I Bonds Mega Thread (I Bond Heads Rejoice!)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
samsoes
Posts: 2244
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

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

Post by samsoes »

MikeZ wrote: Fri Jul 29, 2022 12:54 pm just a general question: But is anyone getting a sense that there is some funny business happening with certain people/groups setting up a ton a shell entitles to acquire i-bonds?
Do you mean setting up a simple revocable Trust only for the purpose of scoring additional i-bonds?

I did!
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
SnowBog
Posts: 3327
Joined: Fri Dec 21, 2018 11:21 pm

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

Post by SnowBog »

user9532 wrote: Sat Jul 30, 2022 8:12 am
fairmont 53 wrote: Fri Jul 29, 2022 7:57 pm My wife and I use the same email address. Can we create two separate accounts at treasury direct to purchase i bonds and use the same email. Don’t want to create the accounts and get locked out. Thanks in advance.
Yes. My wife and I use the same email for TD access.
I'll go one further - we use the same email for our trust accounts as well. So, 4 accounts tied to same email and same bank account.
PaulS
Posts: 27
Joined: Sun Sep 15, 2019 8:59 am

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

Post by PaulS »

Statistical wrote: Thu Jul 28, 2022 9:52 am
jwfails wrote: Thu Jul 28, 2022 9:36 am My wife and I have already purchased the max for 2022, so now we want to purchase gifts for each other. I followed the above attached video from Treasury direct, however, I have a question, maybe a stupid one.

Nowhere in the process was I asked to designate this gift purchase for 2023, as we both have already purchased the max for 2022, will this mess up the process? When you go to your gift box to deliver, do you pick a date (year) at that time? Thanks for any insight.
You never "pick" the date. There is a $10k limit per person to RECEIVE bonds (gifts or directly purchased). So if you tried to deliver the gift right now it wouldn't work because your spouse has already received $10k for this year. If you try to deliver it on Jan 1 it will work because she hasn't received any ibonds for 2023 yet. If she then tried to purchase $10k at any point in 2023 it wouldn't work because she already received $10k for that year.

If you are talking about gift tax purposes as long as you don't gift anything to your spouse this year it would be under the $16k annual limit for reporting gifts.


So if you have purchased I bonds in the amount of 10,000$ each for each other for next 4 years for your spouse in 2022 and these I bonds are sitting in your gift box, do you still have to file 7909 form as this 40000$ exceeds the 16,000$ gift limit for your spouse. Even though you haven’t delivered these gifts in 2022
ModifiedDuration
Posts: 849
Joined: Sat Dec 05, 2015 4:33 pm

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

Post by ModifiedDuration »

PaulS wrote: Sat Jul 30, 2022 4:55 pm
Statistical wrote: Thu Jul 28, 2022 9:52 am
jwfails wrote: Thu Jul 28, 2022 9:36 am My wife and I have already purchased the max for 2022, so now we want to purchase gifts for each other. I followed the above attached video from Treasury direct, however, I have a question, maybe a stupid one.

Nowhere in the process was I asked to designate this gift purchase for 2023, as we both have already purchased the max for 2022, will this mess up the process? When you go to your gift box to deliver, do you pick a date (year) at that time? Thanks for any insight.
You never "pick" the date. There is a $10k limit per person to RECEIVE bonds (gifts or directly purchased). So if you tried to deliver the gift right now it wouldn't work because your spouse has already received $10k for this year. If you try to deliver it on Jan 1 it will work because she hasn't received any ibonds for 2023 yet. If she then tried to purchase $10k at any point in 2023 it wouldn't work because she already received $10k for that year.

If you are talking about gift tax purposes as long as you don't gift anything to your spouse this year it would be under the $16k annual limit for reporting gifts.


So if you have purchased I bonds in the amount of 10,000$ each for each other for next 4 years for your spouse in 2022 and these I bonds are sitting in your gift box, do you still have to file 7909 form as this 40000$ exceeds the 16,000$ gift limit for your spouse. Even though you haven’t delivered these gifts in 2022
There is no gift limit between spouses.
JustThisGuy
Posts: 123
Joined: Sat Sep 12, 2020 2:38 pm

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

Post by JustThisGuy »

Happy Sunday, fellow Bogleheads!

I recently started moving some non-EF money into I-Bonds and bought my first chunk last Thursday in time to make the July window. In the interest of giving another DP before I ask my question, the set-up process for TD was actually pretty painless. The first purchase was easy as well. I put in my order on Wednesday, the funds were pulled at Oh Dark Thirty on Thursday AM and the purchase was in my TD account when I checked later that morning.

For anyone still on the fence, if my experience is the norm, the process isn't the horror story it is sometimes made out to be. Of course, your mileage may vary, and for some here, it definitely has. Hopefully, the future will remain as simple!

Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?

Thank you, in advance, for your responses, and as always, thank you for all of the information that everyone has given over my time here. Were it not for you fine folks, I wouldn't know even a tenth of what I know now about investing and investment products.
Mudpuppy
Posts: 6909
Joined: Sat Aug 27, 2011 2:26 am
Location: Sunny California

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

Post by Mudpuppy »

JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I haven't tried downloading from Treasury Direct. I have a tab in my financial spreadsheet where I enter the bond number, initial amount, issue date, and fixed rate. Additionally, there are calculation columns that tell me if each bond is in the no-redemption period and if the 3-month penalty still applies based on the issue date and today's date. Those columns affect the calculation columns for the "heads-up display" (summary of without penalty, with penalty, and no redemption categories) and current value of each bond. Then I manually pull data from eyebonds.info into the appropriate format for my spreadsheet to compute current interest rate, earned interest, and current value of each bond.

So it's a far bit of manual work, but no more than 10-15 minutes each purchase and every May/Nov when new rates are announced and I can update the entries for my existing bonds. As I get more existing bonds, the May/Nov updates will take a bit more work, but the hassle of manually updating has not reach the point of compelling me to write a script for automatically converting eyebonds.info format into my spreadsheet format or for creating my own calculation script based off current and historical rates.
User avatar
user9532
Posts: 176
Joined: Sun Dec 18, 2016 10:08 pm
Contact:

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

Post by user9532 »

JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Happy Sunday, fellow Bogleheads!

...
Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?

....
Using my calculator you can download a CSV file and save it as an Excel spreadsheet.

Here is the link:

https://eworkpaper.com/ibond.php
gpburdell
Posts: 309
Joined: Sun Jun 17, 2012 9:01 pm

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

Post by gpburdell »

ModifiedDuration wrote: Sat Jul 30, 2022 8:14 am For those having problems opening a Treasury Direct account, Form 5444 (TreasuryDirect Account Authorization) now states that a NOTARY is sufficient for the form.

“INSTRUCTIONS
1. Sign in ink in the presence of a certifying officer or notary.”

“Acceptable seals and stamps:
• The seal or stamp of a notary.”

The form has a revised date of August 2022, but it is already posted on-line.

https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
That's fantastic. Now they need to update the form for changing bank accounts for a notary as well.
User avatar
anon_investor
Posts: 12311
Joined: Mon Jun 03, 2019 1:43 pm

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

Post by anon_investor »

gpburdell wrote: Sun Jul 31, 2022 5:43 pm
ModifiedDuration wrote: Sat Jul 30, 2022 8:14 am For those having problems opening a Treasury Direct account, Form 5444 (TreasuryDirect Account Authorization) now states that a NOTARY is sufficient for the form.

“INSTRUCTIONS
1. Sign in ink in the presence of a certifying officer or notary.”

“Acceptable seals and stamps:
• The seal or stamp of a notary.”

The form has a revised date of August 2022, but it is already posted on-line.

https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
That's fantastic. Now they need to update the form for changing bank accounts for a notary as well.
Or allow adding bank accounts online again...
1rl9DS5gl2
Posts: 107
Joined: Wed Jun 26, 2019 2:22 pm

Ibonds gift box

Post by 1rl9DS5gl2 »

[Thread merged into here --admin LadyGeek]

How long can Ibonds be held in my gift box? What is the procedure to remove them from the gift box and actually give them to the recipient? What happens if the recipient dies before I make the gift? Conversely what if I die before making the gift?
ModifiedDuration
Posts: 849
Joined: Sat Dec 05, 2015 4:33 pm

Re: Ibonds gift box

Post by ModifiedDuration »

1rl9DS5gl2 wrote: Mon Aug 01, 2022 2:43 pm How long can Ibonds be held in my gift box? What is the procedure to remove them from the gift box and actually give them to the recipient? What happens if the recipient dies before I make the gift? Conversely what if I die before making the gift?
I think most of your questions are answered here:

https://thefinancebuff.com/buy-i-bonds-as-gift.html
curryitr
Posts: 96
Joined: Fri Jan 04, 2019 8:29 am

Re: Ibonds gift box

Post by curryitr »

I’m currently in a situation where the recipient of an ibond in my gift box passed away and I’m the beneficiary. I called treasury direct and after waiting on hold for over an hour they said that I could wait till after the bond is one year old and redeem it for cash or that it could be transferred to be an ibond in my name by writing treasury direct via email. However, the agent on the phone said it was possible they wouldn’t answer my email and after writing them two times he was correct. I’m not sure how to proceed at this point… hope that gives you an idea of a real life example.
JustThisGuy
Posts: 123
Joined: Sat Sep 12, 2020 2:38 pm

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

Post by JustThisGuy »

Mudpuppy wrote: Sun Jul 31, 2022 12:50 pm I haven't tried downloading from Treasury Direct. I have a tab in my financial spreadsheet where I enter the bond number, initial amount, issue date, and fixed rate. Additionally, there are calculation columns that tell me if each bond is in the no-redemption period and if the 3-month penalty still applies based on the issue date and today's date. Those columns affect the calculation columns for the "heads-up display" (summary of without penalty, with penalty, and no redemption categories) and current value of each bond. Then I manually pull data from eyebonds.info into the appropriate format for my spreadsheet to compute current interest rate, earned interest, and current value of each bond.
Thanks for the feedback! This sounds similar to what I set up as an initial stab, though yours is more complex than mine is. I suspect I'll log into TD quarterly and update based on what they have listed there. No reason to worry about the 3-mo penalty as they already take that into account when they show the valuation.
JustThisGuy
Posts: 123
Joined: Sat Sep 12, 2020 2:38 pm

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

Post by JustThisGuy »

user9532 wrote: Sun Jul 31, 2022 5:22 pm Using my calculator you can download a CSV file and save it as an Excel spreadsheet.

https://eworkpaper.com/ibond.php
That sounds like a great tool! I'll check it out when I have a moment. Thanks for the pointer!
User avatar
billthecat
Posts: 856
Joined: Tue Jan 24, 2017 2:50 pm
Location: USA

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

Post by billthecat »

JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
We cannot direct the winds but we can adjust our sails • It's later than you think
User avatar
LadyGeek
Site Admin
Posts: 83946
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

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

Post by LadyGeek »

I merged 1rl9DS5gl2's thread into the ongoing discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
engaged73016
Posts: 36
Joined: Fri Nov 26, 2021 9:08 pm

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

Post by engaged73016 »

Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
User avatar
camillus
Posts: 951
Joined: Thu Feb 28, 2013 9:55 pm

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

Post by camillus »

engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
51% US / 34% ex-US / 15% “bond”
dbr
Posts: 41845
Joined: Sun Mar 04, 2007 9:50 am

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

Post by dbr »

engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
What you have accomplished (nothing wrong with it) is cashing in on a temporary high nominal interest rate while settling for a mediocre but very loow risk long term real rate. To the extent that pulling in 8%-9% on $50k for a while and then less later is a minor windfall you have done good.

I bonds on those terms are certainly a valid investment holding that can have a place in a portfolio, so it is certainly not a mistake. A different option would be to risk up and put money not limited in purchase amount into TIPS at maybe 1% or more better real rate but at risk. It really turns on what your overall investment resources are and what the long run plan is. As a touchstone in the bond world the current nominal SEC yield on a TIPS fund like SWRSX is now at 12.84%, but SEC yield being what it is one should be careful about basing decisions on things like that. I would make decisions between TIPS funds and I bonds based on risk rather than current yield, wherein I bonds are a uniquely valuable no risk in real dollars holding and TIPS have definite risks with promise of possible higher real returns. The risk is illustrated by the fact that the YTD return on TIPS funds is about -5% now due to recent large uptick in real rates. But short term returns are also not a reason to make investment decisions.
engaged73016
Posts: 36
Joined: Fri Nov 26, 2021 9:08 pm

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

Post by engaged73016 »

camillus wrote: Tue Aug 02, 2022 7:56 am
engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
Well, hold on here, "if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years", it's not so much that it is locked for more years, it's just that it is more money locked for the same amount of time, isn't it?
In other words, 2022 gift purchases have the same "start date" as 2022 personal purchases, don't they?
ModifiedDuration
Posts: 849
Joined: Sat Dec 05, 2015 4:33 pm

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

Post by ModifiedDuration »

engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
We have bought gifts through 2026.

You do have to consider the lack of liquidity when buying out that far and if that is a potential issue for you.

In addition, if these funds would otherwise be sitting in a high yield savings account or short-term Treasuries, this makes sense. If these funds would be invested differently over the next few years, maybe not.

However, you will be earning 9.62% for the first six months and what will probably be a similar rate for the next 6 months (inflation in the first 3 months of the next 6-month period was at an annual rate of 12%).

So, if you are of the analytical bend and start running on-line savings/ short-term Treasury rate scenarios vs I Bond scenarios for the next few years, it is difficult to come up with a reasonable scenario where I Bonds do not come come out ahead, due to the 9% plus return that can be expected over the first year.

Even a cursory look should show that gifts for 2023 and 2024 are extremely attractive vs. other shorter-term cash and fixed income alternatives. A little financial modeling should have a similar result for the following few years.
dbr
Posts: 41845
Joined: Sun Mar 04, 2007 9:50 am

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

Post by dbr »

engaged73016 wrote: Tue Aug 02, 2022 8:16 am
camillus wrote: Tue Aug 02, 2022 7:56 am
engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
Well, hold on here, "if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years", it's not so much that it is locked for more years, it's just that it is more money locked for the same amount of time, isn't it?
In other words, 2022 gift purchases have the same "start date" as 2022 personal purchases, don't they?
Yes, same start date. The point is that what is locked in is the 0% real rate. The total nominal rate is the real rate + inflation or in this case just what inflation is. Should inflation fall back to 2.5% you have bonds paying 2.5% nominal and you can't fix that. The other side of that is that if inflation drops to 2.5% it could be that 2.5% nominal is a reasonable deal. An alternative would be to lock in a nominal rate that is higher than 2.5% gambling that inflation really is going to fall. The problem here is to understand what you are trying to do. I bonds are a unique asset that essentially is the 0% yield cash of real return assets and that can be a valuable holding but in my opinion it should be valued for what it really is and not as a unique investment that outperforms other investments while also at impossibly low risk to do that. What is understood is that at a point in time exactly that can happen, but it is not reasonable to think that combination will persist. One place the shift in fortunes can be seen is in the fluctuating real yield of real asset bonds, namely TIPS. The real yield on 10 year TIPS has gone from a low of -1% to a high of +3% in recent decades. Today the 10 year is at .09% down from .7% a month ago but up from -1% at the beginning of the year. In the context of those numbers I bonds look like a good no risk holding, but to say they are a panacea would be going too far.
User avatar
samsoes
Posts: 2244
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

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

Post by samsoes »

engaged73016 wrote: Tue Aug 02, 2022 8:16 am
camillus wrote: Tue Aug 02, 2022 7:56 am
engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
Well, hold on here, "if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years", it's not so much that it is locked for more years, it's just that it is more money locked for the same amount of time, isn't it?
In other words, 2022 gift purchases have the same "start date" as 2022 personal purchases, don't they?
Only $10k of the gift bonds can be delivered (and subsequently cashed) in a calendar year. That creates a years-long traffic jam in the event you want to cash out of the bonds which are still in your gift box.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
SnowBog
Posts: 3327
Joined: Fri Dec 21, 2018 11:21 pm

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

Post by SnowBog »

samsoes wrote: Tue Aug 02, 2022 9:44 am
engaged73016 wrote: Tue Aug 02, 2022 8:16 am
camillus wrote: Tue Aug 02, 2022 7:56 am
engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
Well, hold on here, "if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years", it's not so much that it is locked for more years, it's just that it is more money locked for the same amount of time, isn't it?
In other words, 2022 gift purchases have the same "start date" as 2022 personal purchases, don't they?
Only $10k of the gift bonds can be delivered (and subsequently cashed) in a calendar year. That creates a years-long traffic jam in the event you want to cash out of the bonds which are still in your gift box.
The way I think about it comes down to why are you buying I Bonds.

Ask yourself if the "inflation" rate is 0% in say 2024, would you still buy an I Bond in 2024. If the answer is "no", then you probably should not be front loading bonds out that far.

Personally, I'm building up I Bonds (and EE Bonds), have been for a few years, and I will be until we retire - regardless of what the rates are between now and then. So for us, I'd still buy the I Bond in my hypothetical 2024 0% example, so I have no concerns about frontloading bonds out that far (provided it didn't impact our AA - and it doesn't).
engaged73016
Posts: 36
Joined: Fri Nov 26, 2021 9:08 pm

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

Post by engaged73016 »

samsoes wrote: Tue Aug 02, 2022 9:44 am
engaged73016 wrote: Tue Aug 02, 2022 8:16 am
camillus wrote: Tue Aug 02, 2022 7:56 am
engaged73016 wrote: Tue Aug 02, 2022 7:45 am Hi all!

I have finally joined the I bond bandwagon ($10k + $10k spouse).
Reading this (https://thefinancebuff.com/buy-i-bonds-as-gift.html), it seems to me that if I like the current rate (don't we all!?), and want to frontload, couldn't I do the following?
For example, buy 5 gifts of $10,000 each for spouse, in anticipation that there will be 5 years in the future that they won't be able to (/want to because rates may be lower anyways) buy for themselves, and therefore will use those years to "receive" the gifts.
In a nutshell, for example:
2022 buy 5 x $10,000 gifts to spouse
2023 spouse receives 1 of 5, cannot buy
2024 spouse receives 1 of 5, cannot buy
2025 spouse receives 1 of 5, cannot buy
2026 spouse receives 1 of 5, cannot buy
2027 spouse receives 1 of 5, cannot buy

Does that work? Am I missing something?

Thank you!
The problem is this: if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years.

You probably don’t want to overbuy. That said, my DW and I are likely to accelerate next years I bonds to this year via gifts. The very handy part is the one-year lockout starts when the gift is purchased by the giver.
Well, hold on here, "if in 2024 the inflation rate drops to 2.5%, you have money locked in to low rates for several more years", it's not so much that it is locked for more years, it's just that it is more money locked for the same amount of time, isn't it?
In other words, 2022 gift purchases have the same "start date" as 2022 personal purchases, don't they?
Only $10k of the gift bonds can be delivered (and subsequently cashed) in a calendar year. That creates a years-long traffic jam in the event you want to cash out of the bonds which are still in your gift box.
This is not how I understand it (but could be wrong).
Yes, only $10k can be delivered in a calendar year, but there is no limit to how much can be cashed, so in my example above, I was basically thinking:
2022 buy 5 x $10k gifts
2023 $10k delivered
2024 $10k delivered
2025 $10k delivered
2026 $10k delivered
2027 $10k delivered
2027 $50k redeemed penalty free after 5 years from year of purchase (2022)
Am I understanding this wrong?
Silk McCue
Posts: 7220
Joined: Thu Feb 25, 2016 7:11 pm

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

Post by Silk McCue »

engaged73016 wrote: Tue Aug 02, 2022 8:26 pm
samsoes wrote: Tue Aug 02, 2022 9:44 am
Only $10k of the gift bonds can be delivered (and subsequently cashed) in a calendar year. That creates a years-long traffic jam in the event you want to cash out of the bonds which are still in your gift box.
This is not how I understand it (but could be wrong).
Yes, only $10k can be delivered in a calendar year, but there is no limit to how much can be cashed, so in my example above, I was basically thinking:
2022 buy 5 x $10k gifts
2023 $10k delivered
2024 $10k delivered
2025 $10k delivered
2026 $10k delivered
2027 $10k delivered
2027 $50k redeemed penalty free after 5 years from year of purchase (2022)
Am I understanding this wrong?
From my reading the point being made by samsoes, which is clearly stated above (“still in your gift box”), is that you can’t cash out any gift I Bonds until they are delivered which will take many years in your example. They aren’t saying that you can’t cash out more than one bond per year at sometime in the future.

Cheers
User avatar
samsoes
Posts: 2244
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

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

Post by samsoes »

Silk McCue wrote: Tue Aug 02, 2022 8:44 pm
engaged73016 wrote: Tue Aug 02, 2022 8:26 pm
samsoes wrote: Tue Aug 02, 2022 9:44 am
Only $10k of the gift bonds can be delivered (and subsequently cashed) in a calendar year. That creates a years-long traffic jam in the event you want to cash out of the bonds which are still in your gift box.
This is not how I understand it (but could be wrong).
Yes, only $10k can be delivered in a calendar year, but there is no limit to how much can be cashed, so in my example above, I was basically thinking:
2022 buy 5 x $10k gifts
2023 $10k delivered
2024 $10k delivered
2025 $10k delivered
2026 $10k delivered
2027 $10k delivered
2027 $50k redeemed penalty free after 5 years from year of purchase (2022)
Am I understanding this wrong?
From my reading the point being made by samsoes, which is clearly stated above (“still in your gift box”), is that you can’t cash out any gift I Bonds until they are delivered which will take many years in your example. They aren’t saying that you can’t cash out more than one bond per year at sometime in the future.

Cheers
Bingo. Thanks, Silk McCue!
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
JustThisGuy
Posts: 123
Joined: Sat Sep 12, 2020 2:38 pm

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

Post by JustThisGuy »

billthecat wrote: Mon Aug 01, 2022 5:13 pm Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.
I think this will suffice for my needs. Like you (and some of other colleagues), I'll add columns to the table as I need more information. But, this should work.

Thanks for the hint!
an_asker
Posts: 4159
Joined: Thu Jun 27, 2013 2:15 pm

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

Post by an_asker »

billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
ModifiedDuration
Posts: 849
Joined: Sat Dec 05, 2015 4:33 pm

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

Post by ModifiedDuration »

an_asker wrote: Fri Aug 05, 2022 10:59 am
billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made? No, the gifts will just sit in your gift box until you gift them in a future year

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]. Current value (the $10k purchase amount). You buy a $10k gift now and can deliver that in a future year. You don’t have to worry about the accrued interest when delivering the gift

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right? You can buy as much as you want as gifts, but you would be subject to the $10k delivery limit each year. For example, you could buy your wife 15 $10k gifts right now, but it would take you 15 years to deliver them (and you would have no liquidity for these gifts for all those years).
Last edited by ModifiedDuration on Fri Aug 05, 2022 11:14 am, edited 1 time in total.
SnowBog
Posts: 3327
Joined: Fri Dec 21, 2018 11:21 pm

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

Post by SnowBog »

an_asker wrote: Fri Aug 05, 2022 10:59 am
billthecat wrote: Mon Aug 01, 2022 5:13 pm
JustThisGuy wrote: Sun Jul 31, 2022 9:44 am Now for my question: Is there a way to pull a manifest of your holdings out of TD in a spreadsheet-friendly format? I'm thinking of something akin to downloading your portfolio positions from Fidelity. If not, how do all of you handle the record-keeping?
I went to the page in TreasuryDirect that lists each of my bonds, with a bullet checkbox, the confirmation no., issue date, interest rate, status, etc., etc. and copied it into Numbers, which happily brought it in as a nicely formatted table. (YMMV with whatever spreadsheet you prefer.) I then added additional columns with some calculations (e.g, annual interest), fixed rate, age, maturity date, etc. Each month, I go in and copy the table again and paste it over the existing data in my table.

Now, copying it is a little tricky. I have to be sure to start the selection with the bullet in the first row, and select to the bottom right corner figure, and selecting the corresponding (bullet) cell in my table before pasting. I also paste as plain text (shift-option-command-v) so my table formatting is not lost.

I have a table that gives me summary information (e.g., average rate) and a pivot table to show me status (not sellable, sellable with penalty, no penalty) by fixed rate, and a graph and table that shows me for each month how much money has a rate that adjusts. And another one that shows accrued interest by maturity year. And more - I had a little fun building it out.
One reason I am responding to this post is just to bookmark it. But I do have a question:

I learned about this gifting option just a couple of days ago (on another thread).

I have not been following this mega thread so please bear with me. My questions:

- when I purchase the gifts for future years, does treasurydirect force me to pick which year in the future those gifts need to be made?

- will the current value or the fture value be used to determine whether or not you are exceeding the annual gift limit? [I am assuming that if I buy $10k for myself and $10k for DW today, they both will be an identical $XX in value some date in the future]

- as a family of four, we could potentially make $160k in purchases for this year (each member buys $10k for himself/herself and $30k in gifts). Is this correct? Assuming kids have that much money of their own... If we exclude kids, we could still purchase $80k for this year between DW and myself. Does that sound right?

Thanks as always!!
You don't pick the date in advance. But at some point in the future you'll choose to "deliver" a bond as a gift. As a reminder, you can only "purchase" or "receive" (as a gift) $10k in I Bonds.

That $10k is "purchased value". Let's say you buy a $10k bond for spouse today that is worth $11k next year. You can gift the entire $11k bond (which for this limit is treated as a $10k bond - as that was the original purchase price).

Two bonds of the same purchase value bought in the same month will be worth the same amount at all points in the future (until sold).

Each person can purchase (or receive as gift) their own $10k I Bond per year, for a family of 4, that's up to $40k/year.

You can also get up to $5k from tax refund.

And if you have trusts (like living trusts) and/or businesses, those could have their own accounts and each purchase up to $10k more.

As for the "gifts", that's only an option between people (can't be done in trust or business accounts). There's technically no limit to how much you can purchase in gifts. But remember, you can only deliver one $10k bond a year (and only if they don't purchase one that year). So if you bought 4 - $10k bonds as a gift for your spouse (and she did same), assuming you don't buy any others, you could deliver the first "gift" in 2023 (assuming you already bought your own bonds for 2022), the next in 2024, and the last not until 2026. So in essence, you are just "front loading" purchases that you might have otherwise made in the future. But you've locked up those funds in advance, potentially for multiple years (but earning interest and running out the 1- and 5- year clocks from the purchase date).

Back to buying for the kids, recommend reading this which talks about the "should you" side of things: https://thefinancebuff.com/buy-i-bonds-kids-name.html
an_asker
Posts: 4159
Joined: Thu Jun 27, 2013 2:15 pm

Series I savngs bond (aka ibond) question

Post by an_asker »

[Thread merged into here --admin LadyGeek]

Let's assume I have 10k saved up right now sitting in the best money market account (let's say that is Vanguard at approx 2.00% maybe). Today of course, at 9.6% annualized, the iBond beats Vanguard money market hands down.

My hypothetical question: if I don't need this money for the near future (let's say five years), is it guaranteed - the way they are set up - that the iBond return will beat the best money market account each month of the future? Or is it possible that some months they could yield less than Vanguard money market (for example)?
toddthebod
Posts: 232
Joined: Wed May 18, 2022 12:42 pm

Re: Series I savngs bond (aka ibond) question

Post by toddthebod »

The I bond you buy today could theoretically earn 0% starting 6 months from now. More realistically, since you'll get 9.62% for six months and a decent return for the six months after that, after a year you could realistically be earning less than a money market account if inflation returns to historical levels, interest rates remain about where they are, and Treasury doesn't start adding a fixed rate onto the inflation-adjusted rate for the I bond. But you can just redeem your I bonds at that point and move the cash in an afternoon.
User avatar
Ice-9
Posts: 1562
Joined: Wed Oct 15, 2008 12:40 pm
Location: MD

Re: Series I savngs bond (aka ibond) question

Post by Ice-9 »

Assuming you have a Treasury Direct account already set up, purchasing an I-Bond today (8/5/22) would:

1. earn the current 9.62% (0% fixed rate plugged into the formula with inflation) for the first six months
2. earn at a new rate for the following six months (same 0% plugged into the same formula with new inflation numbers), my guess is this will also be quite high compared to a savings account, but theoretically it could be as low as 0%
3. You would be able to withdraw the invested money as of the one-year mark on Aug 1, 2023 (all bonds purchased in August get that date) with a penalty of the most recent three months' interest. Your actual earned rate after penalty would increase closer to the official rate the longer you hold it
4. As of Aug 1, 2027, you would reach the five-year mark, and there would be no penalty for withdrawal

My personal experience is usually I-Bonds have at least a slight rate advantage over online savings accounts. But when that doesn't happen, the most current I-Bonds will likely have a better fixed rate, so hopefully at that time you will be able to redeem your lesser fixed rate I-bonds and reinvest up to the $10k annual max. Your mileage may vary.
Last edited by Ice-9 on Fri Aug 05, 2022 3:40 pm, edited 1 time in total.
dboeger1
Posts: 1259
Joined: Fri Jan 13, 2017 7:32 pm

Re: Series I savngs bond (aka ibond) question

Post by dboeger1 »

toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
toddthebod
Posts: 232
Joined: Wed May 18, 2022 12:42 pm

Re: Series I savngs bond (aka ibond) question

Post by toddthebod »

dboeger1 wrote: Fri Aug 05, 2022 3:39 pm
toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
The absolute worst-case returns for $10,000 in I bonds bought today is on 8/1/2023 you redeem them for $10,481, and you pay Federal taxes on the $481 in interest which would bring your investment return down to somewhere in the 3-4% range which is still better than any high-yield savings account, Treasury bill, or CD out there.
dbr
Posts: 41845
Joined: Sun Mar 04, 2007 9:50 am

Re: Series I savngs bond (aka ibond) question

Post by dbr »

dboeger1 wrote: Fri Aug 05, 2022 3:39 pm
toddthebod wrote: Fri Aug 05, 2022 3:30 pm But you can just redeem your I bonds at that point and move the cash in an afternoon.
I've talked to a few of my coworkers about I-bonds, and they all seem to get hung up on the fact that their effective rate would not be as high as the currently advertised rate. I kept trying to explain to them that they could just redeem after a year and still likely be well ahead of anything else of comparable safety, but they don't seem to get it. I think some people are just way too hesitant to jump on I-bonds as a short-term investment, perhaps because the returns were mediocre for a while and it got sort of typecast as a safe long-term inflation hedge. The one-year lockup is understandably an issue for some people, but beyond that, it's easy to just redeem then when something better comes along, so the potential for opportunity cost is blown way out of proportion. It's one of the only assets you can actually time because the new rates are set based on trailing data, and they go into effect some time after being announced, so you can decide when is best to buy and sell.
You are right. There is a lot of confusion between I bonds being currently a short term windfall and what the advantages of I bonds would be for the long term. The issue is exacerbated by the purchase limits. The bonds are actually meant to be long term holdings rather than short term gimmicks, but times are extreme right now. That is consistent with the purchase limits, the 3 monthy interest penalty, the one year holding requirement, and the 30 year tax deferral. The best strategy if one had seen it coming for cashing in on the windfall would have been a couple of decades of accumulating I bonds. The opportunity to form trusts and to fill gift boxes is an odd provision, but this is the Federal Government here.

One description that might be offered is that I bonds are the cash of real return assets, meaning the real return is zero, but the value is stable after inflation. If you can get a percent or two on the fixed rate that is like finding a 30 year CD that pays a percent or so in interest. There are real asset bonds, which are TIPS. The real rate for TIPS can be positive and it can be negative and as with any marketable bond there is term risk. It would be reasonable to expect the real rate to average positive but it can also not be for some times.
er999
Posts: 318
Joined: Wed Nov 05, 2008 11:00 am

Re: Series I savngs bond (aka ibond) question

Post by er999 »

After 1 year you could always cash out your I bonds and change to a saving account if they end up paying better than.
MikeG62
Posts: 4351
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Series I savngs bond (aka ibond) question

Post by MikeG62 »

er999 wrote: Fri Aug 05, 2022 4:33 pm After 1 year you could always cash out your I bonds and change to a saving account if they end up paying better than.
I would modify that to say after 15 months since the interest in the first 12 months (and even the second 6 months) is very likely to be much higher than anything you can get in any other guaranteed fixed income investment. If the rate drops below other guaranteed fixed income options in the 13th month, hold the bonds to the first day of the 16th month and cash them out. You would then only lose 3 months at that lower/less attractive interest rate.
Real Knowledge Comes Only From Experience
gavinsiu
Posts: 466
Joined: Sun Nov 14, 2021 12:42 pm

Need help with Treasury Direct and ibond

Post by gavinsiu »

[Thread merged into here --admin LadyGeek]

So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?
dbr
Posts: 41845
Joined: Sun Mar 04, 2007 9:50 am

Re: Need help with Treasury Direct and ibond

Post by dbr »

I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off. I agree that the alarms about dealing with Treasury Direct are excessive, but I bonds are really meant to be a long term accumulation of what amounts to real return cash, meaning to be compensated for inflation at no risk to the principal but also at essentially zero real return. That can be a valuable asset to hold in a portfolio or to hold for an emergency fund. If this is to be all you do at TD, I am not sure it is worth it. If you use the account to build a holding of I bonds or to hold individual TIPS and Treasuries it makes sense.
WarAdmiral
Posts: 365
Joined: Mon Jan 20, 2020 7:09 pm
Location: Raleigh

Factors that determine the fixed interest rate on an I-Bond

Post by WarAdmiral »

The current fixed interest on an I-bond is 0%.
What factors determine this interest rate ? Is there a official number that the government follows or is it based on auction (supply/demand) system?
User avatar
Rob5TCP
Posts: 3699
Joined: Tue Jun 05, 2007 7:34 pm
Location: New York, NY

Re: Factors that determine the fixed interest rate on an I-Bond

Post by Rob5TCP »

This has been discussed before. Apparently, the Gov decides what the base rate is
going to be. For quite awhile, it has been zero. I guess, if they want to sell more,
they will raise the rate. If they don't they won't. It seems to be that simple.
Gaston
Posts: 596
Joined: Wed Aug 21, 2013 7:12 pm

Re: Need help with Treasury Direct and ibond

Post by Gaston »

dbr wrote: Sat Aug 06, 2022 8:53 am I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off ... I bonds are really meant to be a long term accumulation of what amounts to real return cash.
Thank you for saying this. I bonds are great if you're accumulating year after year and building up a sizable holding. But as you say, doing a one-off is more nuisance than value.
WarAdmiral
Posts: 365
Joined: Mon Jan 20, 2020 7:09 pm
Location: Raleigh

Re: Factors that determine the fixed interest rate on an I-Bond

Post by WarAdmiral »

I see - so with inflation this high i don't see the need for the govt to raise this rate.
User avatar
retired@50
Posts: 8715
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Factors that determine the fixed interest rate on an I-Bond

Post by retired@50 »

WarAdmiral wrote: Sat Aug 06, 2022 8:58 am The current fixed interest on an I-bond is 0%.
What factors determine this interest rate ? Is there a official number that the government follows or is it based on auction (supply/demand) system?
It sounds more like the latter (supply/demand) but here is what the Treasury Direct website states...
Treasury Direct wrote: Fixed rate

You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.

Treasury announces the fixed rate for I bonds every six months (on the first business day in May and on the first business day in November). The fixed rate then applies to all I bonds issued during the next six months.

The fixed rate is an annual rate.
Source: https://www.treasurydirect.gov/indiv/re ... dterms.htm

Regards,
This is one person's opinion. Nothing more.
gavinsiu
Posts: 466
Joined: Sun Nov 14, 2021 12:42 pm

Re: Need help with Treasury Direct and ibond

Post by gavinsiu »

dbr wrote: Sat Aug 06, 2022 8:53 am I think you should consider whether or not you really want to add an account like this for a couple of ten 1000's once off. I agree that the alarms about dealing with Treasury Direct are excessive, but I bonds are really meant to be a long term accumulation of what amounts to real return cash, meaning to be compensated for inflation at no risk to the principal but also at essentially zero real return. That can be a valuable asset to hold in a portfolio or to hold for an emergency fund. If this is to be all you do at TD, I am not sure it is worth it. If you use the account to build a holding of I bonds or to hold individual TIPS and Treasuries it makes sense.
Actually 1/2 of my bond portion is already in TIPS mutual fund, it's currently about 15% of my portfolio. I acquire this position a few years back before the inflation spike.

I received some extra cash recently. I have earmarked some for my kids 529, and planned to put the rest toward my mortgage. However, I was thinking of holding on to a bit more cash for now in case the recession puts me out of work for a bit, so I am looking into some short term cash positions. I was thinking I could just put some of that money into ibonds for now. In the long term, it can evolved into more of my bond position and I can readjust my portfolio accordingly or I could redeem it and use it toward mortgage. Currently, the mortgage appears to be around 2.6% fixed.
Flyer24
Moderator
Posts: 5062
Joined: Sun Apr 08, 2018 4:21 pm

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

Post by Flyer24 »

Topics have been merged.
ModifiedDuration
Posts: 849
Joined: Sat Dec 05, 2015 4:33 pm

Re: Need help with Treasury Direct and ibond

Post by ModifiedDuration »

gavinsiu wrote: Sat Aug 06, 2022 8:49 am So I have some money that I originally intented to put extra payment into my mortgage, but was thinking that due to inflation, I may be better off putting in some place short term that could make more for now. The suggestion were ibonds. I have signed up for a treasury direct account last night and have some questions.

1. I have link Treasury Direct to my bank account. It is my understanding that the next purchase will be in Sep and I can invest only $10K. I should be able to just buy $10K of ibond. Is there anything thing to watch out for?

2. I assume that my spouse would be able to invest $10K, too. Should I have her sign up for Treasury Direct and invest $10K, too?

3. It appears that I can invest another $5K in tax refund. Is this $5K per household or is it $10K for a married couple?

The ability to gift I Bonds to a spouse might be considered relevant.

One can buy $10k now for themselves and have their spouse buy two $10k gifts for them, to be delivered in January 2023 and in January 2024.

Now, between you and your spouse, you would have a total of $60k invested at the current rate of 9.62% for 6 months and what looks like will be a pretty rich rate for the next 6 months.

You could even consider gifting another $20k for delivery in January 2025.

The drawback in gifting I Bonds is the loss of liquidity.

This explains gifting of I Bonds:

https://thefinancebuff.com/buy-i-bonds- ... x-form-709

By the way, any I Bonds purchased in August will be dated as of August 1 and will begin earning interest as of that date.
Last edited by ModifiedDuration on Sat Aug 06, 2022 9:52 am, edited 2 times in total.
dbr
Posts: 41845
Joined: Sun Mar 04, 2007 9:50 am

Re: Need help with Treasury Direct and ibond

Post by dbr »

Gifting and organizing trusts is a way to pile a lot of money into I bonds at one time. It is very odd that such an end run is actually available, but it is true. Again, if a person really wants a stash of I bonds you can do the gifting.

The drawback is that the bonds can't actually be delivered into the recipient accounts except year by year for several years. That means you are locked into nominal returns that equal inflation, which could fall a lot. You want to be clear why you want assets in I bonds.
Post Reply