated as "their" money.
And keep in mind that when the child is listed as the owner, those bonds cannot be used, tax-free, for the qualifying educational benefit.
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by Rajsx »

Researching benefits/Use of - I Bonds for a retired 65 yr old - Pros & Cons

I understand the present higher variable rate has rekindled interest in I Bonds -

Our fixed income investments are -

In Tax Deferred -
VBTLX - Total Bond Index
VTABX - Total International Bond Index

In Taxable -
VWIUX - Intermediate Term Tax Exempt Bond
VBIRX - Short Term Bond Index
Online Savings Account - 0.5%

We can buy up to $45k/yr in total as I & DW each have Revocable Trusts & we have won the game so to speak.

Please advise, thankyou in advance
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Re: The I Bond Manifesto

Post by Mel Lindauer »

Rajsx wrote: Sat Nov 27, 2021 10:08 pm Researching benefits/Use of - I Bonds for a retired 65 yr old - Pros & Cons

I understand the present higher variable rate has rekindled interest in I Bonds -

Our fixed income investments are -

In Tax Deferred -
VBTLX - Total Bond Index
VTABX - Total International Bond Index

In Taxable -
VWIUX - Intermediate Term Tax Exempt Bond
VBIRX - Short Term Bond Index
Online Savings Account - 0.5%

We can buy up to $45k/yr in total as I & DW each have Revocable Trusts & we have won the game so to speak.

Please advise, thankyou in advance
Some things to keep in mind:
1. I Bonds are risk-free. They're backed by the US Treasury. Bond funds aren't.
2. I Bonds offer tax-deferral for up to 30 years. Your taxable bonds don't.
3. I Bonds are paying way more than your current holdings. Enjoy the extra return.
4. When (not if) interest rates go back up to normal rates, your bond funds will lose value. I Bonds will continue to gain value and can never go down.
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by Rajsx »

Thanks Mel,

In our portfolio; 5 years after buying these I Bonds, they could take the place of our Short Term Bond Fund or Online Savings Bank Account.
The best positive I see is that the I Bonds would maintain their buying capacity vs other vehicles we are using no matter what the future inflation throws at us.
We do not stop laughing because we grow old, we grow old because we stop laughing !!
Carol88888
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Re: The I Bond Manifesto

Post by Carol88888 »

What about deliberately overpaying one's estimated taxes by $5000 in order to get the refund in I Bonds. The only thing wrong with I Bonds is the small amount.

Wasn't the limit about $30,000 back in 2000?
catchup
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Re: The I Bond Manifesto

Post by catchup »

Thank you. I am inspired.
Do investors here consider i bonds to be part of there bond allocation or a cash equivalent.
I have 15% treasuries, 15% Tips. Should I include i bonds with tips, or as a separate asset class.
Is there a ticker symbol that can be plugged in to Vanguard app for purposes of portfolio tracker analysis?
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Re: The I Bond Manifesto

Post by Mel Lindauer »

Carol88888 wrote: Sun Nov 28, 2021 11:43 am What about deliberately overpaying one's estimated taxes by $5000 in order to get the refund in I Bonds. The only thing wrong with I Bonds is the small amount.

Wasn't the limit about $30,000 back in 2000?
1. Yes, you can get $5k in paper I Bonds via your tax refund.
2. Yes, the limit was $30k per person back in the good old days. AND, you could pay for them with your credit card and get the perks to boot.
3. If $10k per person is a "small amount", what are you feelings about the $6k per person limit on Traditional IRAs?
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by Mel Lindauer »

catchup wrote: Sun Nov 28, 2021 12:54 pm Thank you. I am inspired.
Do investors here consider i bonds to be part of there bond allocation or a cash equivalent.
I have 15% treasuries, 15% Tips. Should I include i bonds with tips, or as a separate asset class.
Is there a ticker symbol that can be plugged in to Vanguard app for purposes of portfolio tracker analysis?
You can consider I Bonds to be either cash or bonds, depending on how you plan to use them (short-term goal or long term investment). How you consider them doesn't change their character.

While there is no ticker symbol that you can plug into Vanguard to update your I Bonds, you can add their total value to the "Outside Investments" section of your Vanguard account page and manually update it once a month when the I Bond values increase.
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by Mel Lindauer »

Rajsx wrote: Sun Nov 28, 2021 10:28 am Thanks Mel,

In our portfolio; 5 years after buying these I Bonds, they could take the place of our Short Term Bond Fund or Online Savings Bank Account.
The best positive I see is that the I Bonds would maintain their buying capacity vs other vehicles we are using no matter what the future inflation throws at us.
You may want to continue to hold some ST Bond for rebalancing purposes since you might not want to have to sell some of those good I Bonds with lots of taxes due for that purpose.
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by SnowBog »

catchup wrote: Sun Nov 28, 2021 12:54 pm Thank you. I am inspired.
Do investors here consider i bonds to be part of there bond allocation or a cash equivalent.
I have 15% treasuries, 15% Tips. Should I include i bonds with tips, or as a separate asset class.
I ended up collapsing my "cash" and "bonds" together under the broader "fixed income". This simplified dealing with I Bonds for us, as it really doesn't matter what I consider them as then.
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Re: The I Bond Manifesto

Post by catchup »

Thank you, Mel for your reply!
Makes sense.

Best to you as well.
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Re: The I Bond Manifesto

Post by ivgrivchuck »

SnowBog wrote: Sun Nov 28, 2021 3:17 pm
catchup wrote: Sun Nov 28, 2021 12:54 pm Thank you. I am inspired.
Do investors here consider i bonds to be part of there bond allocation or a cash equivalent.
I have 15% treasuries, 15% Tips. Should I include i bonds with tips, or as a separate asset class.
I ended up collapsing my "cash" and "bonds" together under the broader "fixed income". This simplified dealing with I Bonds for us, as it really doesn't matter what I consider them as then.
I agree. For portfolio construction purposes cash and short/Intermediate duration bonds behave similarly enough, so that switching between them doesn't have a huge impact on the portfolio characteristics.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: The I Bond Manifesto

Post by catchup »

Thank you Snowbog.

Up until now I’ve kept my cash bucket separate from my investment bucket which is 70/30 stocks and bonds.

Will need to decide on a system that works best. I think we can decrease our cash reserves safely with this alternative bond investment, however I will need to manually update it and perhaps substitute a fake bond fund ticker if I want a vanguard portfolio analysis with percent breakdown of asset classes. A little bit of a deterrent, but perhaps worth it.
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Re: The I Bond Manifesto

Post by user9532 »

"The total yield of an I Bond is made up of two components: a fixed rate that remains the
same for the 30-year life of the bond, and an inflation adjustment that’s reset every six
months. The fixed rate is currently zero, and the last inflation adjustment in May 2021 was
3.54% per year."


Was the fixed rate portion any time higher than zero? What are the chances the fixed portion would be higher than zero in the future?
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Re: The I Bond Manifesto

Post by dukeblue219 »

user9532 wrote: Sun Nov 28, 2021 4:12 pm "The total yield of an I Bond is made up of two components: a fixed rate that remains the
same for the 30-year life of the bond, and an inflation adjustment that’s reset every six
months. The fixed rate is currently zero, and the last inflation adjustment in May 2021 was
3.54% per year."


Was the fixed rate portion any time higher than zero? What are the chances the fixed portion would be higher than zero in the future?
At the turn of the millennium an I bond had a fixed rate around 3.5%, which wasn't great at the time, but those bonds are paying 10% today with the inflation kicker.

http://forbestadvice.com/money/investin ... rates.html

Will it happen again? Perhaps, but real rates are negative everywhere these days. The macro bond environment needs to change first.
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Re: The I Bond Manifesto

Post by Rajsx »

Mel Lindauer wrote: Sun Nov 28, 2021 3:02 pm
Rajsx wrote: Sun Nov 28, 2021 10:28 am Thanks Mel,

In our portfolio; 5 years after buying these I Bonds, they could take the place of our Short Term Bond Fund or Online Savings Bank Account.
The best positive I see is that the I Bonds would maintain their buying capacity vs other vehicles we are using no matter what the future inflation throws at us.
You may want to continue to hold some ST Bond for rebalancing purposes since you might not want to have to sell some of those good I Bonds with lots of taxes due for that purpose.
Thanks again Mel
We do not stop laughing because we grow old, we grow old because we stop laughing !!
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Re: The I Bond Manifesto

Post by Mel Lindauer »

dukeblue219 wrote: Sun Nov 28, 2021 4:19 pm
user9532 wrote: Sun Nov 28, 2021 4:12 pm "The total yield of an I Bond is made up of two components: a fixed rate that remains the
same for the 30-year life of the bond, and an inflation adjustment that’s reset every six
months. The fixed rate is currently zero, and the last inflation adjustment in May 2021 was
3.54% per year."


Was the fixed rate portion any time higher than zero? What are the chances the fixed portion would be higher than zero in the future?
At the turn of the millennium an I bond had a fixed rate around 3.5%, which wasn't great at the time, but those bonds are paying 10% today with the inflation kicker.

http://forbestadvice.com/money/investin ... rates.html

Will it happen again? Perhaps, but real rates are negative everywhere these days. The macro bond environment needs to change first.
For the record, the highest announced fixed rate was 3.6% on May 1, 2000. Those babies are paying over 10% now.
Best Regards - Mel | | Semper Fi
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Re: The I Bond Manifesto

Post by smectym »

Mel Lindauer wrote: Fri Sep 24, 2021 3:50 pm
dcw213 wrote: Fri Sep 24, 2021 1:17 pm Thank you Mel. Because of you, my wife and I have maxed out I-bond purchases since 2011. We have been very pleased with the results.

For nearly all of the last decade, they have more than kept pace with yields on alternative risk free liquid investments, acting as a superior emergency fund during this time. This year they are exhibiting the protection that we were buying. I feel fortunate to have a nice chunk of my emergency fund and part of my fixed income allocation that will be yielding around 10x risk free comps in the current period.

Thank you Mel, it is clear that you have helped educate and benefit many people with your educational pieces and posts!
Glad to hear that your I Bonds are working out well for you. And thanks for the kind words.
Just to add my thanks to Mel—and this forum—for consistently pointing out the benefits of I bonds. Some advice on this forum I haven’t taken—and I usually regret it. But I did jump into I Bonds early and often, and we’re reaping the benefits today. It’s a stable, risk-free core to the portfolio, and the rates on some of the bonds are hard to believe
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Re: The I Bond Manifesto

Post by Socal77 »

What is the penalty if you need the money back before 12 months or less?
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Re: The I Bond Manifesto

Post by SnowBog »

Socal77 wrote: Sun Nov 28, 2021 9:34 pm What is the penalty if you need the money back before 12 months or less?
Not possible... (With rare exceptions like a national emergency being declared.)
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Re: The I Bond Manifesto

Post by smectym »

Socal77 wrote: Sun Nov 28, 2021 9:34 pm What is the penalty if you need the money back before 12 months or less?
A very good question, and per Treasury Direct, “the minimum holding period is one year.” So it’s not a matter of paying a penalty to exit before 12 months or less. If you regret the buy within year one, your penalty is having to wait the full year—before then paying 3 months prior interest to exit.

https://www.treasurydirect.gov/indiv/pr ... glance.htm
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Re: The I Bond Manifesto

Post by #Cruncher »

user9532 wrote: Sun Nov 28, 2021 4:12 pmWas the fixed rate portion any time higher than zero?
Since they were introduced in September 1998, there have been 48 semi-annual [1] announcements of I Bond fixed and inflation rates. 33 of those 48 times the announced fixed rate was more than 0%. Most of these occurred early. 23 of the first 24 announcements included a fixed rate greater than 0% ranging as high as 3.6%. But only 10 of the last 24 announcements were greater than 0%, and the highest was only 0.5%.

Here are the 48 announced fixed and inflation rates [2] along with the resulting initial and current composite rates. [3]

Code: Select all

            Fixed   Inflat   -Composite Rate-
Announced    Rate     Rate   Initial  Current    Fixed Rate

Code: Select all

 Sep 1998    3.4%    0.62%     4.66%   10.64%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 Nov 1998    3.3%    0.86%     5.05%   10.54%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 May 1999    3.3%    0.86%     5.05%   10.54%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 Nov 1999    3.4%    1.76%     6.98%   10.64%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

 May 2000    3.6%    1.91%     7.49%   10.85%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 Nov 2000    3.4%    1.52%     6.49%   10.64%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 May 2001    3.0%    1.44%     5.92%   10.23%   |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 Nov 2001    2.0%    1.19%     4.40%    9.19%   |XXXXXXXXXXXXXXXXXXXX

 May 2002    2.0%    0.28%     2.57%    9.19%   |XXXXXXXXXXXXXXXXXXXX
 Nov 2002    1.6%    1.23%     4.08%    8.78%   |XXXXXXXXXXXXXXXX
 May 2003    1.1%    1.77%     4.66%    8.26%   |XXXXXXXXXXX
 Nov 2003    1.1%    0.54%     2.19%    8.26%   |XXXXXXXXXXX

 May 2004    1.0%    1.19%     3.39%    8.16%   |XXXXXXXXXX
 Nov 2004    1.0%    1.33%     3.67%    8.16%   |XXXXXXXXXX
 May 2005    1.2%    1.79%     4.80%    8.36%   |XXXXXXXXXXXX
 Nov 2005    1.0%    2.85%     6.73%    8.16%   |XXXXXXXXXX

 May 2006    1.4%    0.50%     2.41%    8.57%   |XXXXXXXXXXXXXX
 Nov 2006    1.4%    1.55%     4.52%    8.57%   |XXXXXXXXXXXXXX
 May 2007    1.3%    1.21%     3.74%    8.47%   |XXXXXXXXXXXXX
 Nov 2007    1.2%    1.53%     4.28%    8.36%   |XXXXXXXXXXXX

 May 2008    0.0%    2.42%     4.84%    7.12%   |
 Nov 2008    0.7%    2.46%     5.64%    7.84%   |XXXXXXX
 May 2009    0.1%   (2.78%)    0.00%    7.22%   |X
 Nov 2009    0.3%    1.53%     3.36%    7.43%   |XXX

 May 2010    0.2%    0.77%     1.74%    7.33%   |XX
 Nov 2010    0.0%    0.37%     0.74%    7.12%   |
 May 2011    0.0%    2.30%     4.60%    7.12%   |
 Nov 2011    0.0%    1.53%     3.06%    7.12%   |

 May 2012    0.0%    1.10%     2.20%    7.12%   |
 Nov 2012    0.0%    0.88%     1.76%    7.12%   |
 May 2013    0.0%    0.59%     1.18%    7.12%   |
 Nov 2013    0.2%    0.59%     1.38%    7.33%   |XX

 May 2014    0.1%    0.92%     1.94%    7.22%   |X
 Nov 2014    0.0%    0.74%     1.48%    7.12%   |
 May 2015    0.0%   (0.80%)    0.00%    7.12%   |
 Nov 2015    0.1%    0.77%     1.64%    7.22%   |X

 May 2016    0.1%    0.08%     0.26%    7.22%   |X
 Nov 2016    0.0%    1.38%     2.76%    7.12%   |
 May 2017    0.0%    0.98%     1.96%    7.12%   |
 Nov 2017    0.1%    1.24%     2.58%    7.22%   |X

 May 2018    0.3%    1.11%     2.52%    7.43%   |XXX
 Nov 2018    0.5%    1.16%     2.83%    7.64%   |XXXXX
 May 2019    0.5%    0.70%     1.90%    7.64%   |XXXXX
 Nov 2019    0.2%    1.01%     2.22%    7.33%   |XX

 May 2020    0.0%    0.53%     1.06%    7.12%   |
 Nov 2020    0.0%    0.84%     1.68%    7.12%   |
 May 2021    0.0%    1.77%     3.54%    7.12%   |
 Nov 2021    0.0%    3.56%     7.12%    7.12%   |
  1. The second announcement came only two months after the first. After that, they have followed at six month intervals.
  2. From TreasuryDirect's What have rates been in the past?.
  3. An I Bond's composite rate changes every six months and is a combination of the original fixed rate and the latest inflation rate. As an example here is how the "Initial" and "Current" composite rates are calculated for the first I Bond issued in September or October 1998. The initial composite rate combines the 3.4% fixed rate with the 0.62% semi-annual inflation rate announced at the same time. The current composite rate combines the 3.4% fixed rate with the 3.56% semi-annual inflation rate announced November 1st 2021.

    Code: Select all

    composite rate = fixed rate + (2 * inflation rate) + (fixed rate * inflation rate)
             4.66% = 0.034      + (2 * 0.0062)         + (0.034      * 0.0062)
            10.64% = 0.034      + (2 * 0.0356)         + (0.034      * 0.0356)
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Re: The I Bond Manifesto

Post by Socal77 »

Did I read correctly that people who bough these back when the fixed rate on the coupon was 3.4% are now receiving that fixed rate plus the current inflation rate of 7.12% for a total APR of 10.52%?
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Re: The I Bond Manifesto

Post by SnowBog »

Socal77 wrote: Mon Nov 29, 2021 11:55 am Did I read correctly that people who bough these back when the fixed rate on the coupon was 3.4% are now receiving that fixed rate plus the current inflation rate of 7.12% for a total APR of 10.52%?
Yes
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Re: The I Bond Manifesto

Post by life in slices »

Bulgogi Head wrote: Fri Oct 01, 2021 4:16 pm Is there a way in TD direct to see how much you’ve earned each month in interest? For some reason, I see the total value of the bond, but cannot see each month’s interest earned.
This is a great calculator to use for determining iBond current values without logging into TD:
http://eyebonds.info/ibonds/home10000.html

I believe this is run by #cruncher but I may be wrong
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Re: The I Bond Manifesto

Post by Socal77 »

SnowBog wrote: Sun Nov 28, 2021 10:16 pm
Socal77 wrote: Sun Nov 28, 2021 9:34 pm What is the penalty if you need the money back before 12 months or less?
Not possible... (With rare exceptions like a national emergency being declared.)
SnowBog wrote: Mon Nov 29, 2021 12:57 pm
Socal77 wrote: Mon Nov 29, 2021 11:55 am Did I read correctly that people who bough these back when the fixed rate on the coupon was 3.4% are now receiving that fixed rate plus the current inflation rate of 7.12% for a total APR of 10.52%?
Yes
Thanks
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Re: The I Bond Manifesto

Post by chw »

Thanks for the link Mel. I’ve been investing since 2001 (the golden days of I Bonds) on the advice of a friend (wish I had known him a few years earlier).

I’ve converted all of my paper bonds to TD online over the years. You talked about redemptions in the manifesto- do you know if you pick and choose which bonds to redeem in TD(instead of a FIFO method) and can a bond with a 10K original face value be partially redeemed? I will need to do some tax planning with some of the older bonds, as they will mature the same year my RMDs begin. I plan to do some strategic redemptions a few years before maturity on some of the bonds, but the original face value could add some complexity to this if partial redemptions aren’t an option (a good reason to purchase in smaller increments totaling 10k a year).
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Re: The I Bond Manifesto

Post by SnowBog »

chw wrote: Mon Nov 29, 2021 1:38 pm Thanks for the link Mel. I’ve been investing since 2001 (the golden days of I Bonds) on the advice of a friend (wish I had known him a few years earlier).

I’ve converted all of my paper bonds to TD online over the years. You talked about redemptions in the manifesto- do you know if you pick and choose which bonds to redeem in TD(instead of a FIFO method) and can a bond with a 10K original face value be partially redeemed? I will need to do some tax planning with some of the older bonds, as they will mature the same year my RMDs begin. I plan to do some strategic redemptions a few years before maturity on some of the bonds, but the original face value could add some complexity to this if partial redemptions aren’t an option (a good reason to purchase in smaller increments totaling 10k a year).
Unless there's some difference with older bonds and/or "converted" bonds I don't know about...

You should be able to pick the bond and make a partial redemption provided:
  • You redeem at least $25
  • You leave a balance of at least $25
Since $25 is the minimum that can be redeemed, you can't for example take a $50 bond and redeem $40 (leaving only $10 left as it would be unredeemable), but you could redeem $25 (leaving $25).
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Re: The I Bond Manifesto

Post by catchup »

Made my first purchase!
Only 23 years late to the party.

Thanks everyone.
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