I Bonds Mega Thread (I Bond Heads Rejoice!)

[WhitePuma]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

[YoungSisyphus]

My goal is to complete a 10 year ladder of ibonds at $30k a year between personal/business/trust, so while it is tempting to exchange my 0% ibonds, instead going into year 4 (2024), I’ll just buy another $30k in January.

I suppose at year 10 I will look into converting the funds with lower fixed interest rates where possible.

However, I haven’t looked into the gift box process, so perhaps that is an opportunity to exchange funds in my situation?

[AlwaysLearningMore]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

[WhitePuma]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

[anon_investor]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

[grabiner]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

[anon_investor]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

[Richard1580]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

This is the question I had been pondering. I decided that TIPS at 2.4%+ was better than I-Bonds at 1.3% (despite the "phantom" income tax versus tax deferral). Time will tell ...

[WhitePuma]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

Are you sure you’re reading the table correctly? I bought in April 2022, and the inflation component adjusts every 6 months (April 1 and Oct 1). Which means Oct, Nov, and Dec this year are at the new rate 3.38% rate. Which means a sale in January would forfeit those 3 months.

[anon_investor]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

This is the question I had been pondering. I decided that TIPS at 2.4%+ was better than I-Bonds at 1.3% (despite the "phantom" income tax versus tax deferral). Time will tell ...

I sold my 0% 2021 I Bonds and used the proceeds to buy 2023 1.3% I Bonds via Gift Box (scheduled for the end of November). Still debating what to do with the proceeds of my 0% 2022 I Bond I will sell next month. Default plan is to wait until April 2024 and see if 1.3% I Bonds or the May 1 I Bonds will be better. Thinking TIPS in taxable is maybe too much trouble.

[anon_investor]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

Are you sure you’re reading the table correctly? I bought in April 2022, and the inflation component adjusts every 6 months (April 1 and Oct 1). Which means Oct, Nov, and Dec this year are at the new rate 3.38% rate. Which means a sale in January would forfeit those 3 months.

I am not sure I am reading it correctly, but that table should tell you the right month to sell.

[grabiner]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

It depends on your tax situation and the TIPS yield at the time you buy. At the moment, I would usually prefer TIPS yielding 2.2% over I-Bonds yielding 1.3%. If inflation is 3% and you are in a 22% tax bracket, the TIPS will yield 4.21% after tax while the I-Bonds will yield 4.3% pre-tax and you will lose more than the annualized 0.09% to tax upon redemption.

[theac]

Optimal for what goal?

The redemption penalties are there to dissuade people from dancing in and out of what is designed to be a long-term holding.

In our household (we have been accumulating for many, many years) I Bonds serve as a store of CPI-indexed wealth, with no loss value even if interest rates rise.

Wade Pfau writes about their use as a CPI-indexed retirement income stream
https://retirementresearcher.com/every- ... now-bonds/

When you made the purchase, what was the goal for the money?

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

Are you sure you’re reading the table correctly? I bought in April 2022, and the inflation component adjusts every 6 months (April 1 and Oct 1). Which means Oct, Nov, and Dec this year are at the new rate 3.38% rate. Which means a sale in January would forfeit those 3 months.

I am not sure I am reading it correctly, but that table should tell you the right month to sell.

I have a 0% fixed March 2022 I-Bond and plan to sell it on Dec 1st.
These are my figures:

2022 Mar 1 thru Aug was at 7.12%
2022 Sep 1 thru Feb was at 9.62%
2023 Mar 1 thru Aug was at 6.48%
2023 Sep 1 thru Nov was at 3.38%

So I will sell Dec 1st after 3 mos (Sep thru Nov) of 3.38% to cover the penalty.

If I've got it right, that means you can sell your Apr 2022, one month after I sell my Mar 2022, so Jan 1st 2023 would cover your 3 months at 3.38% interest that you'll get penalized for and lose.

[WhitePuma]

Optimal timing given my stated plan to sell.

Long term, the 0% fixed I bonds will not keep up with inflation on an after-tax basis.

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

Are you sure you’re reading the table correctly? I bought in April 2022, and the inflation component adjusts every 6 months (April 1 and Oct 1). Which means Oct, Nov, and Dec this year are at the new rate 3.38% rate. Which means a sale in January would forfeit those 3 months.

I am not sure I am reading it correctly, but that table should tell you the right month to sell.

I have a 0% fixed March 2022 I-Bond and plan to sell it on Dec 1st.
These are my figures:

2022 Mar 1 thru Aug was at 7.12%
2022 Sep 1 thru Feb was at 9.62%
2023 Mar 1 thru Aug was at 6.48%
2023 Sep 1 thru Nov was at 3.38%

So I will sell Dec 1st after 3 mos (Sep thru Nov) of 3.38% to cover the penalty.

If I've got it right, that means you can sell your Apr 2022, one month after I sell my Mar 2022, so Jan 1st 2023 would cover your 3 months at 3.38% interest that you'll get penalized for and lose.

Yes!! This is my thinking exactly. Thanks for the validation.

[anon_investor]

I think you need to sell Feb 1, based on:
https://eyebonds.info/ibonds/10000/ib_2022_04.html

Are you sure you’re reading the table correctly? I bought in April 2022, and the inflation component adjusts every 6 months (April 1 and Oct 1). Which means Oct, Nov, and Dec this year are at the new rate 3.38% rate. Which means a sale in January would forfeit those 3 months.

I am not sure I am reading it correctly, but that table should tell you the right month to sell.

I have a 0% fixed March 2022 I-Bond and plan to sell it on Dec 1st.
These are my figures:

2022 Mar 1 thru Aug was at 7.12%
2022 Sep 1 thru Feb was at 9.62%
2023 Mar 1 thru Aug was at 6.48%
2023 Sep 1 thru Nov was at 3.38%

So I will sell Dec 1st after 3 mos (Sep thru Nov) of 3.38% to cover the penalty.

If I've got it right, that means you can sell your Apr 2022, one month after I sell my Mar 2022, so Jan 1st 2023 would cover your 3 months at 3.38% interest that you'll get penalized for and lose.

Yes!! This is my thinking exactly. Thanks for the validation.

Will you by new 1.3% fixed rate I Bonds?

[theac]

Dec 1st will be my final redemption of 0% fixed for this year (totaling about $60k).

It's the only one that will be subject to the 3 mo penalty, the rest were all past 5 yrs. I purposely wanted to get rid of them this year because my SS starts in March 2024 so wanted to pay the taxes now since I will be in a higher tax bracket in 2024.

I will be buying a 1.3% Fixed Rate at the end of Dec, then my next buy will be in Apr or May 2024.

[jj]

I plan to purchase this years 10K allotment of I bonds at the end of December. Wait is the latest date that I can safely purchase them, considering dates that treasury direct is closed (holidays) as well as processing time?

If it were me, I'd do it for Thursday, 28th December, seeing as neither the 30th nor the 31st are banking days this year. Friday, the 29th might work if it's scheduled ahead of time.

[nalor511]

For those who have redeemed online at TD, if one wants the redemption date to be 12/1, which is a Friday, and definitely doesn't want to lose an extra month's interest by mistakenly triggering the withdrawal for November, what's the best date/time to go online and redeem?

I know with a purchase you'd want to do it Nov 30, because it wouldn't "happen" until the next business day, but I don't know if redemptions work like that. Thanks in advance

I am trying to set up my redemptions as well, before hitting submit, it does list the "redemption date"(it also shows how much is interest versus original principal). I assume if the listed "redemption date" is 12/1/2023 , then you would be okay.

Interesting, when I start to click through the redemption process it gives me the 'issue date' and the 'value' and the 'interest rate' and the 'redemption value' but I do not see the redemption date. I only clicked through the first 2 screens, I'm wary to click on anything that says 'submit'

So I'll probably end up doing it after the clock ticks over to 12/1

[uslee2004]

I plan to purchase this years 10K allotment of I bonds at the end of December. Wait is the latest date that I can safely purchase them, considering dates that treasury direct is closed (holidays) as well as processing time?

Buy on -2 biz-day, and sell on +1 biz-day of the month. For December 2023, -2 biz-day is 28Dec I believe.

[dan7800]

I have bonds that I purchased in Dec 2021 through April 2022. I'd like to utilize iBonds for the long term. So using the formula above, if I redeem the 0% fixed bonds now, it would take me ~ 3 years to break even considering the penalty/taxes? Are folks in a similar position selling the 0% fixed for the new 1.3% fixed, even with the 3 month penalty and taxes?

Personally, I am not. I have new money to invest and my I-Bond position was chosen for the role it plays in my overall portfolio, not for its yield. My IPS says to buy 10k a year while I'm in the accumulation phase and have the new funds to support the purchase. It also says to only dip into the no-penalty, 0% fixed bonds during the accumulation phase if I need to support a large "life event" like buying a new house, significant medical expenses, and so on. I will admit I've not considered the position of NOT having new funds to use for the I-Bonds purchase, since I usually pick up at least 10k a year in side projects, but I suppose I should consider that event and modify my IPS accordingly.

Our IPS says to buy $20k of I Bonds annually (spouses) during the accumulation phase. However, with the ability to buy more than the annual limit via the Gift Box method, to me it makes sense to swap out 0% fixed rate I Bonds for 1.3% fixed rate I Bonds, especially since we plan to hold them longer than the breakeven point. We have 0.2% and 0.4% fixed rate I Bonds that we probably will not redeem early, though if the fixed rate goes up again in May 2024, we might be tempted to do so.

I have no spouse, nor do I have any relative that I would trust with that amount of money, so the gift box is of no practical use to me. Perhaps this leads to missed opportunities, but it also simplifies my IPS.

I can be your friend.

[anon_investor]

For those who have redeemed online at TD, if one wants the redemption date to be 12/1, which is a Friday, and definitely doesn't want to lose an extra month's interest by mistakenly triggering the withdrawal for November, what's the best date/time to go online and redeem?

I know with a purchase you'd want to do it Nov 30, because it wouldn't "happen" until the next business day, but I don't know if redemptions work like that. Thanks in advance

I am trying to set up my redemptions as well, before hitting submit, it does list the "redemption date"(it also shows how much is interest versus original principal). I assume if the listed "redemption date" is 12/1/2023 , then you would be okay.

Interesting, when I start to click through the redemption process it gives me the 'issue date' and the 'value' and the 'interest rate' and the 'redemption value' but I do not see the redemption date. I only clicked through the first 2 screens, I'm wary to click on anything that says 'submit'

So I'll probably end up doing it after the clock ticks over to 12/1

I redeemed some I Bonds at the beginning of the month, my confirmation page (which I did a PDF printout of) lists:

Redemption Instructions:
Redemption Confirmation #:
Requested Redemption Amount:
Principal:
Total Interest:
Taxable Interest:
Federal Tax Withheld:
Net Payment:
Payment Destination:
Routing Number:
Credit Account #:
Redemption Date:

[nalor511]

For those who have redeemed online at TD, if one wants the redemption date to be 12/1, which is a Friday, and definitely doesn't want to lose an extra month's interest by mistakenly triggering the withdrawal for November, what's the best date/time to go online and redeem?

I know with a purchase you'd want to do it Nov 30, because it wouldn't "happen" until the next business day, but I don't know if redemptions work like that. Thanks in advance

I am trying to set up my redemptions as well, before hitting submit, it does list the "redemption date"(it also shows how much is interest versus original principal). I assume if the listed "redemption date" is 12/1/2023 , then you would be okay.

Interesting, when I start to click through the redemption process it gives me the 'issue date' and the 'value' and the 'interest rate' and the 'redemption value' but I do not see the redemption date. I only clicked through the first 2 screens, I'm wary to click on anything that says 'submit'

So I'll probably end up doing it after the clock ticks over to 12/1

I redeemed some I Bonds at the beginning of the month, my confirmation page (which I did a PDF printout of) lists:

Redemption Instructions:
Redemption Confirmation #:
Requested Redemption Amount:
Principal:
Total Interest:
Taxable Interest:
Federal Tax Withheld:
Net Payment:
Payment Destination:
Routing Number:
Credit Account #:
Redemption Date:

Right, I was saying that I don't want to actually go through the process until I can confirm redemption date will be after 12/1, and the first 2 pages I clicked through didn't list the redemption date... I wouldn't want to accidentally go too far and have it redeem today, for example

[anon_investor]

For those who have redeemed online at TD, if one wants the redemption date to be 12/1, which is a Friday, and definitely doesn't want to lose an extra month's interest by mistakenly triggering the withdrawal for November, what's the best date/time to go online and redeem?

I know with a purchase you'd want to do it Nov 30, because it wouldn't "happen" until the next business day, but I don't know if redemptions work like that. Thanks in advance

I am trying to set up my redemptions as well, before hitting submit, it does list the "redemption date"(it also shows how much is interest versus original principal). I assume if the listed "redemption date" is 12/1/2023 , then you would be okay.

Interesting, when I start to click through the redemption process it gives me the 'issue date' and the 'value' and the 'interest rate' and the 'redemption value' but I do not see the redemption date. I only clicked through the first 2 screens, I'm wary to click on anything that says 'submit'

So I'll probably end up doing it after the clock ticks over to 12/1

I redeemed some I Bonds at the beginning of the month, my confirmation page (which I did a PDF printout of) lists:

Redemption Instructions:
Redemption Confirmation #:
Requested Redemption Amount:
Principal:
Total Interest:
Taxable Interest:
Federal Tax Withheld:
Net Payment:
Payment Destination:
Routing Number:
Credit Account #:
Redemption Date:

Right, I was saying that I don't want to actually go through the process until I can confirm redemption date will be after 12/1, and the first 2 pages I clicked through didn't list the redemption date... I wouldn't want to accidentally go too far and have it redeem today, for example

Yeah, I just go redeem on the 1st, if I lose a couple of days of interest (from sitting in my brokerage money market fund) so be it, not worth losing 1 month worth of I Bond interest.

[thrillhou]

Dec 1st will be my final redemption of 0% fixed for this year (totaling about $60k).

It's the only one that will be subject to the 3 mo penalty, the rest were all past 5 yrs. I purposely wanted to get rid of them this year because my SS starts in March 2024 so wanted to pay the taxes now since I will be in a higher tax bracket in 2024.

I will be buying a 1.3% Fixed Rate at the end of Dec, then my next buy will be in Apr or May 2024.

I'm curious if you considered the difference in paying Fed taxes for the redemption in 2023; versus waiting 1 more month and then having another year before you need to pay the taxes on the gains?

I created a simple spreadsheet, and those extra 12 months of gains (I assumed I put them into Tbills at an overall higher rate than the i-bonds) makes the decrease of taxes less drastic. So, I think I'll wait until Jan 1 to redeem my 12-2021 and 01-2022 I-Bonds. Can anyone comment on what I might be overlooking?

[theac]

Dec 1st will be my final redemption of 0% fixed for this year (totaling about $60k).

It's the only one that will be subject to the 3 mo penalty, the rest were all past 5 yrs. I purposely wanted to get rid of them this year because my SS starts in March 2024 so wanted to pay the taxes now since I will be in a higher tax bracket in 2024.

I will be buying a 1.3% Fixed Rate at the end of Dec, then my next buy will be in Apr or May 2024.

I'm curious if you considered the difference in paying Fed taxes for the redemption in 2023; versus waiting 1 more month and then having another year before you need to pay the taxes on the gains?

I created a simple spreadsheet, and those extra 12 months of gains (I assumed I put them into Tbills at an overall higher rate than the i-bonds) makes the decrease of taxes less drastic. So, I think I'll wait until Jan 1 to redeem my 12-2021 and 01-2022 I-Bonds. Can anyone comment on what I might be overlooking?

No, in my case I didn't get that deep into it. The final $10k I'll be redeeming this year on 12-1-23 is being done in 2023 because I'll be in a higher tax bracket in 2024 due to starting my SS in Feb.

If I wasn't starting my SS next year, I might have done it differently, and maybe would have divided the redemption of those 0% I-Bonds between 2023 and 2024.

[Lyrrad]

I'm curious if you considered the difference in paying Fed taxes for the redemption in 2023; versus waiting 1 more month and then having another year before you need to pay the taxes on the gains?

I'm doing that. I have some March and September I Bonds purchased within the past five years that I will sell in early January. It's worth it to me to delay paying $X,000s in tax for a year in exchange for slightly less interest for a month. I don't think my marginal federal tax rate will change this year or next no matter what I do with these bonds.

[wellboy99]

If I schedule a purchase date on 11/30, TD website displays "Purchase Date(s): The purchase date(s) will be on the next available business day.
11-30-2023". Does it mean the purchase date will be on 12/1?

[Lyrrad]

If I schedule a purchase date on 11/30, TD website displays "Purchase Date(s): The purchase date(s) will be on the next available business day.
11-30-2023". Does it mean the purchase date will be on 12/1?

I'd expect it to be the date stated, November 30th. I've had no issues in the past scheduling purchases in advance for the last business/banking day of the month.

[nps]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

Why is the right strategy to wait until three months have elapsed at the lowest rate? That's been consistently recommended here for these zero percent fixed rate bonds, but it doesn't make sense to me given current money market yields.

These bonds will step down from 6.48 to 3.38 percent. Selling before there are three consecutive months of 3.38 percent means being penalized an extra 3.1 percent annualized for each month. However, Treasury money market funds are paying more than 5 percent annualized. So why advise people to wait, absent any tax year considerations?

[Richard1580]

These bonds will step down from 6.48 to 3.38 percent. Selling before there are three consecutive months of 3.38 percent means being penalized an extra 3.1 percent annualized for each month. However, Treasury money market funds are paying more than 5 percent annualized. So why advise people to wait, absent any tax year considerations?

You are going to lose 3 months interest if you sell before 5 years. Which would you prefer - forfeiting three months at 6.48%, or three months at 3.38%? Seems like a no-brainer to me.

[billthecat]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

Why is the right strategy to wait until three months have elapsed at the lowest rate? That's been consistently recommended here for these zero percent fixed rate bonds, but it doesn't make sense to me given current money market yields.

These bonds will step down from 6.48 to 3.38 percent. Selling before there are three consecutive months of 3.38 percent means being penalized an extra 3.1 percent annualized for each month. However, Treasury money market funds are paying more than 5 percent annualized. So why advise people to wait, absent any tax year considerations?

By keeping them, you are foregoing 5-3.38% (1.62%) but gaining 6.48-3.38% (3.1%) - isn't that the comparison?

[tj]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

Why is the right strategy to wait until three months have elapsed at the lowest rate? That's been consistently recommended here for these zero percent fixed rate bonds, but it doesn't make sense to me given current money market yields.

These bonds will step down from 6.48 to 3.38 percent. Selling before there are three consecutive months of 3.38 percent means being penalized an extra 3.1 percent annualized for each month. However, Treasury money market funds are paying more than 5 percent annualized. So why advise people to wait, absent any tax year considerations?

By keeping them, you are foregoing 5-3.38% (1.62%) but gaining 6.48-3.38% (3.1%) - isn't that the comparison?

Yes it is, and it's why I'm waiting until January 2nd to sell my I Bonds that were purchased in 2021 and 2022.

[nps]

I plan to sell Series I-bonds that I purchased in April 2022 at the 0% fixed rate. I’m hoping to get confirmation (or correction, if needed) that my approach is optimal in terms of timing.

My plan is to sell them on January 2, 2024. This will result in the 3-month penalty (consisting of Oct, Nov, and Dec of 2023) being entirely at the 3.38% annualized composite rate.

Does this sound correct/optimal?

Yes, this is the right strategy, and I am planning to do the same. If you want to keep inflation protection, you can replace these 0% I-bonds with new I-bonds yielding 1.3%, or with TIPS likely at an even higher yield, and come out ahead.

Why is the right strategy to wait until three months have elapsed at the lowest rate? That's been consistently recommended here for these zero percent fixed rate bonds, but it doesn't make sense to me given current money market yields.

These bonds will step down from 6.48 to 3.38 percent. Selling before there are three consecutive months of 3.38 percent means being penalized an extra 3.1 percent annualized for each month. However, Treasury money market funds are paying more than 5 percent annualized. So why advise people to wait, absent any tax year considerations?

By keeping them, you are foregoing 5-3.38% (1.62%) but gaining 6.48-3.38% (3.1%) - isn't that the comparison?

You're correct! My mistake

[VictoriaF]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

This is the question I had been pondering. I decided that TIPS at 2.4%+ was better than I-Bonds at 1.3% (despite the "phantom" income tax versus tax deferral). Time will tell ...

Have you purchased 2.4% TIPS a while ago? The last time the 2.4% rate was on November 1st. I am trying to decide whether to buy TIPS at 2.2% real or wait for a higher rate.

As for the I Bonds, I have plenty from the years when they were earning 0.0%-0.3%. I'll be selling them after 5-year mark; I just don't see the need to lose 3 months of interest.

Victoria

[Richard1580]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

This is the question I had been pondering. I decided that TIPS at 2.4%+ was better than I-Bonds at 1.3% (despite the "phantom" income tax versus tax deferral). Time will tell ...

Have you purchased 2.4% TIPS a while ago? The last time the 2.4% rate was on November 1st. I am trying to decide whether to buy TIPS at 2.2% real or wait for a higher rate.

As for the I Bonds, I have plenty from the years when they were earning 0.0%-0.3%. I'll be selling them after 5-year mark; I just don't see the need to lose 3 months of interest.

Victoria

I think 2.4%-2.5% was about my high. I have built a five year ladder of 5-year TIPS.

Math problem: how long will it take to recoup the loss of three months interest (at 3.38%) if you sell 0% I-Bonds and purchase TIPS at 2.2% (real)?

While I have not done the math, I decided that over 2% beats 1.3%, even with the 3 month penalty. YMMV.

[CletusCaddy]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

This is the question I had been pondering. I decided that TIPS at 2.4%+ was better than I-Bonds at 1.3% (despite the "phantom" income tax versus tax deferral). Time will tell ...

Have you purchased 2.4% TIPS a while ago? The last time the 2.4% rate was on November 1st. I am trying to decide whether to buy TIPS at 2.2% real or wait for a higher rate.

As for the I Bonds, I have plenty from the years when they were earning 0.0%-0.3%. I'll be selling them after 5-year mark; I just don't see the need to lose 3 months of interest.

Victoria

I think 2.4%-2.5% was about my high. I have built a five year ladder of 5-year TIPS.

Math problem: how long will it take to recoup the loss of three months interest (at 3.38%) if you sell 0% I-Bonds and purchase TIPS at 2.2% (real)?

While I have not done the math, I decided that over 2% beats 1.3%, even with the 3 month penalty. YMMV.

It’s not just the penalty, it’s also the high tax bracket that some of us are facing if we liquidate now instead of when we are FIREd

[Richard1580]

It’s not just the penalty, it’s also the high tax bracket that some of us are facing if we liquidate now instead of when we are FIREd

True. The tax implications are also a consideration. It depends on how many bonds you are looking to dump.

I fall into the crowd who liked the inflation protection of TIPS, but was not willing to purchase at a negative real yield (I am just weird that way). I-bonds were a valid alternative over the last couple of years, but now TIPS look more attractive, despite the "phantom income" tax, they do not have the purchase limitations of I-bonds.

I am dumping the I-bonds I purchased over the last couple of years and going all in on TIPS. Works for me.

[prettybogle]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

[theac]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

No, you can only buy ONE I-Bond per year.

So you could sell the 2021 on Dec 1st, send the $10k to your bank (get 5+ % in Money Mkt), then buy ONE $10k I-Bond a couple of days before the end of Dec 2023. The I-Bond still collects interest as if you had bought it on Dec 1st.
So you can get double interest for the month of Dec.

Then you're allowed to buy only ONE $10k I-Bond in 2024. Doesn't really matter where the money comes from. You could sell the 2022 I-Bond and do as you did with the 2021 I-Bond, or just use new cash. But either way, sell at the start of the month and buy at the end of the month.

[prettybogle]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

No, you can only buy ONE I-Bond per year.

So you could sell the 2021 on Dec 1st, send the $10k to your bank (get 5+ % in Money Mkt), then buy ONE $10k I-Bond a couple of days before the end of Dec 2023. The I-Bond still collects interest as if you had bought it on Dec 1st.
So you can get double interest for the month of Dec.

Then you're allowed to buy only ONE $10k I-Bond in 2024. Doesn't really matter where the money comes from. You could sell the 2022 I-Bond and do as you did with the 2021 I-Bond, or just use new cash. But either way, sell at the start of the month and buy at the end of the month.

Thanks for this information. We do have money to buy more - so which option is better ? Buy with new money or sell old and use funds to buy ?

[theac]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

No, you can only buy ONE I-Bond per year.

So you could sell the 2021 on Dec 1st, send the $10k to your bank (get 5+ % in Money Mkt), then buy ONE $10k I-Bond a couple of days before the end of Dec 2023. The I-Bond still collects interest as if you had bought it on Dec 1st.
So you can get double interest for the month of Dec.

Then you're allowed to buy only ONE $10k I-Bond in 2024. Doesn't really matter where the money comes from. You could sell the 2022 I-Bond and do as you did with the 2021 I-Bond, or just use new cash. But either way, sell at the start of the month and buy at the end of the month.

Thanks for this information. We do have money to buy more - so which option is better ? Buy with new money or sell old and use funds to buy ?

I don't think it would matter.

If you want to buy one now, in Nov, put your order in by the 28th to play it safe (29th at the latest so it settles on the 30th) and you'll get interest from Nov 1st.

Then if you want, sell the 2021 on Dec 1st to get the full interest for Nov.

Sell the 2022 after you've gotten the three months of 3.38% interest.
So you'd sell it on the 1st of the month, following those 3 months at 3.38%.

I think that's how you'd want to do it, but if I'm missing something someone will add to that.

P.S. I don't know if this applies to you, but if you're married your wife can open an account and you can each buy one per year.

[Nohbdy]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

No, you can only buy ONE I-Bond per year.

So you could sell the 2021 on Dec 1st, send the $10k to your bank (get 5+ % in Money Mkt), then buy ONE $10k I-Bond a couple of days before the end of Dec 2023. The I-Bond still collects interest as if you had bought it on Dec 1st.
So you can get double interest for the month of Dec.

Then you're allowed to buy only ONE $10k I-Bond in 2024. Doesn't really matter where the money comes from. You could sell the 2022 I-Bond and do as you did with the 2021 I-Bond, or just use new cash. But either way, sell at the start of the month and buy at the end of the month.

I would like to clarify that the annual limit of $10k/year exists, but an individual can buy more than one I-bond per year as long as the total is $10k or less per calendar year.

We dollar cost average in, buying up to 10 separate $1k I-bonds annually. I think $25 is the minimum buy.

[solarcub]

I have some 0% fixed rate iBonds. I plan to sell them in January, then turn around and buy new ones at 1.3%. Will I be able to do that without the money ever leaving Treasury Direct, or will I have to sell, wait for the money to show up at my bank, and then buy? Now that I am actually writing this out, it doesn't seem like much of a hardship, but I'm just curious.

[epoche]

I have some 0% fixed rate iBonds. I plan to sell them in January, then turn around and buy new ones at 1.3%. Will I be able to do that without the money ever leaving Treasury Direct, or will I have to sell, wait for the money to show up at my bank, and then buy? Now that I am actually writing this out, it doesn't seem like much of a hardship, but I'm just curious.

Yes. If you select your "Zero Percent Certificate of Indebtedness" as the recipient of the funds, rather than your bank account, it will stay in TD. Then, when you buy the next iBond, be sure to also select "Zero Percent Certificate of Indebtedness" as the source of the funds for the purchase, rather than your bank account. You can schedule both actions in the same session if you wish, allowing a few days in between for settlement.

Some will argue that you should not do this, for two reasons. First, you are forgoing some small additional interest that you could pick up by depositing into your HYSA early in the month and then buying back from your HYSA late in the month, effectively double-dipping on interest for the same funds for one month (or part of one month). Second, there is the remote possibility of getting locked out of your TD account while the funds are in the Zero Percent COI and you cannot access them until unlocking, thus earning no interest for maybe several months. If you schedule both the sell and the buy in the same session, it should mitigate that remote risk.

[Eager for FIRE]

I have some 0% fixed rate iBonds. I plan to sell them in January, then turn around and buy new ones at 1.3%. Will I be able to do that without the money ever leaving Treasury Direct, or will I have to sell, wait for the money to show up at my bank, and then buy? Now that I am actually writing this out, it doesn't seem like much of a hardship, but I'm just curious.

You decide when you sell where the $ is delivered.
You can use any bank/CU Account you have already linked to your account. Or you can deposit it to your own Treasury Direct “C of I” sub account. It earns no interest. You can use 100% of proceeds to DIRECTLY purchase another IBond (or other treasury item), but that counts toward your Calendar year $10k limit. that is an option. But if you need to avoid the calendar year $10k limit through someone Gift-purchasing it and later delivering it to your account in a future year, you’ll need to direct proceeds to an external account.

BTW, you can select any amount >$25 or all of it to sell. For example just the $10k, leaving the earned interest in your account. Prior to your final confirmation it tells you the principal & taxable amount (that will later be reported via a 1099 for this years federal taxes) & the expected date of the redemption (next business day usually)

[evelynmanley]

I have some 0% fixed rate iBonds. I plan to sell them in January, then turn around and buy new ones at 1.3%. Will I be able to do that without the money ever leaving Treasury Direct, or will I have to sell, wait for the money to show up at my bank, and then buy? Now that I am actually writing this out, it doesn't seem like much of a hardship, but I'm just curious.

Yes. If you select your "Zero Percent Certificate of Indebtedness" as the recipient of the funds, rather than your bank account, it will stay in TD. Then, when you buy the next iBond, be sure to also select "Zero Percent Certificate of Indebtedness" as the source of the funds for the purchase, rather than your bank account. You can schedule both actions in the same session if you wish, allowing a few days in between for settlement.

Some will argue that you should not do this, for two reasons. First, you are forgoing some small additional interest that you could pick up by depositing into your HYSA early in the month and then buying back from your HYSA late in the month, effectively double-dipping on interest for the same funds for one month (or part of one month). Second, there is the remote possibility of getting locked out of your TD account while the funds are in the Zero Percent COI and you cannot access them until unlocking, thus earning no interest for maybe several months. If you schedule both the sell and the buy in the same session, it should mitigate that remote risk.

Additional info:

Stay Away from Zero-Percent C of I in TreasuryDirect
by Harry Sit

https://thefinancebuff.com/treasurydire ... -of-i.html

[InMyDreams]

So, I have an I-Bond for a trust account - the only bond in the trust.

If I sell it tomorrow, would the empty account be closed down?

If the account remains open, may I then purchase for that same account another I-Bond by month's end?

No the account will not be closed, I just did this yesterday. You may buy it at month's end if you did not already max out the $10K purchase for this year. Otherwise, wait for Jan 1st

An empty/dormant account with nothing will eventually be closed by Treasury Direct, but not for at least a year (and probably more). If it is, you just reopen a new account, no big deal (they cannot reopen a closed account - I asked). However, for something quick - sell tomorrow, purchase at year-end, the account will remain open.

OK, emptied the account a couple of weeks ago, repurchase started!

[Hector]

Redeeming 0% fixed rate I Bonds makes sense. Is buying 1.3% fixed rate I Bonds or TIPS in taxable better total return if the plan is to hold long term?

It depends on your tax situation and the TIPS yield at the time you buy. At the moment, I would usually prefer TIPS yielding 2.2% over I-Bonds yielding 1.3%. If inflation is 3% and you are in a 22% tax bracket, the TIPS will yield 4.21% after tax while the I-Bonds will yield 4.3% pre-tax and you will lose more than the annualized 0.09% to tax upon redemption.

I think I Bonds are more flexible (after 1 year) compared to long term TIPS. In case I want to sell before maturity, I Bond might be worth more than TIPS depending on what rates would do in the future.
I am going for some I Bond in not retirement account and some 5-10 year TIPS in retirement account.

I think I Bond did better than most regular and inflated protected Treasury bond funds over last 5-10 years. And it might happen again in the future.

[boglebites]

I have 20k in ibonds that I purchased in 2021 and 2022. As the new rate has fixed component of 1.3% I am seriously considering buying under this year quota and also next year quota. I am confused how this 10k limit per year is calculated. Can I sell my old ibonds now and roll them into new ones and also buy another new money 10k ?
For example, in December 2023, can I
1. sell ibonds from 2021 and then buy new with that money
AND
2. Buy new Ibonds worth 10k with new money from my bank account

No, you can only buy ONE I-Bond per year.

So you could sell the 2021 on Dec 1st, send the $10k to your bank (get 5+ % in Money Mkt), then buy ONE $10k I-Bond a couple of days before the end of Dec 2023. The I-Bond still collects interest as if you had bought it on Dec 1st.
So you can get double interest for the month of Dec.

Then you're allowed to buy only ONE $10k I-Bond in 2024. Doesn't really matter where the money comes from. You could sell the 2022 I-Bond and do as you did with the 2021 I-Bond, or just use new cash. But either way, sell at the start of the month and buy at the end of the month.

Thanks for this information. We do have money to buy more - so which option is better ? Buy with new money or sell old and use funds to buy ?

This has been a really helpful thread, I'm in a similar situation. Why are you even selling your old one if you have money to buy more? Why not keep your old one instead of buying anew?

[Bulgogi Head]

I have two sets of iBonds purchased on 5/1/2021 and 1/1/2022. I plan to sell one of the sets in early December. Both are 0% fixed and I think both would lose the same 3 month penalty. Is there any rule of thumb on which to sell? Any pros and cons either way?