Author Topic: I-Bonds  (Read 4748 times)

iamsoners

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I-Bonds
« on: March 15, 2012, 11:27:45 AM »
My family is planning on buying our first home in the summer of 2013.  Until then, we have a large amount of cash we're holding on to for a sizable downpayment (40% or so).  Currently it's kept in a savings account at .8% since I have no stomach for market volatility over such a short period.  Recently though, I've begun to think about I-Bonds as an attractive option.  Upside is 3.03% rate of return.  Downside is now withdrawals for the first year and then losing 3 months of interest upon withdrawal.  Obviously we're only technically keeping up with inflation but $1100 sounds a lot better than $400 to me.

Am I missing out on any downsides?  Or any other more liquid opportunities?

My husband and I are pretty debt adverse and until we have a paid off house (and can utilize a HELOC) will probably keep a sizable emergency fund--do you think I Bonds provide enough liquidity for unemployment emergencies?

velocistar237

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Re: I-Bonds
« Reply #1 on: March 15, 2012, 01:20:33 PM »
I don't know about I-bonds, but you're doing the right thing by keeping your money out of volatile investments. Another option to consider is putting it into VFISX or VIPSX.

MrSaturday

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Re: I-Bonds
« Reply #2 on: March 16, 2012, 10:21:09 AM »
You can only buy $5000 in I bonds per person per year, so you'll be limited by the size of your family.  And the rate is going to be adjusted at the end of this month so the current rate could go up or down.

For emergency funds I think they're a great option and I started putting money in them last year for that purpose.  You just need to allow for the 1 year lockup and spread the buys out a bit.

For the rest of the money you might consider Alliant CU, which is paying 1% on savings accounts.  If you don't qualify to be a member you can fix that with a $10 donation to their chosen charity.

Chris

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Re: I-Bonds
« Reply #3 on: March 16, 2012, 12:03:44 PM »
You can only buy $5000 in I bonds per person per year, so you'll be limited by the size of your family.

Individuals can buy $10k in I bonds per year (source).

I Bonds aren't a bad place to keep some cash. But your holding period is short (< 5 yrs), so you're going to lose the last 3 months of interest as a penalty. If you buy the bonds this month, you'll be getting the 3.06% through August. The worst case for the following 6-month period would be a 0% rate.  The "upside" to a 0% rate is that you don't have any interest to lose with the penalty. So worst case, you'll looking at about $300 in interest on $20k in bonds. This interest is state tax exempt.

On a 1-yr CD paying 1.06%, you'd earn about $200 in interest over 1 year.

MrSaturday

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Re: I-Bonds
« Reply #4 on: March 16, 2012, 03:21:29 PM »
You can only buy $5000 in I bonds per person per year, so you'll be limited by the size of your family.

Individuals can buy $10k in I bonds per year (source).

Oops.  I guess they raised the limit on the online bonds when they [mostly] eliminated the paper bonds.

TheDude

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Re: I-Bonds
« Reply #5 on: March 17, 2012, 12:03:51 AM »
I am not a hug fan of I bonds if you are going to use the money in the next few years. They are great if you keep a big emergency fund but not great for something you want truly liquid.

I would look here http://www.fatwallet.com/forums/finance/775437/

here: http://www.fatwallet.com/forums/finance/783099/

or here https://www.kasasa.com/  for liquid accounts. There are possibly more but it depends on your state. You should look around to see if you can find something in your state.