📢 Get 15% off our brand-new bond courses thru 11:59PM ET on 4/30/2024 for Financial Literacy Month - enter coupon code bondfans2024 at checkout - see links below for more details! Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters Or get both & save $100: www.diamondnestegg.com/home#_paa2isucf 👉Join our super-supersaver membership for regular market updates & monthly live member Q&As ruclips.net/channel/UCnexoc6tvesvcCEzZhmI-Agjoin >>>>>>>>>> WATCH NEXT Our Bond Courses vs RUclips Membership | Which Is Right For You: ruclips.net/video/H5h4Eyh0hjo/видео.html Bond Beginners Course Sneak Peak | I-Bonds vs TIPS: ruclips.net/video/uXPzbje1g2E/видео.html Bond Masters Course Sneak Peak | How To Build A Bond Ladder: ruclips.net/video/p90IDmXn19s/видео.html >>>>>>>>>> Here is the overview for Bond Beginners: 1. Bond Basics What A Bond Is & How A Bond Works Why Invest In Bonds New Issue vs Secondary Market Bonds Interest Rates & Bond Prices Current Yield & Yield To Maturity Always Remember This! Buying At Par, Above Par & Below Par Different Types Of Bonds Wrap-Up 2. The Risks Of Bond Investing Seven Key Bond Risks Credit Risk Interest Rate Risk Reinvestment Risk/Call Risk Inflation Risk Liquidity Risk Currency Risk & Country Risk Bond Risk Mitigation Strategies Wrap-Up 3. US Treasuries Overview What Are US Treasuries Why Invest In Treasuries Where Can You Buy Treasuries How Are Treasuries Taxed Wrap-Up 4. Treasury Bills What Are Treasury Bills (T-Bills) When Do T-Bill Auctions Happen Where Should You Buy At Auction Auto-Roll When Buying At Auction Where To Find Recent Auction Results High Rate vs Investment Rate Reopening Auctions Cash Management Bills (CMBs) Buying & Selling On Secondary Market Wrap-Up 5. Treasury Notes & Bonds What Are Treasury Notes & Bonds When Do Auctions Happen Buying Treasury Notes & Bonds Auction High Yield vs Interest Rate Floating Rate Notes (FRNs) Treasury Zeros (STRIPS) Wrap-Up 6. TIPS (Inflation-Protected) What Are TIPS When Do TIPS Auctions Happen Nominal vs Real Yields Negative Yields How Do You Adjust TIPS For Inflation Taxes On Phantom Income Secondary Market Liquidity Wrap-Up 7. I-Bonds (Inflation-Protected) What Are I-Bonds How Does I-Bond Interest Work I-Bonds vs TIPS The Annual I-Bond Limit Wrap-Up 8. Agency Bonds The Universe Of Bonds What Are Agency Bonds How Are Agency Bonds Taxed Treasuries vs Agencies Who Might Want To Consider Agencies Yield-To-Call & Yield-To-Worst Where Can You Buy Agency Bonds Wrap-Up 9. Municipal Bonds Our Bond Universe Gets More Complex What Are Municipal Bonds How Safe Are Munis How Are Munis Taxed The De Minimis Rule Social Security & Medicare Premiums Treasuries, Agencies & Munis Who Might Want To Consider Munis Wrap-Up 10. Corporate Bonds Our Bond Universe Is Complete What Are Corporate Bonds How Safe Are Corporates Corporate Bond Hierarchies Five Key Features Of Corporate Bonds How Are Corporates Taxed Treasuries vs Corporates, Etc. Who Might Want To Buy Corporates Wrap-Up >>>>>>>>>> Here is the overview for Bond Masters: 1. Stocks vs Bonds Historical Performance Are Bonds Really Less Volatile Why Invest In Bonds Accumulation vs Decumulation Allocation of Stocks vs Bonds Wrap-Up 2. Which Bonds Might Be Right For You Treasuries & Other Types of Bonds Nominal vs Real Yields Inflation vs Non-Inflation-Protected Taxable vs Tax-Advantaged Accounts Wrap-Up 3. Bond Ladders & Other Bond Strategies Normal vs Inverted Yield Curve What Is A Bond Ladder 5 Important Bond Laddering Questions Laddering When Rates Are Rising Laddering When Rates Are Falling Laddering When Rates Are Uncertain What Is A Bullet What Is A Barbell Wrap-Up 4. Holding to Maturity vs Selling Early Why Hold to Maturity When To Sell Early Before Maturity Tax Implications Of Selling Early Wrap-Up 5. Individual Bonds, Bond Funds, Etc. Why Buy Individual Bonds Why Buy Bond Funds Bond Fund Considerations Key Bond Fund Concepts CDs vs Treasuries Other High-Yield Investments Wrap-Up 6. Our B.E.S.T. Model Portfolios By Age Our B.E.S.T Model Portfolios By Age Model Portfolios In The Industry B.E.S.T Model Portfolio Difference How Much Do You Need To Retire? How I Use The Rules of 100, 110, & 120 B.E.S.T Model Portfolios (20s) B.E.S.T Model Portfolios (30s & 40s) B.E.S.T Model Portfolios (50s & 60s) B.E.S.T Model Portfolios (70s+) Wrap-Up 7. The Decumulation Phase What Is The Decumulation Phase? Bear Markets & Recessions What Can You Do In Bad/Bear Markets Decumulation Tax Considerations The 4% Rule The Bucket Strategy The Flooring Approach Jen’s Bucket Strategy With A Twist Wrap-Up >>>>>>>>>> SOURCES FOR TODAY'S VIDEO: treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/ >>>>>>>>>> Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
You might as well buy them much later in the month because you get the full interest for the month even if you buy them on the second to last business day.
You can sell all your old I-bonds now and have your wife or trusted friend buy a bunch of Ibonds in 10K increments as gifts for you right now and just have them deliver 10K amounts once a year to your account. This way you lock in the 1.3% fixed rate
You can't cash before 12 months, so 9 months isn't bad if you're purchasing new bonds anyway. So I reinvest my 0 interest bonds. I figured 8 months break even but 9 months is still wealth it.
Does this calculation include the effect of compounding of interest on older bonds that cannot be replaced with a new i-bond purchase? For example, if your 0% bond is worth $12k, it is now earning interest on that amount but you can only repurchase $10k.
Hi there! The calculation in our illustration assumes that the reinvestment amount is $1K net of taxes - you would get a similar breakeven if you were reinvesting $10K net of taxes.
I have old I Bonds that were paying 9 percent from two years ago. Should we still cash in if in 30 percent bracket for new I Bonds? Maybe get treasuries.
If you already bought $10,000 of IBonds in May 2024 with NEW money - are you then allowed to redeeem $10,000 of older IBonds and then use that money to get another $10,000 of IBonds at the current May 2024 interest rate?
Love the clear, informative advice you provide throughout all of your videos. Thank you for being a great help! Purchased (2) 10,000 i Bonds in Oct/22. Thinking now is the time to redeem them since there are higher rates through other vehicles. Just asking if you agree. Thanks again!
I've maxed out on I-bonds for 3 years in a row, with fixed rates of 0%, 0.4% and 1.3%. Rather than follow their individual yields, I just average them together, so I now have 30 bonds with an average fixed yield of about 0.6%, which I'm happy with. No plans to sell any of them. I love they are tax-deferred until you sell or redeem, so my little pot of gold can grow exponentially!
It might still be worth selling the 0% I-bonds and buying short term treasuries instead. They are more liquid and they are paying higher rates. You can say the downside with short term treasuries compared to I-bonds is you have to pay taxes now, instead of deferring. But long term, taxes in this country have to increase substantially (because we cannot run deficits like this indefinitely, and actually as rates rise, the pain of the deficits grows also). So arguably (almost no matter what your rate is), deferring taxes may not be a great strategy. Look at the new capital gains rates Biden is proposing.
@@triyoda Point taken - future taxes are likely to be higher. For me, I-bonds are mainly a "hedge against inflation", so I'm willing to risk slightly lower yields in the short run. To "hedge against higher future taxes", I am gradually converting funds from my traditional IRA to a Roth IRA.
I cashed out 10k in I Bonds that were almost 6 years old so no interest lost there. I then took the interest those bonds earned and put it in my high yield savings account (4.5%). Then I took the original 10k and bought my yearly limit in I Bonds this month (April). The only downside I see is that I'll have to pay taxes on the interest of the cashed out I Bonds next year. However, my standard deduction will cover that so I think I came out ahead. Now I'm just wondering if there was a way to have cashed out those I Bonds without the interest being subject to Federal taxes.
If you have any stocks with capital losses in a taxable account, you can try to create at least $3000 in excess capital losses that can then be applied against ordinary income. That can be more valuable than using the capital loss against appreciated stocks that were held over a year because they'd often be taxed at a lower rate like 0% or 15% (depending on your income).
@@_-Karl-_ very limited exemption and have very low income I’ve done 100s tax returns, granted the people I’ve done are clearly middle income people .. not one ever qualified, it is so limited
I redeemed and reinvested my 0% I bonds last November and December (I hadn't bought other I bonds last year), so I have another $10,000 to invest this year. I just bought another $5,000 in new I bonds at 1.30%.Thanks for confirming that that was a good thing to do. On a different note, could you do a video on buy TIPS on the secondary market? It seems more complicated than buying simple Treasuries. I started to on Vanguard and Fidelity, and when I tried to buy say $1,000 worth of a bond that matures in 5 years, it shows a "principal" of $1,400 or $2,000. So it looks like the inflation adjustment for the underlying $1,000 bond is also included? Is is there a way to buy say exactly $3,000 worth of TIPS?
She did a video about buying new issue TIPS on Fidelity, but not secondary market, that I could find. Now that I'm investigating further, there's a fair bit of can complexity.
In my case, it would make sense to wait and let three months go at 2.96% ( with my 0% fixed rate) then sell and buy the new ones with the fixed rate versus doing it now and taking the penalty of three months worth at 3.94% and thus lowering the early withdrawal penalty, if I understand correctly. However, would the early withdrawal penalty be higher than .985 percent with 0 % fixed because IF your fixed rate is 0% percent, then that means they were purchased months ago and the compounding nature would have increased your 1k and 3.94 would be of your higher sum vs the initial investment of 1k. Maybe that is implied and this obviously is just an example not intended to be precise. Thanks Jennifer
Really enjoyed your video, your explanation (spreadsheet) was very well done, I think anyone would be able to follow. I had reset all my I-bonds over 5 years old, didn't realize how short the payback was for doing the 0.9% (I am a long-term holder). I hold many gift bonds for my young nieces and nephews, it looks like I should reset everything for them as well.
In your scenario you redeemed the 0.0% I-Bonds in April and it will take 9 months to recoup the loss. I did this in January 0.0% for the 1.3%. Would that mean that I would recoup at 6 months?
I would suggest that if it's possible, buy the April I-Bonds with new money and hold the 0% fixed rate I-Bond for at least another 3 months. The breakeven time will be significantly reduced that way. For the higher fixed rate amounts, you'd have to hold longer. I would recommend holding the 0.40% fixed rate for an additional 8 to 9 months. The 0.90% fixed rate, I would try to hold for the full 5 years because you'd likely need to hold an additional 16 to 18 months to significantly diminish the breakeven time.
Thank you, Jenn. Great explanation and detailed visual illustrations as usual. One thing I wasn't sure was if you recommended leaving the accrued interest from the .00 fixed rate and just withdrawing the 10K to reinvest in the new 1.3 fixed rate.
I buy $10k every year in January but next year I’m going to buy $5k in April and $5k in October from then on. I want at least a 5 year ladder before considering swapping out.
For me its no NY state tax on IBonds when you redeem, whereas HYSA is taxed annually. I use my HYSA for holding cash I may want access to sooner. My IBonds are long term holds and Fed tax-deferred until redeemed when I retire (lower tax bracket).....so accrued interest also grows much faster.
Because HYSA rates are not fixed, and so they may go down in time. Also, TIPS and I-Bonds are meant for inflation protection, if you want inflation protection.
HYSA might be 5% for a few months. Once the feds cut rates maybe the HYSA will be back to 1% if you're lucky. At least with an I-BOND bought right now you lock in 1.3% fixed for up to 30 years. Most likely inflation rate combined with the fixed rate its not likely to get less than 3% return at any period
I redeemed the last of my I bonds with no fixed interest and repurchased this month. I used new money to reach my annual limit. I am holding my 0.4% fixed interest I bonds for now. I may just let them ride for four more years.
I want to replace $20k in zero rate bonds for new bonds with fix rate of 1.3%. will I only be allowed to replace $10k per year because of the annual purchase limits? Is replacing different than purchasing with "new" money?
This is a very useful vedio! My qustion is if I cash my 10k I-bond 3 years old, then I purchase a new10k i-Bond, will this use my allowance of this year? So which means I cannot purchase any more i-Bond?
Yes. You are only allowed to purchase $10,000 each calendar year, regardless of whether you are cashing out old I-bonds & re-purchasing or using new money to purchase. Of course, you can purchase more with gifts, etc as shown in other videos.
@@poolmilethirty2859 I don't know about Gil, but I withdrew the total including interest so it was about $3,132. So I'll have $132 additional on taxes unless I bump up pretax investment or our FSA.
If you wait, treasury yields could drop and the I bonds fixed and variable rates could be lower. Treasuries have historically underperformed inflation, while I bonds with a 1.3% fixed rate outperform. Also, I bonds are tax-deferred while treasuries are not.
Jennifer had explained the pros and cons of I Savings Bonds vs TIPS in a separate video. Both can be very useful. I Savings Bonds can be used like an emergency fund at any time after one year (but especially after 5 years) whereas TIPS can fluctuate a great deal on the secondary market, but if you hold TIPS until their maturity, you can get your principle back.
Here's my thinking on this: Currently, 1 year Treasuries on the secondary market are available at 5.22% (though, less for smaller quantities). the I-Bond combined rate will probably come in around 4.31%, hence a 91 basis points in favor of Ts for a one year hold assuming that the I-Bond inflation adjustment in 6 months doesn't change. I think it will change to a lower value as inflation fighting bears more fruit, increasing the spread in favor of the Ts. If inflation goes up (currently annualized at 3.5% for CPI-U) the Fed will jack up rates again allowing a rollover to a higher rate at the end of the 1 year holding period with a likely larger spread over adjusted I-Bonds. Am i wrong? Would love to her some other viewpoints.
@@BruceLR57 if your time horizon is 1 year, then 1 year or shorter treasuries are better. If your time horizon is 5+ years, then I bonds might be better. I own both and view I bonds as a medium to long term investment with better inflation protection than treasuries.
I believe the Best way is to Sell Early and Buy Late in the Month. As long as buy in that month you accrue interest from the 1st of the month. So you would put the money in a high yield saving account for 3 weeks or so...
Thank you for this break even video. I think one should add a couple of months to the break even to reflect taxes that has to be paid. I feel I have enough I Bonds, but redeemed some of my converted 0% paper bonds to purchase more. Numerous $50, 100 bonds cluttered my account. They are older than 5 years.
I already sold all my ibonds last year and in January 2024. If I buy 10K before April 30, the rate of 5.27% is only for 6 months, yes? So what will my 10k earn in one year from my purchase?
Jennifer, you always give SO much food for thought! I’m buying i bonds today for my husband & I. I bought my max in December after redeeming my old 0% ones. I’ll buy our max today. And wondering about the gifting option? If I should do that as well this week or next month? Or wait til next year? I am considering TIPS. Haven’t pulled the trigger on those but with your guidance may do that as well. So thanks for giving us so much valuable information on all our choices! My mainstay is still short term TBills. So much volatility. I just found the old video on how to buy i bonds in TD as it’s been a while. So helpful. 💙💎🪺🥚!
If you feel that the 1.3% fixed rate is about as good as it will get and I-Bonds are going to be part of your financial plan for a some years, you could purchase multiple gifts for your spouse (and they for you) and then stash them. Getting a gift I-Bond counts against your annual purchase limit, but if things settle down and you have a year without intent to purchase new I-bonds, then just gift each spouse one of the I-bonds in the Gift box that year. Buying a bunch of gifts a while back with the I-Bond inflation rate was 9.67% allowed one to get a really nice return on those I-Bond gifts sitting in the TD Gift bin waiting for future gifting. There is no real limit to the number of gift I-Bonds you can buy, but you can only give them 10K in any given year.
📢 Get 15% off our brand-new bond courses thru 11:59PM ET on 4/30/2024 for Financial Literacy Month - enter coupon code bondfans2024 at checkout - see links below for more details!
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WATCH NEXT
Our Bond Courses vs RUclips Membership | Which Is Right For You: ruclips.net/video/H5h4Eyh0hjo/видео.html
Bond Beginners Course Sneak Peak | I-Bonds vs TIPS: ruclips.net/video/uXPzbje1g2E/видео.html
Bond Masters Course Sneak Peak | How To Build A Bond Ladder: ruclips.net/video/p90IDmXn19s/видео.html
>>>>>>>>>>
Here is the overview for Bond Beginners:
1. Bond Basics
What A Bond Is & How A Bond Works
Why Invest In Bonds
New Issue vs Secondary Market Bonds
Interest Rates & Bond Prices
Current Yield & Yield To Maturity
Always Remember This!
Buying At Par, Above Par & Below Par
Different Types Of Bonds
Wrap-Up
2. The Risks Of Bond Investing
Seven Key Bond Risks
Credit Risk
Interest Rate Risk
Reinvestment Risk/Call Risk
Inflation Risk
Liquidity Risk
Currency Risk & Country Risk
Bond Risk Mitigation Strategies
Wrap-Up
3. US Treasuries Overview
What Are US Treasuries
Why Invest In Treasuries
Where Can You Buy Treasuries
How Are Treasuries Taxed
Wrap-Up
4. Treasury Bills
What Are Treasury Bills (T-Bills)
When Do T-Bill Auctions Happen
Where Should You Buy At Auction
Auto-Roll When Buying At Auction
Where To Find Recent Auction Results
High Rate vs Investment Rate
Reopening Auctions
Cash Management Bills (CMBs)
Buying & Selling On Secondary Market
Wrap-Up
5. Treasury Notes & Bonds
What Are Treasury Notes & Bonds
When Do Auctions Happen
Buying Treasury Notes & Bonds
Auction High Yield vs Interest Rate
Floating Rate Notes (FRNs)
Treasury Zeros (STRIPS)
Wrap-Up
6. TIPS (Inflation-Protected)
What Are TIPS
When Do TIPS Auctions Happen
Nominal vs Real Yields
Negative Yields
How Do You Adjust TIPS For Inflation
Taxes On Phantom Income
Secondary Market Liquidity
Wrap-Up
7. I-Bonds (Inflation-Protected)
What Are I-Bonds
How Does I-Bond Interest Work
I-Bonds vs TIPS
The Annual I-Bond Limit
Wrap-Up
8. Agency Bonds
The Universe Of Bonds
What Are Agency Bonds
How Are Agency Bonds Taxed
Treasuries vs Agencies
Who Might Want To Consider Agencies
Yield-To-Call & Yield-To-Worst
Where Can You Buy Agency Bonds
Wrap-Up
9. Municipal Bonds
Our Bond Universe Gets More Complex
What Are Municipal Bonds
How Safe Are Munis
How Are Munis Taxed
The De Minimis Rule
Social Security & Medicare Premiums
Treasuries, Agencies & Munis
Who Might Want To Consider Munis
Wrap-Up
10. Corporate Bonds
Our Bond Universe Is Complete
What Are Corporate Bonds
How Safe Are Corporates
Corporate Bond Hierarchies
Five Key Features Of Corporate Bonds
How Are Corporates Taxed
Treasuries vs Corporates, Etc.
Who Might Want To Buy Corporates
Wrap-Up
>>>>>>>>>>
Here is the overview for Bond Masters:
1. Stocks vs Bonds
Historical Performance
Are Bonds Really Less Volatile
Why Invest In Bonds
Accumulation vs Decumulation
Allocation of Stocks vs Bonds
Wrap-Up
2. Which Bonds Might Be Right For You
Treasuries & Other Types of Bonds
Nominal vs Real Yields
Inflation vs Non-Inflation-Protected
Taxable vs Tax-Advantaged Accounts
Wrap-Up
3. Bond Ladders & Other Bond Strategies
Normal vs Inverted Yield Curve
What Is A Bond Ladder
5 Important Bond Laddering Questions
Laddering When Rates Are Rising
Laddering When Rates Are Falling
Laddering When Rates Are Uncertain
What Is A Bullet
What Is A Barbell
Wrap-Up
4. Holding to Maturity vs Selling Early
Why Hold to Maturity
When To Sell Early Before Maturity
Tax Implications Of Selling Early
Wrap-Up
5. Individual Bonds, Bond Funds, Etc.
Why Buy Individual Bonds
Why Buy Bond Funds
Bond Fund Considerations
Key Bond Fund Concepts
CDs vs Treasuries
Other High-Yield Investments
Wrap-Up
6. Our B.E.S.T. Model Portfolios By Age
Our B.E.S.T Model Portfolios By Age
Model Portfolios In The Industry
B.E.S.T Model Portfolio Difference
How Much Do You Need To Retire?
How I Use The Rules of 100, 110, & 120
B.E.S.T Model Portfolios (20s)
B.E.S.T Model Portfolios (30s & 40s)
B.E.S.T Model Portfolios (50s & 60s)
B.E.S.T Model Portfolios (70s+)
Wrap-Up
7. The Decumulation Phase
What Is The Decumulation Phase?
Bear Markets & Recessions
What Can You Do In Bad/Bear Markets
Decumulation Tax Considerations
The 4% Rule
The Bucket Strategy
The Flooring Approach
Jen’s Bucket Strategy With A Twist
Wrap-Up
>>>>>>>>>>
SOURCES FOR TODAY'S VIDEO:
treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/
>>>>>>>>>>
Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
Inflation is still extremely high. I-Bonds need to reflect real inflation.
I buy $10k of i-bonds on January 2nd every year so I am already maxed out. I will hold my old ones.
You might as well buy them much later in the month because you get the full interest for the month even if you buy them on the second to last business day.
@@dmulvanyI think it’s recommended to buy ibonds a business day before the last business day of the month.
@@dmulvany Good point.
@@kinpatu I am 60 and wondering same thing? Cash out at 30 percent tax bracket or just leave there until we retire?
You can sell all your old I-bonds now and have your wife or trusted friend buy a bunch of Ibonds in 10K increments as gifts for you right now and just have them deliver 10K amounts once a year to your account. This way you lock in the 1.3% fixed rate
Thank you Jenn. Your videos are so informative and useful ❤
I redeemed my 0% & 0.4% I-bonds earlier & have been investing in T-bills, now just bought new I-bonds (and gifts) at 1.3% fixed rate.
My question is why would we choose 3.94% I-bond over the 5%+ Treasury Bills?
You can't cash before 12 months, so 9 months isn't bad if you're purchasing new bonds anyway. So I reinvest my 0 interest bonds. I figured 8 months break even but 9 months is still wealth it.
Holding for May IBond fixed rate announcement before redeeming my 0% fixed rate IBonds.
I won't redeem any I-bond, so I do not need to pay Federal tax on the interest earnings now😂😂
Does this calculation include the effect of compounding of interest on older bonds that cannot be replaced with a new i-bond purchase? For example, if your 0% bond is worth $12k, it is now earning interest on that amount but you can only repurchase $10k.
Hi there! The calculation in our illustration assumes that the reinvestment amount is $1K net of taxes - you would get a similar breakeven if you were reinvesting $10K net of taxes.
Great job....you are so understandable.❤❤❤❤
I have old I Bonds that were paying 9 percent from two years ago. Should we still cash in if in 30 percent bracket for new I Bonds? Maybe get treasuries.
Buying TIPS and Treasury Notes (and Bills).
If you already bought $10,000 of IBonds in May 2024 with NEW money - are you then allowed to redeeem $10,000 of older IBonds and then use that money to get another $10,000 of IBonds at the current May 2024 interest rate?
Love the clear, informative advice you provide throughout all of your videos. Thank you for being a great help! Purchased (2) 10,000 i Bonds in Oct/22. Thinking now is the time to redeem them since there are higher rates through other vehicles. Just asking if you agree. Thanks again!
I've maxed out on I-bonds for 3 years in a row, with fixed rates of 0%, 0.4% and 1.3%. Rather than follow their individual yields, I just average them together, so I now have 30 bonds with an average fixed yield of about 0.6%, which I'm happy with. No plans to sell any of them. I love they are tax-deferred until you sell or redeem, so my little pot of gold can grow exponentially!
It might still be worth selling the 0% I-bonds and buying short term treasuries instead. They are more liquid and they are paying higher rates. You can say the downside with short term treasuries compared to I-bonds is you have to pay taxes now, instead of deferring. But long term, taxes in this country have to increase substantially (because we cannot run deficits like this indefinitely, and actually as rates rise, the pain of the deficits grows also). So arguably (almost no matter what your rate is), deferring taxes may not be a great strategy. Look at the new capital gains rates Biden is proposing.
@@triyoda Point taken - future taxes are likely to be higher. For me, I-bonds are mainly a "hedge against inflation", so I'm willing to risk slightly lower yields in the short run. To "hedge against higher future taxes", I am gradually converting funds from my traditional IRA to a Roth IRA.
Why to buy TIPS if the yield on zero-coupon bonds are a lot higher?
TIPS offer inflation-protection (unlike Treasury zeros)
Can you sell your i bonds and buy new ones with the same money on the same day?
My 0% I Bonds are in my gift box. how does this effect the selling of them?
Yes, you can’t sell them until they are gifted/delivered. Subject to the annual $10k purchase limit per SSN limit. Good luck
You have to deliver them first.
And you have held them for the minimum year.
I cashed out 10k in I Bonds that were almost 6 years old so no interest lost there. I then took the interest those bonds earned and put it in my high yield savings account (4.5%). Then I took the original 10k and bought my yearly limit in I Bonds this month (April). The only downside I see is that I'll have to pay taxes on the interest of the cashed out I Bonds next year. However, my standard deduction will cover that so I think I came out ahead. Now I'm just wondering if there was a way to have cashed out those I Bonds without the interest being subject to Federal taxes.
If you have any stocks with capital losses in a taxable account, you can try to create at least $3000 in excess capital losses that can then be applied against ordinary income. That can be more valuable than using the capital loss against appreciated stocks that were held over a year because they'd often be taxed at a lower rate like 0% or 15% (depending on your income).
@@_-Karl-_ very limited exemption and have very low income
I’ve done 100s tax returns, granted the people I’ve done are clearly middle income people .. not one ever qualified, it is so limited
I redeemed and reinvested my 0% I bonds last November and December (I hadn't bought other I bonds last year), so I have another $10,000 to invest this year. I just bought another $5,000 in new I bonds at 1.30%.Thanks for confirming that that was a good thing to do.
On a different note, could you do a video on buy TIPS on the secondary market? It seems more complicated than buying simple Treasuries. I started to on Vanguard and Fidelity, and when I tried to buy say $1,000 worth of a bond that matures in 5 years, it shows a "principal" of $1,400 or $2,000. So it looks like the inflation adjustment for the underlying $1,000 bond is also included? Is is there a way to buy say exactly $3,000 worth of TIPS?
Have you looked at her list of past videos? It seems like she may have already done a video on that topic.
She did a video about buying new issue TIPS on Fidelity, but not secondary market, that I could find. Now that I'm investigating further, there's a fair bit of can complexity.
In my case, it would make sense to wait and let three months go at 2.96% ( with my 0% fixed rate) then sell and buy the new ones with the fixed rate versus doing it now and taking the penalty of three months worth at 3.94% and thus lowering the early withdrawal penalty, if I understand correctly. However, would the early withdrawal penalty be higher than .985 percent with 0 % fixed because IF your fixed rate is 0% percent, then that means they were purchased months ago and the compounding nature would have increased your 1k and 3.94 would be of your higher sum vs the initial investment of 1k. Maybe that is implied and this obviously is just an example not intended to be precise. Thanks Jennifer
Really enjoyed your video, your explanation (spreadsheet) was very well done, I think anyone would be able to follow. I had reset all my I-bonds over 5 years old, didn't realize how short the payback was for doing the 0.9% (I am a long-term holder). I hold many gift bonds for my young nieces and nephews, it looks like I should reset everything for them as well.
In your scenario you redeemed the 0.0% I-Bonds in April and it will take 9 months to recoup the loss. I did this in January 0.0% for the 1.3%. Would that mean that I would recoup at 6 months?
I would suggest that if it's possible, buy the April I-Bonds with new money and hold the 0% fixed rate I-Bond for at least another 3 months. The breakeven time will be significantly reduced that way. For the higher fixed rate amounts, you'd have to hold longer. I would recommend holding the 0.40% fixed rate for an additional 8 to 9 months. The 0.90% fixed rate, I would try to hold for the full 5 years because you'd likely need to hold an additional 16 to 18 months to significantly diminish the breakeven time.
Looks like you nailed the May to Oct fixed rate! Congrats! How soon will you be able to predict if it goes up or down in November?
Great video! We think alike. 😊
Thank you, Jenn. Great explanation and detailed visual illustrations as usual. One thing I wasn't sure was if you recommended leaving the accrued interest from the .00 fixed rate and just withdrawing the 10K to reinvest in the new 1.3 fixed rate.
I buy $10k every year in January but next year I’m going to buy $5k in April and $5k in October from then on. I want at least a 5 year ladder before considering swapping out.
I'm so confused!! Why not just keep money in a HYSA at 5%?
For me its no NY state tax on IBonds when you redeem, whereas HYSA is taxed annually. I use my HYSA for holding cash I may want access to sooner. My IBonds are long term holds and Fed tax-deferred until redeemed when I retire (lower tax bracket).....so accrued interest also grows much faster.
Because HYSA rates are not fixed, and so they may go down in time. Also, TIPS and I-Bonds are meant for inflation protection, if you want inflation protection.
HYSA might be 5% for a few months. Once the feds cut rates maybe the HYSA will be back to 1% if you're lucky. At least with an I-BOND bought right now you lock in 1.3% fixed for up to 30 years. Most likely inflation rate combined with the fixed rate its not likely to get less than 3% return at any period
Thanks Jenn! Are you also going to be buying the I-bonds in April to gift to each other?
I redeemed the last of my I bonds with no fixed interest and repurchased this month. I used new money to reach my annual limit. I am holding my 0.4% fixed interest I bonds for now. I may just let them ride for four more years.
Can you update the chart with the best months to redeem old .4% I Bonds?
At these rates isn't keeping the funds in HYSA better?
Thank you! Very informative
I want to replace $20k in zero rate bonds for new bonds with fix rate of 1.3%. will I only be allowed to replace $10k per year because of the annual purchase limits? Is replacing different than purchasing with "new" money?
You can buy 10K and then have somebody gift you 10K (but not deliver until next year). This way you lock in the 1.3% on the 20K
Do you have a referral link for Fidelity? Is that even a thing?
I redeemed today!
This is a very useful vedio! My qustion is if I cash my 10k I-bond 3 years old, then I purchase a new10k i-Bond, will this use my allowance of this year? So which means I cannot purchase any more i-Bond?
Yes. You are only allowed to purchase $10,000 each calendar year, regardless of whether you are cashing out old I-bonds & re-purchasing or using new money to purchase. Of course, you can purchase more with gifts, etc as shown in other videos.
Redeemed I-bonds with .4 fixed rate and bought the 1.3 fixed rate.
Did you withdraw the whole thing, or did you leave the accrued interest?
@@poolmilethirty2859 I withdrew the whole bond principal and interest.
@@poolmilethirty2859 I don't know about Gil, but I withdrew the total including interest so it was about $3,132. So I'll have $132 additional on taxes unless I bump up pretax investment or our FSA.
The combined rate on I-bonds is still below what is available on Treasuries. Why not wait?
If you wait, treasury yields could drop and the I bonds fixed and variable rates could be lower. Treasuries have historically underperformed inflation, while I bonds with a 1.3% fixed rate outperform. Also, I bonds are tax-deferred while treasuries are not.
Jennifer had explained the pros and cons of I Savings Bonds vs TIPS in a separate video. Both can be very useful. I Savings Bonds can be used like an emergency fund at any time after one year (but especially after 5 years) whereas TIPS can fluctuate a great deal on the secondary market, but if you hold TIPS until their maturity, you can get your principle back.
Here's my thinking on this: Currently, 1 year Treasuries on the secondary market are available at 5.22% (though, less for smaller quantities). the I-Bond combined rate will probably come in around 4.31%, hence a 91 basis points in favor of Ts for a one year hold assuming that the I-Bond inflation adjustment in 6 months doesn't change. I think it will change to a lower value as inflation fighting bears more fruit, increasing the spread in favor of the Ts. If inflation goes up (currently annualized at 3.5% for CPI-U) the Fed will jack up rates again allowing a rollover to a higher rate at the end of the 1 year holding period with a likely larger spread over adjusted I-Bonds. Am i wrong? Would love to her some other viewpoints.
@@BruceLR57 if your time horizon is 1 year, then 1 year or shorter treasuries are better. If your time horizon is 5+ years, then I bonds might be better. I own both and view I bonds as a medium to long term investment with better inflation protection than treasuries.
This has been my burning question!! I took care of the 0% bonds, but the 0.4% bonds?
Thanks for your timely video!!😊
Redeemed old I bonds, bought new I bonds and TIPs
I’m. Buying bonds at the 1.3 fixed. Also very interested in tips ladder strategies since they are also at attractive rates right now.
That's on our TO-DO list in the coming weeks Jeffrey :-) Jen
Should you redeem your I Bond beginning of the month as oppose to the end of the month? I want to get the full months interest.
I believe the Best way is to Sell Early and Buy Late in the Month. As long as buy in that month you accrue interest from the 1st of the month. So you would put the money in a high yield saving account for 3 weeks or so...
Thank you for this break even video. I think one should add a couple of months to the break even to reflect taxes that has to be paid. I feel I have enough I Bonds, but redeemed some of my converted 0% paper bonds to purchase more. Numerous $50, 100 bonds cluttered my account. They are older than 5 years.
I hate my older $200 bonds cluttering up the printout but since some have a fixed rate of 3% they’re just going to have to sit there until maturity.
@@monarene44 3% fixed rate??? What year did you buy those?
I already sold all my ibonds last year and in January 2024. If I buy 10K before April 30, the rate of 5.27% is only for 6 months, yes? So what will my 10k earn in one year from my purchase?
A $1000 I bond will earn $26.40 by October 1, 2024. Then the variable and fixed rate will change again in November this year.
One thousand dollar I bond.
If nothing changed a $10k bond would earn around $528 in one year-not too shabby.
@@monarene44 Only the variable rate will change from that purchase in November. The fixed 1.3% stays.
@@bernlitzner2739 Yes I know that.
Not making the switch. Appreciate the info though.
Jennifer, you always give SO much food for thought! I’m buying i bonds today for my husband & I. I bought my max in December after redeeming my old 0% ones. I’ll buy our max today. And wondering about the gifting option? If I should do that as well this week or next month? Or wait til next year? I am considering TIPS. Haven’t pulled the trigger on those but with your guidance may do that as well. So thanks for giving us so much valuable information on all our choices! My mainstay is still short term TBills. So much volatility. I just found the old video on how to buy i bonds in TD as it’s been a while. So helpful. 💙💎🪺🥚!
If you feel that the 1.3% fixed rate is about as good as it will get and I-Bonds are going to be part of your financial plan for a some years, you could purchase multiple gifts for your spouse (and they for you) and then stash them. Getting a gift I-Bond counts against your annual purchase limit, but if things settle down and you have a year without intent to purchase new I-bonds, then just gift each spouse one of the I-bonds in the Gift box that year. Buying a bunch of gifts a while back with the I-Bond inflation rate was 9.67% allowed one to get a really nice return on those I-Bond gifts sitting in the TD Gift bin waiting for future gifting. There is no real limit to the number of gift I-Bonds you can buy, but you can only give them 10K in any given year.
@@petestandley2690 I didn’t realize you could give multiple gifts at one time to each other. Thanks for the info.
Thanks Pete. And Debra, here is our gifting video for reference: ruclips.net/video/bSoZJJypSAQ/видео.html
@@DiamondNestEgg thank you!