New I Bond Rates To Fall | Here's Why I'm Selling, Not Buying
HTML-код
- Опубликовано: 11 апр 2023
- With the release of April 2023 CPI numbers, we can now calculate the new inflation rate on I bonds that will go into effect next month. I put that number at about 3.38%. We don't yet know what the fixed rate will be. But assuming it stays the same, currently 0.40%, I bonds are no longer the attractive investment they once were.
Here's why I'm selling, not buying, I bonds.
Join the newsletter: robberger.com/newsletter/?utm...
------------
Video Resources
------------
CPI: www.bls.gov/cpi/
Current I Bond Rates: www.treasurydirect.gov/saving...
Historical I Bond Rates: www.treasurydirect.gov/files/...
Real Yields: home.treasury.gov/resource-ce...
Best Savings Accounts: www.allcards.com/best-savings...
Best CD Rates: www.allcards.com/best-cd-rates/
------------
Investing Tools
------------
My Book (Retire Before Mom and Dad): amzn.to/2MsRJ9B
Personal Capital (Investment Tracking, Retirement Planning): robberger.com/personal-capital
New Retirement (Retirement Planner): robberger.com/new-retirement
Stock Rover: robberger.com/stock-rover
M1 Finance $30 Bonus (IRA & Taxable Accounts): robberger.com/m1finance-bonus
------------
Credit Cards & Banks
------------
My Favorite Credit Cards: www.allcards.com/best-credit-...
My Favorite Online Banks: www.allcards.com/best-online-...
------------
Popular Videos
------------
1️⃣ How to Create a 3-Fund Portfolio: • How to Create a 3 Fund...
2️⃣ How I Manage 28 Accounts in One App: • How I Manage 28 Financ...
3️⃣ 7-Step Financial Checkup: • A 7-Step Annual Financ...
#ibonds #ibond #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
LET'S CONNECT
RUclips: / @rob_berger
Facebook: / financialfreedomguy
Twitter: / robert_a_berger
DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.
I bought in April and October last year so I think I will just sit tight until the inflation rate falls a bit more so the 3 month penalty sting will be less. Still money ahead vs. any other safe investments in the last 12 months. 6 month T-bills still look pretty good to me so I think I will be adding some more rungs to my T-Bill ladder instead of more I-Bonds. Remember all the US treasuries don't have state or local income tax so if you are comparing them to CDs, it isn't exactly apples to apples on the return rates.
@sean mcGuire especially if you live in a high tax state like NY, CA, or NJ. If you live in FL, TX, or DE the appeal lessons.
Are you currently in, or quickly approaching, retirement? I’m 20 years out so I’m curious your purpose for the T-bill ladder if not close to retirement.
@@rapfreak7797 About 2 years out from retirement. I view the ladder as part of my emergency funds with a money market account as the other part. So a ladder of 6 6-month T-bills where 1 T-bill is maturing each month. This gives me a little better return than the money market alone. These dollars are part of my "safer" money in my portfolio that also includes bond index funds. My ratio is roughly 60% "riskier" (stock mutual funds) and 40% "safer" (cash and bonds). If I were 20 years out, I would still have both but my ratio would probably be 70-30 or even 80-20.
@@seanmcguire7532 thanks for the detailed response.
I bought in April and October too. So it just switched to 6.48% for 6 months. After that we will have to decide what to do but I don't see giving up 3 months of 6.48% interest unless the inflation rate is very low and I can still get decent rates on T-bills which I doubt will be the case by then.
Thank you Rob for telling us the straight story. Your channel consistently provides excellent analysis.
Thanks for the suggestion to hold for the additional 3 months if selling within the 5 year window. It’s a little confusing how they hold the first 3 months interest earned but will evidently pay you for that but hold back the last 3 when sold. Good to know, especially with such a big difference in rates.
I don't think that HYSA and MMF will continue to have their high returns compared to inflation. How accurate CPI really is to the true rate of inflation for consumers is up to debate, but I think for long term cash savings, I Bonds will come closer to retaining value compared to inflation than bank products.
You have a 10K limit per person per year. If you sell all your I bonds, thats it, you cannot get back in except 10K a year going forward. So by selling them, you eliminate the opportunity to get back in at the level you sold out at. Thanks for the video, 3 % I bonds sounds depressing but 9% was not sustainable.
If I consider the significant amount of time I've invested learning about I Bonds versus the amount of money I'm ultimately going to make, the ROI isn't looking real good😀
So true! LOL The good news, learn it once, use it multiple times. $10K personal I-BOND another $10K entity account I-BOND (your APLHA-Trust) and another $10K entity account I-BOND (your MALE-Trust) and so on and so on for an individual ... all using same SSN all same year. And then there's the folks using multiple family members and gifting each other LOL But if only one purchase, terrible ROI
Thanks for the quick update!
Thanks for the update Rob! Traveling Italy this month and been purposely out of the loop. I am very much appreciative of your channel, and your initial ibond 7.12 video that put me and a lot of friends into researching and considering ibonds. The timing of that initial video was perfect. I went in large as possible via tax refund, gifts to trust and spouse. We have surfed the wave and are looking to catch another. Again thanks and the general comments would be funny if the folks weren't actually serious😮.
Great timely video, thanks Rob!
Thanks so much Rob...I have been waiting to hear your opinion on I Bond purchase for April/May. I did not realize that the 3 months of interest you pay if you sell after 1 year is the current rate and not the rate that you bought in at (which for me was the high 9+% rate). Great thing to know that selling as the I Bond rates go down is the rate at which 3 months of interest will be deducted.
Yes, that is an incredible feature.
Yes, just need to compare when it makes sense for you to take the three month interest hit and what you can start earning on it elsewhere.
It's the rate of the last 3 months before the month you cash out. If you look at your account, you will see that the interest amount accrued is always 3 months less than it should be.
since your interest is compounded every 6 months, you should wait 3 months after the 1 yr anniversary, otherwise, you not only lose the last 3 months but the compounding of the previous 6 months.
One important omission on your excellent discussion today was on TIPS if there is deflation your principal is adjusted downward accordingly. Why the US government did this is beyond me, but there you go.
great video Rob, thanks again!
Thanks for the update. I'm not buying but I'm not selling yet, since I just purchased IBonds recently. If only we had a crystal ball.
FYI: Brio Direct 12 month CD is 5.25%. Synchrony Bank has a 5.15% 14 month CD, no minimum balance. Marcus 5.05% 10 month CD, $500 minimum. Alliant Credit Union 5.05 Jumbo ($75,000 & Up) 5.00% (under $75k) . Always read the terms at maturity so your CDs don’t roll automatically without you making a decision.
Of course with CD there are state taxes; T-bills have not state taxes.
@@SallySamsara yes, I’m in a no tax state
Thanks, Rob great simple explanation for the novice.
Thanks for the quick update. I overpaid taxes to get more I bonds. Tax refund purchase date is not certain, so may be issued in May, missing the current rate. Therefore changing my refund strategy to cash refund.
I overpaid my 2020 Amended return by $5000. I call it a zero coupon zero interest stripped bond. As government still has not processed my return nor contacted me to tell me when they will process. My accountant wrote them a letter over two months ago. No response!
Thank you for covering this topic.
One point you don't mention Rob is that IBond interest compounds tax deferred so it sort of acts like an IRA. Whereas CD's and other fixed rate products incur a tax liability each year on the interest and you usually don't have access to the interest to pay the tax. I am planning on buying more IBONDS in April but maybe not in the Fall.
Great point @allen everhart
You can also use them tax free for education. I’ve started purchasing them for my nieces since their father doesn’t want to open a 529 plan.
@@mere_cat there is an income limit.
I was going to make this point too. If you sell your I-bond then buy a T-bill etc, when that matures you lose to taxes . The I- bond interest is tax deferred. Maybe calculate a tax equivalent yield on the cd or T-bill to compare to the new I- bond rate?
@@mere_cat This is a great benefit you've pointed out, but keep in mind that if your MAGI is over $128,650 MFJ (as of 2022), you cannot exclude all of the I bond interest, and the exclusion amount hits zero at MAGI of $158,650 MFJ. IRS Form 8815 illustrates this.
Very helpful. Thank you.
Buy now in April and get 6.89% for the first six months and 3.38% for next six months (could be a little higher if the .40% fixed rate continues). Averages out to be a little over 5% per month. No state and local taxes and federal taxes are deferred until you cash out.
My understanding is the fixed rate portion stays constant with your iBond for as long as you hold it.
@@krisskogs2532 thank you!
not 5% per month.
@@hanwagu9967 it does “average” out to be be a little over 5% annually.
If desired, one can choose to pay the federal interest on I-Bonds annually, rather than pay all of the interest at once. Years ago, I had bought EE bonds at $250 every month that came due after 30 years, so there was a lot of interest to pay. Now that some of us are getting closer to the time when we’ll have to pay ordinary income tax rates (about 28%) on Social Security and RMDs, it might make sense to pay the interest on I-bonds now, depending on our tax situation.
Alternatively, one could choose to sell an I-Bond in a year that one has a lot of tax deductions (although doing a tailored Roth conversion might make more sense if one has tax-deferred retirement accounts).
Thank you for the suggestion to hold until the past 3 months have been at a lower rate. So if the new lower rate kicks in in May, and I sell my 17-month-old I-bond in August, then my 3-month penalty will be at the new lower interest rate ? Just want to make sure I get the timing right.
Thanks s much Rob. I will be buying this month to get the 6.89%, buying some T-bills and then will be gifting the older I-bonds my husband and I bought each other for the next 5 years and then most likely selling out of them at that point depending on what is going on in the world. It is our safest money and we did do well during a chaotic year. We are long term investors so we are looking for opportunities but only low-risk ones.
The 6.89% rate ends on 5/1..
I’m using I bonds as a place to park and mostly forget buffer/emergency/project funds for the long term, so I have no plan to sell due to declining inflation.
@Rob Berger, great content as always - thank you as always for the straight-forward, honest approach and the reminder that everyone's situation/strategy is different.
I began purchasing I-bonds two years ago partly as a way to build an emergency fund but also with the long-term strategy to supplement eventual retirement before claiming social security. I'm 55 this year, hope to retire between 60-65 but not claim SS until 70. We spend @ $200/week on groceries and so I purchase an I-bond weekly ($192.30 x 52 = $10k) thinking this will eventually fund my grocery bill when I retire. Note that my I-Bond holdings represent @ 1% of my entire portfolio so for me the long-term strategy works as I'm covered in stocks, real-estate, etc.
Super informative video, thanks rob!
We are choosing to sell some 0% fixed rate bonds from 2010 to 2011 to buy this year's allocation in April since we can upgrade the fixed portion to 0.4%. This comes at a small tax cost on the sale, but it upgrades the portfolio. The one year lock and
Subscribed, thank you for sharing your knowledge. Best to you.
What do you think of emergency fund in Ibond? After the 12 months, I can take it out at any point and at the same time, it is keeping my emergency fund is keeping up with inflation?
Why now simply put money in government based market market fund? It is 100% US treasuries and pays today 4.52% interest. Yes, it gets adjusted every 7days but clearly beats savings rates with the same flexibility.
For long term treasuries TLT is probably better nowadays as it dropped and assuming that the rates are to come down this ETF will go up in price collecting dividends on its way up.
Rob can you do a CD review video from a brokerage perspective? Thx
Sure tempted to sell my only I bond this month. It's been 12 months. I'm thinking of transferring funds to a bond fund. I believe interest rates will go down and bond prices will rise.
Great video Rob! Real like the new book shelves.🎉 P.S. need to get rid of those footballs! 😂😂
OH
A good discussion with many important points.
Great education today, Have I bonds but only held 3 years.
I was allways going to sale my ibonds 3 months after they drop below 3.5%.
@bob burger you need to point out these are not the bond portion of a stock portfolio. These are savings bonds a place to stash cash.
Rob, thanks for your videos and newsletter. Regarding selling (and buying) I-Bonds, something that I consider is the tax impact. I am planning to retire in next few years and expect my marginal tax rate to by much lower then. So I bonds have an advantage there vs TIPS and T-Bills. Agree?
The real joke is that these are all federally taxed on the nominal rate. So generally you still lose out in the long run.
We know the interest rates for I-Bonds purchased in April will be 6.88% for 6 months and about 3.79% for then next 6 (average of 5.34%) with the ability to defer taxes indefinitely (and earn on the deferred tax portion). Bonus is getting interest retroactive to April 1 making actual return even higher. 52 week Treasury Bills are about 4.8% now. At the end of 12 months (plus 2 months and 1 day sitting in the penalty box) and periodically thereafter, if the spread between the new I-Bond rate and the 26 week T-Bill is big enough, then I would consider redeeming. For TIPS, after going through 2021 and 2022, the volatility made me a bit wary. Ultimately, it depends on one's personal objectives and projections.
Suze Orman plans on addressing the I-bonds on an upcoming podcast.
You didn’t address the hassle factor. Time spent vs capped return.
Thank you Rob!
Excellent info!
Rob. I bought $10K Ibond right before the 9% rate offer ended late 2022. Should I sell and put in S&P500 ? If I cash out my $10K I lose the 5 months interest I had or what penalty? I also have 30 year $75K worth of Ibonds bought in 2003. Cashing them out wise?
Depends on the purpose. I bond cannot beat stock market long term. But it’s good to park the emergency fund. Long time bond has liquidity issue and risk of losing money if sold on the secondary market.
Good information to keep in mind but I am not selling just yet.
I have had my I-Bonds many years. I am not selling. They have a very nice fixed rate.
No one should be selling now, most people have a rate lock for 6+ months in the future and you lose the last 3 months of earnings. Worst case you hold until you get to a low rate and hold it for 3 additional months, before selling. If done correctly, you would have bought your Ibonds prior to the rate changing. That locked you in for the higher rate for 6 mo, then the current rate, then the next rate. By doing that, your getting higher interest rates vs the actual rate.
I have some I bonds I've held for 13 years with a fixed rate of 0.30%. They are part of a college fund for my son who is 13. The profits would be tax free if I used them for that purpose. I'm in a fairly low tax bracket. Should I sell them, pay the tax and buy a CD now?
남쌤! 너무 유익한 동영상 감사합니다! ^^
I prefer I bonds with fixed rates, with the assumption of a long-term hold.
Over the next 30 years (at least 5 years not to lose 3 mo interest), there will likely be plenty of volatility; but, the fixed rate remains the same!
- I use I bonds as a hedge against inflation & safe storage of essentially a cash equivalent.
- I do not use I bonds with an expectation of large returns....
Hello Rob,
How do I redeem an
I bond or EE bond?
Do any banks, credit unions, or investment houses still redeem bonds? Can you tell me which banks and where? Has redemption of bonds been transferred to the treasury direct website ?
Thank you.
One very frustrated bond holder.
Is there an EWP calculator for ibond holdings on the TD platform to assist with our decision to sell or hold an ibond ? Anyone ?
I agree completely that having a fixed rate is great. So buy some this year and if rates start going down, sell older bonds with 0% fixed rate. If you are married and have not bought I bonds yet this year, you can buy $10k now at 6.89 and if the fixed rate goes up in May you can buy another $10k each as a gift to your spouse
No mention of huge tax advantage of ibonds vs tips?
Don’t forget about including the benefit of state income tax exemption on growth when comparing to other vehicles.
Darn! I thought you were about to give me answer other than "I don't know"😀
Currently retired and living off dividends and interest. I am on Medicaid, so, I have to be careful to not go over the income limit. I-bonds interest doesn't need to be reported to the IRS until I cash them in and they aren't subject to state taxes. Going to continue investing in them and hope for the fixed rate to stay the same or go up unless someone has a better idea. Suggestions?
curious if you don't mind sharing ... I assume you mean living off dividends + interest + social security? I'm retiring in July and that's my plan!
@@jimclark5037 57 and not on social security or a pension yet, but will. Just living off dividends and interest. My living expenses are very low.
@@charlesbailey5579 Nice!
Medicaid still doesn't consider assets, only income? System needs to be revamped maybe.
@@opentrunk thanks for your comment maybe.
Now isn't the time to be getting into I-Bonds or purchasing new ones. I got in when the rate was 7.12% which was the perfect time to do so. I don't like penalties so I'd rather hold on to my bonds for now but if the rate drops yet again then I will have to consider waiting three months and then cashing in.
It would be interesting if the inflation numbers takes off again...just more to think about...
Gets involved, but you might want to expound on the Tax difference between your CD interest and the I Bond.. this can make it more attractive to hold the I Bond, especially if you
live in an income tax state.
Also the tax can be deferred until maturity or when you sell, unlike a CD.. A great option if you are going to retire in X years and will be in a lower tax bracket then.
Finally.. IF you use the proceeds to pay for for higher education for a child or even grandchild, the interest may be TAX FREE...
What about rolling I bonds into 529 and 529 into Roth IRA?
@@briandadude I think you can only buy & sell Ibonds thru TD. Check on it.
Seems like all too much fuss just buy BIL or SHV
@@jessicamcneil5624 If you meet income requirements, I bonds can be sold and transferred to a Qualified Tuition Plan (529) with no tax due.
I dont understand why anyone would hold a 10 year bond. If 10 years is your time horizon then buy stocks.
Don’t hold for 10 years . 😂😂😂
I think you have to plug your nose and buy a mix of securities sometimes even when you are pretty sure it will be a not so good investment. If the global economy goes into a simultaneous recession these long term bonds could pay out handsomely. Odds of that happening? Who knows? If things really bad may be nice to have a government backed bond that pays out like clockwork. Small piece of mind.
@@ScoobieDoo-zy1rh why would you buy it in the first place?
You can buy and sell bonds, just like the stock, just like you don’t live on dividends on stock as well. BTW, 60/40 would increase your sharpe ratio compare to all stock and mix equity with bond can add more expected return compare to pure stock base on modern portfolio theory.
@@xzhuang2006 i have no intention to ever hold 40% in bonds. The most I'll ever hold will be 10% or less bonds are simply a place to park cash they're not a long term investment.
The iBond inflation rate underestimates the inflation rate of my basket of goods. 40 bp is not worth it to lock in even 12 months.
Curious to anyone who knows, but why would anyone ever buy a 30 year bond paying 1.38? At the very least wouldn't a savings account be better? Or heck, just put it in an S&P500 or bond index?
@@_-Karl-_ Thanks Karl, I appreciate the reply and explanation
1,38 real yield. i e additional to inflation. 😀
Do my I bonds change rate to current rate on the anniversary purchase date and at 6 month, or the date the rates change? Want to know so I can compute my 3 month penalty amount.
It's based off of the date purchased, and you get 6 months at each rate. You would have the Nov. 2022 rate for 6 months if you bought in on April 30. That's my understanding.
They change 6 months after you bought the bond. If you buy an I bond this month you’ll get 6.89 for the next 6 months and then it will change to the new rate. This repeats every 6 months until you sell the I bond.
Is it correct that if we sell an I-Bond on the first day of the month that counts as one of the 3 months even if you didn't hold it the full month?
Yes. But, when you bought the bond, you got the whole month worth of interest even if you bought it on the very last day of the month. So, it kind of evens out.
@@jeeplife5262 And you got the whole month of interest from the account the money came from to purchase the I-BOND; double dip month one. Sell 1st day of month and get interest full month from account the money is going to. Additional penalty offset. AKA never a full 90 days penalty
Is this 3.38% really correct? Because there is the 6 month rate and the 12 month rate which is twice the 6 month rate. To me, it's hard to believe that the 12 month rate is so low, rather than this being the 6 month rate.
Maybe this was covered Rob, buts Tips are not tax deferred, while Ibonds are. That is a big deal!
Good stuff
@Rob, another nice video. I have a tax refund amount + amount from checking account around 25K. I never went for HYSA/CD/I-Bonds/T-Bills due to market volatility and less knowledge. I am medium term investor and I can planning for 1 year to start with. Shall I go for I-Bond in April with 10K, so (6.89+3.4)/2 -> 5.2%-last 3mo interest with 3.4%-> 4.2% overall? and also 10K with 12 months of T-bills with 4.2%? I have few grands in robinhood cash interest for 4.3% already. what do you suggest?
I know you are not a financial advisor, but want to get your friendly suggestion or your experience.
@Rob any comments?
medium term investing is in no way 1yr.
Is the 3.79% for May factoring in the fixed .4% if bought before May or would it be $ 4.19 for the next 6 months?
It's my best guess including a .4 fixed rate. Of course, we won't know the composite rate until the Treasury officially announces the fixed rate in May.
if May 23 i bond has a fixed rate, that fixed rate will only apply to new issue i bonds between May-Nov 23. if you previously purchased i bonds with a fixed rate (e.g. like Nov 22-Apr 23), you continue to earn that fixed rate plus the inflation rate for May 23. If Treasury follows what has historically done, the fixed rate for May should be around 1%. Remember, the inflation rate was destined to decrease more than expected, because of BLS's politically motivated change in weighted calculation methodology from 2yr to 1yr using 2021 data. However, the new weighted calculation does not have an impact on the trailing 10yr from which the fixed rate is determined. So, even though the inflation rate is much lower, the fixed rate could and should increase for May.
@@hanwagu9967 Right. I didn’t know if his 3.79 estimate was factoring in the .4 current fixed (if bought before the new rate.
DCA I bonds? Now that's an idear
If you bought the bonds now, the current rate of 6.89 would hold for another 6 months.
Yes, therefore if someone intends to buy more I bonds at this time they may as well do it in April to get the 6.89% rate for 6 months rather than wait until May and get the new 3.79% rate.
If you are a short-term investor, yes, most likely better to buy in April! If long term, then as Rob says, might want to wait and see if you get a better fixed rate. Even better, if you know your exact time horizon and are a long term investor, buy TIPS, not I-Bonds.
If you combine with the 6.89 rate, that’s a pretty decent return for one year.
But not significantly different from a 12 month t bill, which doesn't cone with the three month penalty
That’s not the correct math. The combined rate for 12 months would be near 5.34%. You can get that in a cd or HYSA now.
This was confusing.
All I care about is the fixed rate, I just want my cash equivelent investments to out pace inflation. For example the high rates last year didn't have a fixed rate so I didn't buy because I got that rate plus the fixed rate on the bonds I bought with a fixed rate previously. CDs may seem like a good idea but if you lock in the money and inflasion goes up your losing money.
Would you take the cash payout and buy a bond ETF, like Vanguard Medium term? Also, when someone is in a 66/33 stock bond fund, is it smart to sell it and turn the proceeds into a stock ETF and a bond ETF? As I near retirement I have 33% bonds but they are within a balanced fund, Wellington. Your program has made me realize the conundrum I am in. Thanks. David
Why is accrued interest being applied so slowly to my Series I bonds? My I bonds did not yield what I thought they were going to yield during the 9.62% Oct 2022-April 2023 window. Anybody else see this slow accrual of interest on Treasury Direct? Is this due to the debt limit "financial magic" being done to pay government bills?
me thinks if you do not know how an investment works, you ought not be investing in it.
What about a TIPS ETF like SCHP?
Thank you Rob. I too might sell the I-bond I bought a year ago. I understand about losing 3 months interest, but don't know the precise rules regarding which 3 months of interest is lost. Would the interest I lose if I sell 3 months after the lower May rate be significantly less than the interest I will lose if I sell now? Thank you again.
Depending on when you bought last year( if you bought before last May) you may have 6.89% for another 6 months or so. Then it would drop to the next rate of 3.79. That is still over a 5 percent avg interest rate for close to the next year.
@@DadofBallers Thanks Sean. On Clark Howard's youtube video from 3 days ago he said you don't want to sell at a time when the last 90 days had a hefty rate of interest. That's exactly what I was asking.
You lose the last three months (most recent) of interest. How much that will be depends on when exactly you purchased your ibonds.
@@TheAzmountaineer Also, if you sell toward the end of the month, it's closer to a 2 month loss rather than 3 months loss. Selling on the last day of the month is effectively counted as a full month!
@@jimdavis9581 you want to sell at the beginning of the month. You’ll lose the interest from Treasury Direct for that month, but you’ll have the cash & can invest it somewhere else & earn interest somewhere else for that “lost” month. Buy I-bonds at the end of the month (because you’ll get an issue date of the 1st of the month & start earning interest from the 1st of the month), and sell at the beginning of the month.
I honestly don't understand the appeal or value in investing in bonds for the long term.
Also thinking inflation would be sticky I bought an I-Bond last Nov.-so,stuck with it for 8 more months.
But you will get back 100% of your investment which cannot be said for some stock market choices.
So... What if this slow-down in the rate of inflation is temporary? That's happened before. I get what you are saying, but you are essentially market-timing interest rates and inflation. If inflation significantly declines, that most likely means economic contraction/recession. If that is the case, the Fed will lower short-term rates and HYSA rates will tumble. It may make more sense to look at for instance a 5 year Treasury ladder to lock in a solid fixed rate across the ladder and reduce your interest rate exposure. A ladder paired with I bonds could be beneficial for the more conservative part of a portfolio.
you are making contradictory statements. If the slow-down is temporary, that implies that inflation will increase again, not decrease.
@@hanwagu9967 Not exactly. What he is saying IMO is that inflation has peaked, and is going significantly lower. If inflation goes significantly lower, that is most likely from aggregate demand declining from tightening financial conditions. If that occurs, interest rates will most likely be cut back down easing financial conditions and HYSA will go back to paying nothing, as will I Bonds. However, if the rate of inflation re-accelerates, I bonds will continue to be the place to be for inflation protection.
Too late. 😂 I already bought mine for the year. Not selling unless I can repurchase with a higher fixed rate.
What does "annualized" mean? I bought it at 9 something.
divide by 12
This is the first year I bought series I bonds. I believe I bought 1 year bonds. Why do only mention 30 year bonds?
All I bonds are 30 years. You're just allowed to sell them after holding for 1
@@logs495 i bonds are actually have an original 20year maturity with automatic 10 year extended maturity.
Do the fixed rates get added to other fixed rates. For example, if your current rate is a fixed rate of .50 and a new rate is .40, does your total I bond now have a fix rate of .90. Thanks Rob!
The fixed rate stays at the original rate at time of purchase for 30 years.
Thanks!
👀 @Rob Berger - do I spy a 100K subscriber plaque??? CONGRATS!
I’m holding because inflation comes in bouts and I’m not convinced we have tamed it
4.3% composite on I bonds starting May 2023.
The CPI number is a month behind. Oil is up $13/bbl higher than what is in the CPI. It's all manipulated.
Cpi numbers are so crooked.
I’m looking at ibonds as an emergency fund (after 12 months). With the likelihood that we not tap those funds, I’m inclined to forgo the April purchase and buy afterwards to capture the higher fixed rate component. We might hold them for a long time. It’s nice to have an emergency fund that doesn’t devalue from inflation.
Inflation is still sky high. Don’t believe the fools in government who release phony numbers. 🇺🇸
you need double your emergency fund in order to establish an i bond emergency fund ladder. with the trajectory of rates, it is currently better to ladder treasuries rather than i bonds.
One important consideration, if you're thinking of selling that old I-Bond that has a 0.0% fixed rate, is that you will need to pay taxes on the interest accrued. For example, a $10,000 I-Bond from 2/1/2012 is now worth $13,112. Assuming you're in the 24% tax bracket, you will owe $746.88 income tax on the $3,112 interest. If you keep the bond, then you will continue to compound interest on that $746.88 for the duration of time you keep the bond.
Alternatively, if you sell the I-Bond and put the proceeds minus the tax owed into a short term T-Bill or CD, you will pay tax on the interest each year until the T-Bill or CD matures (and if it's a CD, you'll pay state tax too if applicable), so you lose some of that compounding effect.
Compounding only helps if you end up in a lower tax bracket in the year of redemption.
um, that's not how taxes work, and your tax argument is rather confusing.
@@hanwagu9967 Actually that's how taxes work - I-Bonds are tax-deferred instruments, i.e. taxes on the accrued interest are not due until the bonds are redeemed. If "that's not how taxes work," please point out the inaccuracy and provide your understanding of how it works, instead of making an unhelpful general statement.
Why would you buy TIPS and not e bonds instead?
Go Bucks!
Interesting
Fixed rate of 0.40% for I- Bond=chump change...as inflation is at least 10%.. you are losing 9.6%/ year....buy Gold.
I wish I hadn’t purchaed an I bond now
Bought CD’s with my IRA; for those saying treasury’s don’t pay taxes get real, the taxes are deferred nothing is tax free unless you buy CD’s in Puerto RICO as a resident and even those only pay tax to the government and not the IRS 😊
How can the inflation rate be going down when gas prices are going up? Who is putting these figures together?
Because gas prices aren't the only thing used to calculate inflation.
It's still not a big deal whether you buy i-bonds, because you can only buy 10,000 per person, but you should be a long term investor for buying this type of security.
Why would you buy bonds for a long term investment?
@@aaront936 it's for cash reserve lol. it's always a good idea to have cash on the side for large purchases or life emergencies.
Long term, no because even if you captured higher fixed rate i bonds, they still underperformed the market.