Question for people who have Series I bonds

[Omy]

I got caught up in the Series I bond rush of 2021. My Series EE bonds had mostly matured, and the crazy inflation-driven rates of the Series I bonds beckoned. We have $80k worth so far (purchased $20k in Nov 2021, $20k in Jan 2022, $20k in Jan 2023, and $20k in Jan 2024).

As inflation drops, these bonds look a lot less interesting so I'm considering selling them off. But the other side of me thinks it might be good to have some sitting around as a hedge against inflation in the future. But how long do I want to have these bonds sitting around not making much at all?

Just curious what everyone's thinking these days...

[Michael in ABQ]

I sold mine off at the beginning of the year as that was when the rates were going to drop even further. Plus it delays any taxes on the interest until next tax year.

They could make sense for your portfolio, but for me it just felt like I had my cash tied up in an underperforming asset with little or no potential upside.

[oldladystache]

I've been selling most of the ones with the lowest base rate. I'll probably buy one this year, haven't decided yet. I've been buying every year for about 10 years.

[2Birds1Stone]

I plan on keeping the $50k I have in them as a hedge against future inflation, it's such a small portion of the portfolio that if they drag returns it won't be by much.

I consider them a second tier emergency fund at this point.

[Loren Ver]

Between DH and I we have 40k, so not a lot.  Given that the combined rate is still over 5% we aren't in a hurry so we are nominally waiting for the 5 year timer to run out where they don't pay you the last three months of interest.  If the rates go under 5%, then we will cut bait and run, as stated above, it is almost a second emergency fund as we are still in our sequence of return risk timing.

So, none of the above.  5+% for no effort ain't bad.

[RWD]

I plan on keeping the $50k I have in them as a hedge against future inflation, it's such a small portion of the portfolio that if they drag returns it won't be by much.

I consider them a second tier emergency fund at this point.

This is basically my approach as well. We only bought $20k, so not enough to really matter either way anyway. I'll probably cash them out if the returns become negligible.

[tooqk4u22]

We bought $40k worth and a I can't wait to get rid of them, just not worth having two additional accounts/passwords for such a small percentage.   

Will cash them in when kids start college and I quit my job again so that we meet income limits so we don't pay tax on the interest.   

[reeshau]

I bought at the peak rates, too.  So, my $40k had 0% fixed rates.  I sold last fall.  It's an easy trade for those, either to a current I bond with a 1.3% fixed rate or just a plain CD.

[Mariposa]

We also got in during the high rates, but I've decided to have them as a permanent part of our portfolio as an inflation hedge. They're also a deflation hedge, since the rate can't go below 0%.

Between our two accounts, I sold just about all 100k we had in January and re-bought at the fixed 1.3% interest rate, using the gift box option. Note that doing this means I'm committed to taking 5 years or so to have access to this money again. Our EF is elsewhere, and we plan for this to be a long-term position. If the fixed rate goes up, I'll probably buy some more via gift boxes and transfer to our accounts over time.

We're planning to pursue a glide path at some point, and I'm anticipating that I bonds will be 5-10% of our portfolio when we retire. I might also do a TIPS ladder (not TIPS fund) at some point. We have no pensions and no other guaranteed income at retirement except for social security. I plan on having 40% in bonds / cash right before retirement, and I bonds will be a part of that.

The exemption from state and local taxes also makes I bonds more attractive for us.

My parents, on the other hand, have generous pensions in addition to social security that more than covers their living expenses. Their guaranteed retirement income would also cover the majority of long-term care expenses, should one or both of them need it. They also live in a state with no state / local taxes. I advised them to sell their I bonds and not re-buy. They are pretty much invested in 100% equities.

[markpst]

I am keeping mine. I have a target retirement date of 2027, so I would rather take the interest expense in retirement versus now when I am still working. This means I also don't lose the three months interest. Currently the tax would be 22% for fed, would likely be 15% (assuming 12% rate reverts in 2025) in retirement. It would possibly still be advantageous to sell now but I think the penalty and the potential change in tax rate makes it not worth my while.

[Shuchong]

I have $180k or so, and am keeping them all.  They are an inflation hedge, emergency fund, and part of my bond allocation, all in one.  They also extend my tax-advantaged space -- I plan to cash them out in retirement when my tax rates will be much lower. 

Going forward, I'll either buy ibonds or TIPs each year, whichever seems more attractive.  I'm building a ladder to get me from age 50 to 70, with about 30k maturing each year.  That covers my mortgage and all other housing/utility costs. 

[seattlecyclone]

I've targeted about 5% of our stash to I bonds since before they were cool. I'm sticking with them. The inflation hedge is a nice property, as is the special tax status accorded to savings bonds (tax on interest is deferred until you sell, and possibly forgiven if you're paying for college when you sell and your income is low to moderate at that time). The fixed portion of the interest rate is the highest it has been in 16 years, so this is a good time to buy if you want to have these as part of your long-term allocation.

[Louise]

I keeping our I bonds for college expenses since the interest won't be taxed. I'm all stocks in our 529 plan since we have the bonds.

[waltworks]

I sold our ~$180k worth and put the money in our Vanguard settlement (money market) fund which returns 5.3% right now. The penalty was minimal by the time I sold them (I waited until the rates had dropped) and it just didn't seem worth it to keep the money there when there were so many other safe options that paid a lot more.

But it was a nice way to make some easy safe $ during Covid times!

-W

[englishteacheralex]

Thanks for bringing this up! We had $20k in iBonds that we bought in 2021 and this thread made me wonder if maybe we might want to change that. Talked it over with DH this morning and we just sold 'em to put in other places. Happy with our choice and glad this made me check the current interest rate.

[pdxvandal]

I first bought these in October 2021 at $10k, then another $10k in February 2022 when the rates were ~8-9%. Sold them all last year when the rates dropped below 6%. I'd rather have the flexibility and similar rates of a money-market account. Definitely good while it lasted!

[Holocene]

I've sold all my 0% fixed rate I bonds.  I still have a 0.4% fixed rate bond from April 2023 which I'll probably keep for now.  I plan to have $35k at the current 1.3% fixed rate by the end of this month.  The 1.3% real rate is attractive enough for me to hold long-term.  Not quite as good as TIPS rates, but they're more flexible (after a year) so I have both.  I thought it was worth swapping out the 0% bonds for 1.3% bonds as I'm hoping to keep them for a while.  It does restart the 1 year lockup period and 3 month interest penalty clock.  But I still think I'm better off if I hold for at least a couple years.  And if interest rates drop again, the 1.3% real rate will be very nice to have locked in.

[tj]

I sold them in January. I think I only bought in 2021 and 2022.

[FLBiker]

We sold ours ($40K, 0% fixed) several months back, changed the cash into CAD (the exchange rate was quite good) and put it into Canadian GICs (like CDs) earning 5%+.  We're prepping to pay off our mortgage when it matures in ~ a year.  Canadian mortgages are different than the US -- even though we have a 25 year amortization period, the rate was only fixed for 5 years, at which point it matures and you get a new one.  Assuming rates are higher than we would like (our first 5 years was at 2.5%) we'll pay it off.