An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

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hoops777
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by hoops777 »

SnowBog wrote: Sat Dec 11, 2021 5:09 pm
ivgrivchuck wrote: Sat Dec 11, 2021 3:50 pm
ObiQuiet wrote: Sat Dec 11, 2021 3:43 pm
nydoc wrote: Sat Dec 11, 2021 3:00 pm If you need that money for something I guess you can’t redeem it yourself as it was designated as a gift to someone else. Recipient can only receive 10k a year and then have to wait additional year to redeem it. Your 100k may be stuck in TD account for a long time.
I don't think that's true, is it?
I don't expect it to be true, but it seems that nobody in the board knows for sure...
A person can either buy for themselves or have a gift "delivered" of at most $10k per year. So if today you bought $50k as gifts for each spouse, and assuming that they also bought $10k individually. You could "deliver" the first of the $10k in 2022, the next $10k in 2023, etc., with the last of the original $50k delivered in 2026.

As to what could go wrong with the plan, all that's known right now is the 7% for the first 6 months. While unlikely, the remaining nine 6-month periods could all be 0%, but you've locked up money for 5 years and are stuck with it. So for those who are only interested in I Bonds due to the 7% rate, they may end up very disappointed.

Some recognize I Bonds for what they are, essentially a preservation of capital. I Bonds aren't really earning anything, even at 7%, instead they are keeping up with inflation (minus taxes eventually). Granted this is much better than you can get in a bank, but you aren't going to "make money" on I Bonds. For these people, they were probably buying I Bonds years ago, and we'll be buying I Bonds years from now when the interest rate is [hopefully] no longer an eye popping 7.12%. So for them to front load purchases, they aren't really concerned about future rates - as they already know it will be whatever inflation is - and that's fine for them.
I was planning on buying our 10,000 each limit in January which gets us up to 200,000 total in our TD accounts.
I am very conservative and have CD’s maturing so I thought might as well take advantage of this rate now to fill up what I wanted as a max in our IBonds.
Buy now as gifts vs rolling the dice on new rates the next few years. If nothing else it feels good to get that 7% for 6 months and if inflation stays high all next year the bonds will catch that as well.They will be what they will be in the future.
K.I.S.S........so easy to say so difficult to do.
boglemtgt
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by boglemtgt »

I am a bit confused and need help with this front-loading strategy.
I, wife, minor son
Dec 2021:
1. I buy 10K for 2021 today, buy a gift of 10K for my son and , buy a gift of 10K for my wife
2. My wife buys 10K for 2021 today, buy a gift of 10K for my son and , buy a gift 10K for me.

1. Can my wife deliver the gift in Jan 2022 that she purchased in Dec 2021 ?
2. Will I be able to repeat in Jan 2022 what I did in Dec 2021? or I would be only restricted to 10K which includes my delivered gift and will not be able to purchase in 2022?
3. How my minor son would get the bond money? Do I keep it in my account and deliver hime say after 10-15 years? What will be the normal strategy while gifting to minor child?
SnowBog
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by SnowBog »

boglemtgt wrote: Mon Dec 13, 2021 12:01 am I am a bit confused and need help with this front-loading strategy.
I, wife, minor son
Dec 2021:
1. I buy 10K for 2021 today, buy a gift of 10K for my son and , buy a gift of 10K for my wife
2. My wife buys 10K for 2021 today, buy a gift of 10K for my son and , buy a gift 10K for me.

1. Can my wife deliver the gift in Jan 2022 that she purchased in Dec 2021 ?
2. Will I be able to repeat in Jan 2022 what I did in Dec 2021? or I would be only restricted to 10K which includes my delivered gift and will not be able to purchase in 2022?
3. How my minor son would get the bond money? Do I keep it in my account and deliver hime say after 10-15 years? What will be the normal strategy while gifting to minor child?
1) yes
2) no, you can only buy or receive $10k per year. But you can buy another gift and deliver it in 2023. However, I don't see the point. Just buy $10k for each now, another $10k in a few weeks (2022), and then buy the gift or just wait until 2023 for the next $10k each.
3) you would need to create a minor account, which is linked to a parent account. Can't help on the last part, I see no reason to gift my child $10k. They have a 529 and UTMA already.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by Mel Lindauer »

SnowBog wrote: Sat Dec 11, 2021 5:09 pm
A 6 month stretch of 0% is the perfect time to redeem an I bond prior to the 5yr point.
True, but don't redeem them in the first month the rate changes to 0%. If you do so, you'd lose three months of decent interest. Instead, wait for three months and then your penalty will be $0, since the penalty is the last three months' interest.
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loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

Has anyone attempted yet to purchase a gift in one year of more than $10k for a single recipient? I am wondering if they are going to limit the purchase of a gift to any one person to $10k per year also.

I can't find anything on Treasury Direct that answers the above. If there is a 10k annual limit on a gift purchase per recipient person, then it is going to be a very short ladder.
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HueyLD
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by HueyLD »

loukycpa wrote: Tue Dec 14, 2021 7:25 am Has anyone attempted yet to purchase a gift in one year of more than $10k for a single recipient? I am wondering if they are going to limit the purchase of a gift to any one person to $10k per year also.

I can't find anything on Treasury Direct that answers the above. If there is a 10k annual limit on a gift purchase per recipient person, then it is going to be a very short ladder.
Maybe you can do so and report back to the BH community. Thanks.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

HueyLD wrote: Tue Dec 14, 2021 7:32 am
loukycpa wrote: Tue Dec 14, 2021 7:25 am Has anyone attempted yet to purchase a gift in one year of more than $10k for a single recipient? I am wondering if they are going to limit the purchase of a gift to any one person to $10k per year also.

I can't find anything on Treasury Direct that answers the above. If there is a 10k annual limit on a gift purchase per recipient person, then it is going to be a very short ladder.
Maybe you can do so and report back to the BH community. Thanks.
I will do that. I am more skeptical now this strategy is going to work, based on the following I read on Treasury Direct:

How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.

How much in EE bonds can I buy as gifts for others?
You can buy up to $10,000 per recipient as gifts for anyone. The bonds can be delivered only to recipients with a valid TreasuryDirect account. If your recipient does not yet have a TreasuryDirect account, you can still buy gift bonds and hold them in your account’s Gift Box.

Then again, there is also this that was in a FAQ on Treasury Direct:

If I deliver gifts to another TreasuryDirect customer, how does it affect the recipient's purchase limitation?
If you deliver gifts to another customer, the amount of the delivery is applied toward the annual purchase limitation for each security type for the year the gift delivery occurs.

So is it delivery or purchase (or both) where the 10k purchase limit is applied? If the FAQ is the more precise answer, and the other statements were just generalizing and not distinguishing between purchase and delivery, then perhaps it is possible.
Last edited by loukycpa on Tue Dec 14, 2021 7:44 am, edited 1 time in total.
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HueyLD
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by HueyLD »

The “count toward giftee’s purchase limit” only applies when the gifted bonds are transferred to their accounts.

That’s why you should give it a try.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

HueyLD wrote: Tue Dec 14, 2021 7:41 am The “count toward giftee’s purchase limit” only applies when the gifted bonds are transferred to their accounts.

That’s why you should give it a try.
I plan to try it later this month. I will report back to this thread.
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HueyLD
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by HueyLD »

Hint: 31 CFR § 363.52 (b):

“What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.“
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

HueyLD wrote: Tue Dec 14, 2021 7:54 am Hint: 31 CFR § 363.52 (b):

“What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.“
Thanks. If anyone else is interested, here is complete reg:

§ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.

(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.

(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.

(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.

[77 FR 213, Jan. 4, 2012]
ivgrivchuck
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by ivgrivchuck »

loukycpa wrote: Tue Dec 14, 2021 7:45 am
HueyLD wrote: Tue Dec 14, 2021 7:41 am The “count toward giftee’s purchase limit” only applies when the gifted bonds are transferred to their accounts.

That’s why you should give it a try.
I plan to try it later this month. I will report back to this thread.
This year i've purchased 10k i-bonds for myself and $20k for my spouse as gifts (not yet delivered)

My spouse has purchased 10k i-bonds for herself and $20k for me as gifts (not yet delivered)

The bonds are in giftbox and no complaints from TD so far...
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
Index4Life
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by Index4Life »

Has anyone tried to deliver a gift when the recipient has already purchased $10,000 for themselves? Does TD tell the sender that it cannot be delivered?

It seems odd because in cases other than spouse/child recipients, the sender in theory would have no knowledge of how much the recipient has purchased for themselves.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

ivgrivchuck wrote: Tue Dec 14, 2021 3:32 pm and $20k for my spouse as gifts (not yet delivered)

The bonds are in giftbox and no complaints from TD so far...
Good to know. Seems like it has worked for you then, at least so far................
hoops777
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by hoops777 »

loukycpa wrote: Tue Dec 14, 2021 4:39 pm
ivgrivchuck wrote: Tue Dec 14, 2021 3:32 pm and $20k for my spouse as gifts (not yet delivered)

The bonds are in giftbox and no complaints from TD so far...
Good to know. Seems like it has worked for you then, at least so far................
[/quote
Delete
K.I.S.S........so easy to say so difficult to do.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

ivgrivchuck wrote: Tue Dec 14, 2021 3:32 pm
loukycpa wrote: Tue Dec 14, 2021 7:45 am
HueyLD wrote: Tue Dec 14, 2021 7:41 am The “count toward giftee’s purchase limit” only applies when the gifted bonds are transferred to their accounts.

That’s why you should give it a try.
I plan to try it later this month. I will report back to this thread.
This year i've purchased 10k i-bonds for myself and $20k for my spouse as gifts (not yet delivered)

My spouse has purchased 10k i-bonds for herself and $20k for me as gifts (not yet delivered)

The bonds are in giftbox and no complaints from TD so far...
So far I have done the same. Each of us purchased 10k in Jan 2021. On Thursday and Friday last week each of us each day bought 10k for the other as gifts. No problems. Set up to do the same gifts each day next week.

Plan is to build a 10k a year inflation adjusted annuity for each of us (20k total) until my age 70 (2043). Will buy as much as I need and can get delivered out for that purpose and then stop. I had previously purchased 40k in I and 40k in EE for the same purpose. Will be moving other fixed income in tax deferred into equities in order to stay 60/40.

This will provide an income floor and reduce what I need from the rest of the portfolio when I FIRE (which I plan to do any minute now). If I subtract this annuity from my spending needs (and the SS that will replace it at age 70), the rest of my portfolio is more than 25X. I consider myself at FI now.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
Last edited by loukycpa on Sat Jan 01, 2022 9:17 am, edited 1 time in total.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by Grt2bOutdoors »

oneleaf wrote: Fri Nov 12, 2021 11:30 pm
absolute zero wrote: Fri Nov 12, 2021 8:28 pm Bumping this old thread to see if anyone has done something similar to what OP has described? Seems like a very effective way to put a significant sum of money into i bonds all at once.
I ended up not doing this, but I sorta wish I did. In 2019, fixed rates were 0.5% and then 0.2% in early 2020... I had a feeling those were the best rates we'd see in awhile, so I wanted to front load a few extra years worth. But now at 0%, I'd probably not bother front loading and just buy annually as normal.
I should not of been so skeptical. You hit upon a great idea and should we get so lucky to have a fixed rate reappear on the I bond I’ll try to be more attentive next time.

Happy New Year!
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jj
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by jj »

Thank you to poster oneleaf.

I am so sorry to have missed your original post back in March 2020.

My family is early retired with relatively little tax-deferred space, we have been buying 'I' Bonds since 2005 in an effort to increase our tax-deferred space for fixed-income investments. All our traditional IRAs are in bonds and even some of our Roth is bonds as I cannot bring myself to have our stock portion too high. This is an excellent strategy for us to get a bit more into fixed income, even if we don't have access to that cash for a few years as we take 'ownership' of the $10k gifts slowly year by year.
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett
Angst
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by Angst »

loukycpa wrote: Sat Jan 01, 2022 8:39 am I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
This is interesting! Thank you hoops777 for sending me over here.

I wonder if I could gift myself? Anyone know for sure? If not, I'd probably try it to find out.

So... any other downside with this front loading?

I'm clearly not up to crunching the numbers hypotheticals, but if we end up having stocked up with multiple, $10,000 gift tranches of I Bonds for future disposal, what happens when real rates go back up into positive territory? Remember 2019? It wasn't so long ago! Although rates crept downwards through the year, the 5-yr real rate was as high as 1.00%. In 2018, it got to 1.17%, and of course 10, 20 and 30-yr real rates were even higher. If/when real rates go back up, you can't just bail on all those ungifted I Bonds quickly. I Bonds are presently such a good deal over TIPS simply because real rates are negative. TIPS compensate for inflation too, but they are yielding roughly (very "roughly", the comparison is complicated) 0.5 to 1.5% less than the 0.00% fixed rate I Bonds (depending on what year, 5, 7, 10, 20, 30 on the real yield curve you're comparing to).

It's hard to compare I Bonds and TIPS - they're both such odd birds with strange features and so forth - but 5-yr TIPS are probably as good as anything for a place to start. If/when 5-yr real rates are back up to 1.00% territory with even higher rates on longer maturities, I will be back to considering selling I Bonds for equity in taxable and selling equity for TIPS in my Roth. (I've been there before.) I'm not dismissing the whole Frontloading idea of this thread at all, I like it! But I'm just pointing out, I think it's not necessarily a slam dunk for everyone.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by SnowBog »

+1

I'd be more tempted if there was a fixed rate > 0%.

I'll also be more tempted in my final year of employment if I want to "load up" with my last paycheck(s).

Otherwise, I'm adverse to locking up money that can't be touched for years. (And for context, I'm maxing out I & EE Bond purchases each year.)

If it ends up looking like rates are going down in May, I might pre-purchase 2023 I Bonds as "gifts" just to get a head start with 6 months at the 7.12%. But currently can't justify anything further out.
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stevewolfe
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by stevewolfe »

loukycpa wrote: Sat Jan 01, 2022 8:39 am I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
Thank you loukycpa! Once you / your spouse received the gifted I-Bond, were you able to change the registration from individual to "X WITH Y"? I think that was another question that came up along the way. Thanks!
Angst
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"Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by Angst »

SnowBog wrote: Tue Jan 11, 2022 10:33 pm +1

I'd be more tempted if there was a fixed rate > 0%.

I'll also be more tempted in my final year of employment if I want to "load up" with my last paycheck(s).

Otherwise, I'm adverse to locking up money that can't be touched for years. (And for context, I'm maxing out I & EE Bond purchases each year.)

If it ends up looking like rates are going down in May, I might pre-purchase 2023 I Bonds as "gifts" just to get a head start with 6 months at the 7.12%. But currently can't justify anything further out.
I'm with you. I might contribute/gift myself for both 2023 and 2024...

Gifting oneself:

I figure it will work (at least I haven't heard definitively to the contrary), so I am going to try it out before the end of January, and if I get that far, I'll try to deliver the gift to myself a week later, in February. This would complete my $10,000 maximum for 2022. Afterwards, I could/should be able to gift myself again (before the May rate change) for another $10k or two, I just won't deliver until Jan 2023, etc. For anyone interested...

Watch the video. Treasury Direct has good, basic, "how to" videos, including this one on purchasing I/EE Bonds as gifts:
https://treasurydirect.gov/indiv/tools/purchasing-a-gift-bond.htm

Also, don't forget Harry Sit's "Finance Buff" website! It's great and it includes this relevant page:
https://thefinancebuff.com/buy-i-bonds-as-gift.html
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Re: "Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by BrokerageZelda »

Angst wrote: Wed Jan 12, 2022 10:08 am
SnowBog wrote: Tue Jan 11, 2022 10:33 pm +1

I'd be more tempted if there was a fixed rate > 0%.

I'll also be more tempted in my final year of employment if I want to "load up" with my last paycheck(s).

Otherwise, I'm adverse to locking up money that can't be touched for years. (And for context, I'm maxing out I & EE Bond purchases each year.)

If it ends up looking like rates are going down in May, I might pre-purchase 2023 I Bonds as "gifts" just to get a head start with 6 months at the 7.12%. But currently can't justify anything further out.
I'm with you. I might contribute/gift myself for both 2023 and 2024...

Gifting oneself:

I figure it will work (at least I haven't heard definitively to the contrary), so I am going to try it out before the end of January, and if I get that far, I'll try to deliver the gift to myself a week later, in February. This would complete my $10,000 maximum for 2022. Afterwards, I could/should be able to gift myself again (before the May rate change) for another $10k or two, I just won't deliver until Jan 2023, etc. For anyone interested...

Watch the video. Treasury Direct has good, basic, "how to" videos, including this one on purchasing I/EE Bonds as gifts:
https://treasurydirect.gov/indiv/tools/purchasing-a-gift-bond.htm

Also, don't forget Harry Sit's "Finance Buff" website! It's great and it includes this relevant page:
https://thefinancebuff.com/buy-i-bonds-as-gift.html
TD will not let you gift to yourself. TD will not even let you put yourself as POD on a gift bond with someone else as primary.

Ask me how I know. 😢 (They can always edit the POD in their own account after they take possession.)
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

stevewolfe wrote: Wed Jan 12, 2022 9:57 am
loukycpa wrote: Sat Jan 01, 2022 8:39 am I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
Thank you loukycpa! Once you / your spouse received the gifted I-Bond, were you able to change the registration from individual to "X WITH Y"? I think that was another question that came up along the way. Thanks!
I have not attempted to change the registration. Haven't given this any thought but perhaps I should. All of my savings bonds so far are just in our respective individual names with no co owner or survivor.
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

I am using this strategy to fund a part of a bridge to deferred SS for spouse and I from age 50 (year 2023) to 70 (year 2043). Using Series EE bonds for the tail end of the ladder (2041 through 2043). Series I bonds for the rest of it. Probably will never get all of it into savings bonds (nor do I want it all there, given the long duration want some equity exposure), but this strategy has allowed me to get a meaningful chunk of it there at least.

Other than the liquidity issue (which I can deal with), I can't see any downside to putting this money in the gift box locking in 0% real.

I've swapped this out for total bond fund in my 50/50 portfolio. I have plenty of total bond fund for rebalancing with my equity portfolio. If total bond fund beats 0% real then I lose I guess. If it doesn't I win.

I am gaining some insurance against unexpected inflation (inflation in excess of what the market is expecting). Similar to what one would get with TIPS but with a bit of yield spread over what TIPS are right now (so I should beat TIPS purchased these days, presuming both are held to maturity).

I am also increasing my tax deferred space and reducing state taxes a smidge, so that's bit of a bonus.
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Re: "Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by Angst »

BrokerageZelda wrote: Wed Jan 12, 2022 10:10 am TD will not let you gift to yourself. TD will not even let you put yourself as POD on a gift bond with someone else as primary.
Ask me how I know. 😢 (They can always edit the POD in their own account after they take possession.)
Dang! I figured as much, but I'll still try next week, just to watch the mystery unfold for myself.
Without a spouse or heirs, I'll have to look to siblings, or probably just a good friend who's of a like mind.
We'll be IBFF's. :D
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by SnowBog »

loukycpa wrote: Wed Jan 12, 2022 11:00 am I am using this strategy to fund a part of a bridge to deferred SS for spouse and I from age 50 (year 2023) to 70 (year 2043). Using Series EE bonds for the tail end of the ladder (2041 through 2043). Series I bonds for the rest of it. Probably will never get all of it into savings bonds (nor do I want it all there, given the long duration want some equity exposure), but this strategy has allowed me to get a meaningful chunk of it there at least.

Other than the liquidity issue (which I can deal with), I can't see any downside to putting this money in the gift box locking in 0% real.

I've swapped this out for total bond fund in my 50/50 portfolio. I have plenty of total bond fund for rebalancing with my equity portfolio. If total bond fund beats 0% real then I lose I guess. If it doesn't I win.

I am gaining some insurance against unexpected inflation (inflation in excess of what the market is expecting). Similar to what one would get with TIPS but with a bit of yield spread over what TIPS are right now (so I should beat TIPS purchased these days, presuming both are held to maturity).

I am also increasing my tax deferred space and reducing state taxes a smidge, so that's bit of a bonus.
I'm doing the same thing... Except not using the "gift" approach yet. (But I am using 2 trusts + tax refund, so buying $45k of I Bonds each year.)

But as noted in a prior post, if fixed goes > 0% and/or in my final working year(s) I may "load up" using the "gift" approach.

In particular, my original plan/model assumed I'd quite buying I Bonds when we retire - which is still true. But that final year, instead of buying $45k of I Bonds, we could buy "extra" to be delivered $20k/year for as many years as it takes. That is seriously interesting to me...
loukycpa
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

SnowBog wrote: Wed Jan 12, 2022 1:16 pm
loukycpa wrote: Wed Jan 12, 2022 11:00 am I am using this strategy to fund a part of a bridge to deferred SS for spouse and I from age 50 (year 2023) to 70 (year 2043). Using Series EE bonds for the tail end of the ladder (2041 through 2043). Series I bonds for the rest of it. Probably will never get all of it into savings bonds (nor do I want it all there, given the long duration want some equity exposure), but this strategy has allowed me to get a meaningful chunk of it there at least.

Other than the liquidity issue (which I can deal with), I can't see any downside to putting this money in the gift box locking in 0% real.

I've swapped this out for total bond fund in my 50/50 portfolio. I have plenty of total bond fund for rebalancing with my equity portfolio. If total bond fund beats 0% real then I lose I guess. If it doesn't I win.

I am gaining some insurance against unexpected inflation (inflation in excess of what the market is expecting). Similar to what one would get with TIPS but with a bit of yield spread over what TIPS are right now (so I should beat TIPS purchased these days, presuming both are held to maturity).

I am also increasing my tax deferred space and reducing state taxes a smidge, so that's bit of a bonus.
But as noted in a prior post, if fixed goes > 0% and/or in my final working year(s) I may "load up" using the "gift" approach.
Trying to understand this mindset to make sure I'm not missing anything.

If you have other bonds in your portfolio, do you expect their future return to exceed the return on I bonds, therefore no reason to swap?

Seems like you and others think of this as only whether future I bond purchase (> 0% fixed) could slightly exceed return versus current I bond purchase (0% fixed). Hold onto reserves in cash or other bonds until hopefully that increase happens and lock in then.

I can't understand that mindset personally given bond market seems to be priced for negative real return. Seems to me you are losing ground every year you wait and accept the negative real return from your cash and/or other bonds.

I guess I am seeing this as a bit of a free lunch versus other fixed income alternatives right now. Only price is liquidity and hassle, which I can deal with. I'm probably wrong.

0% real unfortunately feels like as good as one can lock in for risk free return these days.
Last edited by loukycpa on Wed Jan 12, 2022 2:07 pm, edited 1 time in total.
Average Investor
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Re: "Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by Average Investor »

BrokerageZelda wrote: Wed Jan 12, 2022 10:10 am
TD will not let you gift to yourself. TD will not even let you put yourself as POD on a gift bond with someone else as primary.

Ask me how I know. 😢 (They can always edit the POD in their own account after they take possession.)
For what it’s worth, my mother was able to gift an I bond registered to my father POD my mother.
Tomorrow never knows.
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Re: "Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by ivgrivchuck »

Average Investor wrote: Wed Jan 12, 2022 1:43 pm
BrokerageZelda wrote: Wed Jan 12, 2022 10:10 am
TD will not let you gift to yourself. TD will not even let you put yourself as POD on a gift bond with someone else as primary.

Ask me how I know. 😢 (They can always edit the POD in their own account after they take possession.)
For what it’s worth, my mother was able to gift an I bond registered to my father POD my mother.
Same here.

I was able to gift a bond to my spouse POD me.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: "Gifting" Oneself to Frontload I/EE Bond Annual Limit?

Post by BrokerageZelda »

ivgrivchuck wrote: Wed Jan 12, 2022 2:07 pm
Average Investor wrote: Wed Jan 12, 2022 1:43 pm
BrokerageZelda wrote: Wed Jan 12, 2022 10:10 am
TD will not let you gift to yourself. TD will not even let you put yourself as POD on a gift bond with someone else as primary.

Ask me how I know. 😢 (They can always edit the POD in their own account after they take possession.)
For what it’s worth, my mother was able to gift an I bond registered to my father POD my mother.
Same here.

I was able to gift a bond to my spouse POD me.
Hmm, looks like you two are right, I stand corrected. I was able to write a gift registration with myself as POD. I think what I did earlier was try to write in myself as the WITH (which, I just checked, it doesn't allow).
tibbitts
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by tibbitts »

Does buying as a gift require the recipient's social security number?
BrokerageZelda
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by BrokerageZelda »

tibbitts wrote: Wed Jan 12, 2022 2:29 pm Does buying as a gift require the recipient's social security number?
The most recent answer I've found is from 2011:
viewtopic.php?t=84360

Short answer: for bonds purchased electronically, yes. (I agree that this severely restricts the pool of people you can buy gift bonds for without awkward conversations.) The 'all zeros' approach only works when converting paper bonds.
Angst
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by Angst »

Angst wrote: Wed Jan 12, 2022 10:08 amWatch the video. Treasury Direct has good, basic, "how to" videos, including this one on purchasing I/EE Bonds as gifts:
https://treasurydirect.gov/indiv/tools/purchasing-a-gift-bond.htm
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by tibbitts »

BrokerageZelda wrote: Wed Jan 12, 2022 2:36 pm
tibbitts wrote: Wed Jan 12, 2022 2:29 pm Does buying as a gift require the recipient's social security number?
The most recent answer I've found is from 2011:
viewtopic.php?t=84360

Short answer: for bonds purchased electronically, yes. (I agree that this severely restricts the pool of people you can buy gift bonds for without awkward conversations.) The 'all zeros' approach only works when converting paper bonds.
I wasn't even able to assign a beneficiary via the website without an actual SSN, and assuming that's the case for gifts, it seems like a very severe practical limitation. Is everybody finding the "friends and family" group that they're buying hundreds of thousands of dollars in I-bonds for willing to share social security numbers?
SnowBog
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by SnowBog »

loukycpa wrote: Wed Jan 12, 2022 1:36 pm
SnowBog wrote: Wed Jan 12, 2022 1:16 pm
loukycpa wrote: Wed Jan 12, 2022 11:00 am I am using this strategy to fund a part of a bridge to deferred SS for spouse and I from age 50 (year 2023) to 70 (year 2043). Using Series EE bonds for the tail end of the ladder (2041 through 2043). Series I bonds for the rest of it. Probably will never get all of it into savings bonds (nor do I want it all there, given the long duration want some equity exposure), but this strategy has allowed me to get a meaningful chunk of it there at least.

Other than the liquidity issue (which I can deal with), I can't see any downside to putting this money in the gift box locking in 0% real.

I've swapped this out for total bond fund in my 50/50 portfolio. I have plenty of total bond fund for rebalancing with my equity portfolio. If total bond fund beats 0% real then I lose I guess. If it doesn't I win.

I am gaining some insurance against unexpected inflation (inflation in excess of what the market is expecting). Similar to what one would get with TIPS but with a bit of yield spread over what TIPS are right now (so I should beat TIPS purchased these days, presuming both are held to maturity).

I am also increasing my tax deferred space and reducing state taxes a smidge, so that's bit of a bonus.
But as noted in a prior post, if fixed goes > 0% and/or in my final working year(s) I may "load up" using the "gift" approach.
Trying to understand this mindset to make sure I'm not missing anything.

If you have other bonds in your portfolio, do you expect their future return to exceed the return on I bonds, therefore no reason to swap?

Seems like you and others think of this as only whether future I bond purchase (> 0% fixed) could slightly exceed return versus current I bond purchase (0% fixed). Hold onto reserves in cash or other bonds until hopefully that increase happens and lock in then.

I can't understand that mindset personally given bond market seems to be priced for negative real return. Seems to me you are losing ground every year you wait and accept the negative real return from your cash and/or other bonds.

I guess I am seeing this as a bit of a free lunch versus other fixed income alternatives right now. Only price is liquidity and hassle, which I can deal with. I'm probably wrong.

0% real unfortunately feels like as good as one can lock in for risk free return these days.
My AA is 60/40, and I & EE Bonds make up a fraction of that 40%...

Primarily, my I & EE Bonds are there as an income floor/bridge between early retirement and delayed pensions & social security. They serve a secondary purpose of reducing the cash I previously kept for "sleeping well at night" (I didn't consider it an "emergency fund" as such, more just that we like having roughly 1 year of expenses in a liquid and easily accessible format).

As in able to buy enough with current cash flow and annual limits to meet that need, I'd need a "reason" to purchase more. I've previously shared my thoughts on potential reasons I'd consider.

As for other bonds <shrug>... I couldn't buy enough I Bonds to meet my 60/40 AA - even using the "gift" route. So I just accept them for what they are, and leave them to do what they are going to do.

Plus there's a chart on bonds that shows how at low interest rates, the price adjustment are a greater part of return vs. at higher rates the actual rate itself is the biggest part of the return. I've not yet accepted that "this time is different", so I'm assuming they'll keep working how they work. Maybe in the short term, especially if inflation continues to rise faster than expected, they'll have a negative return. But at some point, that will probably reverse.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by czaj »

Does anybody know how this frontload strategy works with the annual gift tax limit? Is it counted as a gift in the year it's purchased or delivered?

EDIT: My guess is that it's safest to count in the year of purchase for tax purposes.
Last edited by czaj on Fri Jan 14, 2022 11:33 am, edited 1 time in total.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by yoga »

Wow, always something new to learn. I should buy our 2023 allocation as gifts before the next rate change.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by SnowBog »

czaj wrote: Fri Jan 14, 2022 10:33 am Does anybody know how this frontload strategy works with the annual gift tax limit? Is it counted as a gift in the year it's purchased or delivered?

EDIT: My guess is that it's safest to count in the year of purchase for tax purposes.
I'm not sure...

But my guess would be the opposite - it would count in the year delivered.

As a different example, let's say I buy a new car as a gift for a relative. It's not a "gift" until they've actually received it.

This also lines up with how Treasury Direct treats the annual $10k limit.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by kapios »

This is an open issue that remains unclear.

It is possible that gifting I-bonds in year one would be considered a gift of future interests since the recipient would not be able to use the funds the first year - in this case the gift tax exclusion would not apply.

In year 2, the recipient would have full control of the funds and, assuming that the bonds can be transferred to the recipient's TD account, the gift tax exclusion would apply.

I have not been able to find a definitive answer on this.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by czaj »

FWIW, Harry Sit says in the year of purchase.
Is buying I Bonds or delivering I Bonds considered a gift to the recipient? If I buy $50,000 for someone this year and deliver $10,000 to him each year over the next 5 years, do I need to file a gift tax return?
Harry Sit wrote:As soon as you buy, the recipient’s name and Social Security Number are attached to the bond, which can’t be changed. Interest will start accruing to the recipient at that point. I consider that as a gift. Because $50,000 is greater than the $16,000 annual gift tax exclusion amount, I will file a gift tax return.
Source, in the comments: https://thefinancebuff.com/buy-i-bonds-as-gift.html
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by czaj »

SnowBog wrote: Fri Jan 14, 2022 1:21 pm
czaj wrote: Fri Jan 14, 2022 10:33 am Does anybody know how this frontload strategy works with the annual gift tax limit? Is it counted as a gift in the year it's purchased or delivered?

EDIT: My guess is that it's safest to count in the year of purchase for tax purposes.
I'm not sure...

But my guess would be the opposite - it would count in the year delivered.

As a different example, let's say I buy a new car as a gift for a relative. It's not a "gift" until they've actually received it.

This also lines up with how Treasury Direct treats the annual $10k limit.
I do like that analogy. Expanding on that: what if you purchase the car and put the title in their name in 2022 and physically deliver it in 2023? Perhaps this is a silly example, but my guess is you would go based on the car title change date.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by dstac »

Well I missed a bunch of this with my 2020 purchases. Since my +1 did not have a TD account, I simply bought theirs as a gift.

I'm now getting ready to do 2021 purchases, and was thinking about setting up TD account for +1. If I purchase $10k in the new account though, it sounds like I can't "deliver" the gift this year. Am I getting that right?
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by uslee2004 »

stevewolfe wrote: Wed Jan 12, 2022 9:57 am
loukycpa wrote: Sat Jan 01, 2022 8:39 am I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
Thank you loukycpa! Once you / your spouse received the gifted I-Bond, were you able to change the registration from individual to "X WITH Y"? I think that was another question that came up along the way. Thanks!
Thanks loukycpa for sharing this. It is nice to know it worked since for you thus far it clearly counter what stated at TD website:

How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.

My reading of above limit only $10K can be purchased as gift for each gifted i-bond recipient

To stevewolfe, I bought gifted i-bonds to my spouse on 30 Dec, delivered on 7 Jan, and immediately changed the registration without issue.
uslee
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

uslee2004 wrote: Sat Jan 15, 2022 12:31 pm
stevewolfe wrote: Wed Jan 12, 2022 9:57 am
loukycpa wrote: Sat Jan 01, 2022 8:39 am I can confirm this front loading strategy works.

The week of 12/19/21 through 12/24/21, each day my spouse and I purchased gifts of $10k of each other (total of $50k each). This was after purchasing 10k each back in January 2021.

Today 1/1/22 we both delivered $10k to each other. The $10k bond we delivered to each other immediately show up in our separate accounts after delivering.

Easy peasy. Assuming I don't hear from the United States Treasury that I am violating some rule I am currently ignorant of, I will be doing this again in a couple of months.
Thank you loukycpa! Once you / your spouse received the gifted I-Bond, were you able to change the registration from individual to "X WITH Y"? I think that was another question that came up along the way. Thanks!
Thanks loukycpa for sharing this. It is nice to know it worked since for you thus far it clearly counter what stated at TD website:

How much in I bonds can I buy as gifts?
The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.

My reading of above limit only $10K can be purchased as gift for each gifted i-bond recipient

To stevewolfe, I bought gifted i-bonds to my spouse on 30 Dec, delivered on 7 Jan, and immediately changed the registration without issue.
The 10k limit for the recipient is not applied in the year of purchase, but rather the year you deliver to the recipient. So you can purchase as much as you want, but then can only deliver $10k per year to the recipient.

Here is confirmation from TD:

Do bonds I've bought as gifts through TreasuryDirect but have not yet delivered to the gift recipient apply against my annual limit?

No. Gift bonds are purchased in the name and SSN of the gift recipient. They do not count against your annual limit even if you have purchased them through your TreasuryDirect account but have not yet delivered them. Gift purchases in TreasuryDirect count toward the annual limit of the recipient in the year they are delivered.

https://www.treasurydirect.gov/indiv/re ... angeqa.htm

If Treasury has an issue with this strategy, it would seem they would place some kind of limit on how much you can purchase each year and hold in the gift box for any one person. They don't seem to do that at all. They only limit how much can be delivered each year.

Treasury seems to allow a bond to stay in the gift box for a long period of time, even until maturity, as they discuss what happens to a gift bond that is not delivered out before it matures. Apparently the final value post maturity stays in the gift box until you deliver it out. Savings bonds don't mature for 30 years, so apparently Treasury contemplates that the giver can hold the bonds in the gift box for a very long period of time (over 30 years).

https://www.treasurydirect.gov/indiv/he ... GiftGiving

I think as far as anyone can tell, the barn door is wide open right now. Will Treasury either clarify or change policy in the future? Need to keep an eye out for this.
Last edited by loukycpa on Mon Jan 17, 2022 10:47 am, edited 2 times in total.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by VaR »

What happens if the recipient pre-deceases the gifter? That is, in the examples where spouses are pre-buying several years of gifts with delivery scheduled for several serial years, what happens if the receiving spouse dies?

Do all the bonds get delivered at once? If so, what happens since this would exceed the annual limitation for the receiving spouse?
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gas_balloon
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by gas_balloon »

It's actually possible to buy more than 10K per person per calendar year according to thefinancebuff. Basically you open a trust using software for each person, so each person can now contribute 10k each in their name as well as in their Trust's name.

https://thefinancebuff.com/how-to-buy-i-bonds.html (see the "Purchase Limit" section of the page).

I find this is better than trying to use gifts as a workaround since the rules around what happens if a gifter is deceased before gifting out an I-Bond are not very clear.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by loukycpa »

gas_balloon wrote: Mon Jan 17, 2022 2:44 am It's actually possible to buy more than 10K per person per calendar year according to thefinancebuff. Basically you open a trust using software for each person, so each person can now contribute 10k each in their name as well as in their Trust's name.

https://thefinancebuff.com/how-to-buy-i-bonds.html (see the "Purchase Limit" section of the page).

I find this is better than trying to use gifts as a workaround since the rules around what happens if a gifter is deceased before gifting out an I-Bond are not very clear.
That allows you to double the amount you can purchase sure. But what if you want to purchase more than that today? Then that is what this strategy is for.
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Re: An Easy Way to Frontload (temporarily exceed) I/EE Bond Annual Limit?

Post by dboeger1 »

Wow, learn something new every day! Despite the 0% fixed rate, I'm tempted to do this while the variable rate is still >7%. I probably wouldn't front-load more than 1-2 years worth of I-bonds because I don't like locking up money for that long, but this does seem like a good way to quickly build up a bond position in a time when regular treasuries have negative real yields. I've been mulling over the possibility of paying down a mortgage instead of pouring everything into stocks, but as long as I-bonds are paying more than the mortgage is costing me, they seem like a no-brainer.
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