Series I Savings Bonds for Emergency Fund - 3.54% interest rate

[bmjohnson35]

We are buying $20k this month ourselves and probably another $20k early in 2023. I only wish they would allow you to collect the interest paid as it's paid out, instead of forcing you to wait until you sell the bond.  I'm buying ours in $1k increments, so we have more flexibility when we might want to access the money down the road.

If you have the cash, look at the gift box option. You can each buy $10k personally, and buy an additional $10k for the other person in your gift box. You can transfer it when the recipient hasn't used up their purchases for the year. That way you lock in $40k at the higher rate instead of $20k. Both the interest and the redemption clock start upon purchase, not upon transfer.

Ok, I just read an article on this topic. If I understand correctly, I can buy $10k for myself and purchase another $10k as a gift for my spouse, but can't "deliver" it any sooner than 2023.  If she has already bought $10k for herself, she in turn, can also gift me $10k as well, but once again can't deliver it until 2023.  If we both do this, neither of us can buy I bonds next year, but we will have locked in the high existing rate of return and the gifts will start earning interest immediately even so they are "sitting" in the gift box awaiting delivery.  Is this correct?

One thing I have read recently, is speculation that the fixed rate portion of the I bond interest rate formula may change from zero to a few percent in Nov or Dec.  If this is true, the additional benefit would be locking in the fixed rate portion of the interest formula for any bonds purchased.  The existing fixed rate is locked in when you purchase an I bond.  This means that even as the CPI rates change in the future, your future overall rate will potentially be higher because you will be locking a higher fixed rate in the formula.  Assuming I am getting all of this correct, purchasing the $20k in future bonds as gifts in November or December for a delivery in 2023, instead of buying them this month, could potentially combine the benefits of both strategies.

[Holocene]

Ok, I just read an article on this topic. If I understand correctly, I can buy $10k for myself and purchase another $10k as a gift for my spouse, but can't "deliver" it any sooner than 2023.  If she has already bought $10k for herself, she in turn, can also gift me $10k as well, but once again can't deliver it until 2023.  If we both do this, neither of us can buy I bonds next year, but we will have locked in the high existing rate of return and the gifts will start earning interest immediately even so they are "sitting" in the gift box awaiting delivery.  Is this correct?

I believe your understanding is correct.  I've never done this, but I read on Bogleheads that a lot of people have done it.  It sounds like there's currently a glitch with buying gifts right now.  The site is supposed to undergo maintenance Sunday morning and maybe it'll be fixed.

One thing I have read recently, is speculation that the fixed rate portion of the I bond interest rate formula may change from zero to a few percent in Nov or Dec.  If this is true, the additional benefit would be locking in the fixed rate portion of the interest formula for any bonds purchased.  The existing fixed rate is locked in when you purchase an I bond.  This means that even as the CPI rates change in the future, your future overall rate will potentially be higher because you will be locking a higher fixed rate in the formula.  Assuming I am getting all of this correct, purchasing the $20k in future bonds as gifts in November or December for a delivery in 2023, instead of buying them this month, could potentially combine the benefits of both strategies.

No one knows what the new fixed rate will be.  Some speculate it will stay at 0% because there's already so much demand for I bonds that they don't need to drive any more.  Some think it might go up since treasury interest rates have been rising (particularly 10 year TIPS yield) and generally the fixed rate rises with them.  I highly doubt it'll be raised to a few percent.  I'd be incredibly surprised if it's over 1% and suspect it'll be in the 0-0.5% range.  In the end, no one knows.

The problem with waiting until November is that you lose the current high 9.62% adjustable rate.  Buying in November means your adjustable rate will be 6.48%.  The only thing you gain then with gifting over waiting until 2023 to buy directly is starting the clock/earning interest a couple months early.  So you can't combine the benefits of a (potential) higher fixed rate and the current higher adjustable rate.

If you're planning to hold short-term, I don't think the benefits of a small fixed rate will overcome losing the high 9.62% adjustable rate.  If you're planning to hold 10-20 years, it might.  But you're still taking a risk because the new fixed rate might be 0% and you lose the 9.62% for nothing.

I don't have a spouse and don't have free cash right now to try and do another $10k as a gift, so I'll be waiting until 2023 and hoping the fixed rate rises!  But I did create a trust and bought an additional $10k for that in April.  That's another option as well to get an additional $10k per year in I bonds.

[TomTX]

If you have the cash, look at the gift box option. You can each buy $10k personally, and buy an additional $10k for the other person in your gift box. You can transfer it when the recipient hasn't used up their purchases for the year. That way you lock in $40k at the higher rate instead of $20k. Both the interest and the redemption clock start upon purchase, not upon transfer.

Ok, I just read an article on this topic. If I understand correctly, I can buy $10k for myself and purchase another $10k as a gift for my spouse, but can't "deliver" it any sooner than 2023.  If she has already bought $10k for herself, she in turn, can also gift me $10k as well, but once again can't deliver it until 2023.  If we both do this, neither of us can buy I bonds next year, but we will have locked in the high existing rate of return and the gifts will start earning interest immediately even so they are "sitting" in the gift box awaiting delivery.  Is this correct?

One note: You're not required to perform the transfer in 2023. You could decide to directly purchase another $10k each in 2023 and just let the gift bonds sit in the gift box until 2024. or 2025. Etc.

[bmjohnson35]

Ok, I just read an article on this topic. If I understand correctly, I can buy $10k for myself and purchase another $10k as a gift for my spouse, but can't "deliver" it any sooner than 2023.  If she has already bought $10k for herself, she in turn, can also gift me $10k as well, but once again can't deliver it until 2023.  If we both do this, neither of us can buy I bonds next year, but we will have locked in the high existing rate of return and the gifts will start earning interest immediately even so they are "sitting" in the gift box awaiting delivery.  Is this correct?

I believe your understanding is correct.  I've never done this, but I read on Bogleheads that a lot of people have done it.  It sounds like there's currently a glitch with buying gifts right now.  The site is supposed to undergo maintenance Sunday morning and maybe it'll be fixed.

One thing I have read recently, is speculation that the fixed rate portion of the I bond interest rate formula may change from zero to a few percent in Nov or Dec.  If this is true, the additional benefit would be locking in the fixed rate portion of the interest formula for any bonds purchased.  The existing fixed rate is locked in when you purchase an I bond.  This means that even as the CPI rates change in the future, your future overall rate will potentially be higher because you will be locking a higher fixed rate in the formula.  Assuming I am getting all of this correct, purchasing the $20k in future bonds as gifts in November or December for a delivery in 2023, instead of buying them this month, could potentially combine the benefits of both strategies.

No one knows what the new fixed rate will be.  Some speculate it will stay at 0% because there's already so much demand for I bonds that they don't need to drive any more.  Some think it might go up since treasury interest rates have been rising (particularly 10 year TIPS yield) and generally the fixed rate rises with them.  I highly doubt it'll be raised to a few percent.  I'd be incredibly surprised if it's over 1% and suspect it'll be in the 0-0.5% range.  In the end, no one knows.

The problem with waiting until November is that you lose the current high 9.62% adjustable rate.  Buying in November means your adjustable rate will be 6.48%.  The only thing you gain then with gifting over waiting until 2023 to buy directly is starting the clock/earning interest a couple months early.  So you can't combine the benefits of a (potential) higher fixed rate and the current higher adjustable rate.

If you're planning to hold short-term, I don't think the benefits of a small fixed rate will overcome losing the high 9.62% adjustable rate.  If you're planning to hold 10-20 years, it might.  But you're still taking a risk because the new fixed rate might be 0% and you lose the 9.62% for nothing.

I don't have a spouse and don't have free cash right now to try and do another $10k as a gift, so I'll be waiting until 2023 and hoping the fixed rate rises!  But I did create a trust and bought an additional $10k for that in April.  That's another option as well to get an additional $10k per year in I bonds.

Yeah, buying this month is probably better option.

[bmjohnson35]

If you have the cash, look at the gift box option. You can each buy $10k personally, and buy an additional $10k for the other person in your gift box. You can transfer it when the recipient hasn't used up their purchases for the year. That way you lock in $40k at the higher rate instead of $20k. Both the interest and the redemption clock start upon purchase, not upon transfer.

Ok, I just read an article on this topic. If I understand correctly, I can buy $10k for myself and purchase another $10k as a gift for my spouse, but can't "deliver" it any sooner than 2023.  If she has already bought $10k for herself, she in turn, can also gift me $10k as well, but once again can't deliver it until 2023.  If we both do this, neither of us can buy I bonds next year, but we will have locked in the high existing rate of return and the gifts will start earning interest immediately even so they are "sitting" in the gift box awaiting delivery.  Is this correct?

One note: You're not required to perform the transfer in 2023. You could decide to directly purchase another $10k each in 2023 and just let the gift bonds sit in the gift box until 2024. or 2025. Etc.

Understood.  I'm afraid I don't have that much free cash to lock up for a minimum of 12 months. 

[Omy]

"One note: You're not required to perform the transfer in 2023. You could decide to directly purchase another $10k each in 2023 and just let the gift bonds sit in the gift box until 2024. or 2025. Etc."

If the interest starts accruing immediately (before the gift is delivered), how would the recipient know to pay taxes on that interest? (I decided years ago to pay interest each year on my bonds rather than have a big hit when I cash them in at the end.)

[TomTX]

"One note: You're not required to perform the transfer in 2023. You could decide to directly purchase another $10k each in 2023 and just let the gift bonds sit in the gift box until 2024. or 2025. Etc."

If the interest starts accruing immediately (before the gift is delivered), how would the recipient know to pay taxes on that interest? (I decided years ago to pay interest each year on my bonds rather than have a big hit when I cash them in at the end.)

I'm really not interested in that amount of effort (paying every year, tracking what's been paid, maintaining documentation) for basically no return, nor am I interested in investigating how to do so.

Feel free to research it if it's important to you.

Most people simply pay the interest when they cash out the bond - which also allows offsetting the tax due if it was used for educational purposes.

[PDXTabs]

If the interest starts accruing immediately (before the gift is delivered), how would the recipient know to pay taxes on that interest? (I decided years ago to pay interest each year on my bonds rather than have a big hit when I cash them in at the end.)

It doesn't pay a coupon so they don't have to. No one has to pay taxes until the bond is redeemed.

[simonsez]

"One note: You're not required to perform the transfer in 2023. You could decide to directly purchase another $10k each in 2023 and just let the gift bonds sit in the gift box until 2024. or 2025. Etc."

If the interest starts accruing immediately (before the gift is delivered), how would the recipient know to pay taxes on that interest? (I decided years ago to pay interest each year on my bonds rather than have a big hit when I cash them in at the end.)

That seems like more work to give the govt an interest free loan to access their share of the funds via taxes earlier.  Simplistic example: Why take the time and effort to calculate taxes year in year out and give the government $10 in year 1, $12 in year 2, $14 in year 3, $16 in year 4, and $18 in year 5 if I could just give them $70 all at once in year 5 when redeeming?  It's not like the amounts that would be redeemed wouldn't easily be able to cover all the tax at once and have plenty left over.  Plus, there is an opportunity cost to that money while you have it.  If the government has your money earlier, that opportunity is lost.

[Omy]

I started 19 years ago because I had a low earning year and would get to pay zero tax on all of the interest that had accrued on my EE bonds up until then. Once you start declaring annually, you're supposed to continue reporting on your taxes annually. It takes an extra minute to print out the annual calculator so not much effort (and I will owe zero taxes when I redeem which also controls my AGI for ACA purposes).

[Rosy]

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

3. I need to hold for 15 months if I want to be sure to get the above interest.
If I cash in within 12 months I will lose three whole months interest - essentially receiving only nine months of interest and zero interest for three months?

4. One can stack different amounts up to $10K or add to an existing I Bond up to $10K, right?

5. One can redeem any amount -
 so I could redeem $3K out of my $10K after 15 months and keep the remaining $7K of my $10K I-Bond intact?

6. I'm not clear on why someone would hold the I-Bond for five years? Is there a significance to holding it for five years? and if I did, would it simply earn a different rate every six months but somehow give me an additional advantage?

7. Taxes - I just declare it under my income tax as interest income at the time of redemption, correct?

[seattlecyclone]

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

Yes to both.

3. I need to hold for 15 months if I want to be sure to get the above interest.
If I cash in within 12 months I will lose three whole months interest - essentially receiving only nine months of interest and zero interest for three months?

You may not cash out during the first 12 months. That's a super important point to be aware of before putting your money in. For the next four years after that they'll keep the most recent three months of interest when you cash out, meaning if you cashed out a year + a day after purchasing you'd only receive nine months of interest in the end.

4. One can stack different amounts up to $10K or add to an existing I Bond up to $10K, right?

5. One can redeem any amount -
 so I could redeem $3K out of my $10K after 15 months and keep the remaining $7K of my $10K I-Bond intact?

Yes. $10k per person purchase limit per year, you can buy and sell in lower increments than that.

6. I'm not clear on why someone would hold the I-Bond for five years? Is there a significance to holding it for five years? and if I did, would it simply earn a different rate every six months but somehow give me an additional advantage?

Five years is when the early redemption three-month interest clawback ends. You basically get a bonus three months of interest on the 5th anniversary. The interest rate resets every six months for the entire life of the bond.

7. Taxes - I just declare it under my income tax as interest income at the time of redemption, correct?

Yes. You have the option to claim the interest every year if you like, but it's generally beneficial to defer that tax. Also there's a tax rule that if you pay college expenses in the same year you sell, the interest is tax-free if you meet certain income limits.

[NotJen]

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

Yes to both.

I just want to clarify this a little bit -

- If you buy before Oct 28, you get 9.62% for Oct 1 2022 (purchases any time in Oct get you full interest for the month) through Mar 31 2023.  Then 6.47% for Apr 1 2023 through Sept 30 2023.

- If you buy Nov 1 (transactions take a business day to process, so putting in an order Oct 29, 30, or 31 will count as a purchase on Nov 1), you will get 6.47% for Nov 1 2022 through Apr 31 2023, and then whatever new rate for May 1 2023 through Oct 31 2023.

[Arbitrage]

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

Yes to both.

I just want to clarify this a little bit -

- If you buy before Oct 28, you get 9.62% for Oct 1 2022 (purchases any time in Oct get you full interest for the month) through Mar 31 2023.  Then 6.47% for Apr 1 2023 through Sept 30 2023.

- If you buy Nov 1 (transactions take a business day to process, so putting in an order Oct 29, 30, or 31 will count as a purchase on Nov 1), you will get 6.47% for Nov 1 2022 through Apr 31 2023, and then whatever new rate for May 1 2023 through Oct 31 2023.

Yes, though there is also the possibility that the bonds offered in November will have a fixed rate component as well.  Given how high interest rates are getting on TIPS (almost 2% real on some durations), they really should offer a fixed rate.  I'm probably going to start looking long and hard at buying individual TIPS, especially without a significant fixed rate on I bonds.

[Rosy]

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

Yes to both.

3. I need to hold for 15 months if I want to be sure to get the above interest.
If I cash in within 12 months I will lose three whole months interest - essentially receiving only nine months of interest and zero interest for three months?

You may not cash out during the first 12 months. That's a super important point to be aware of before putting your money in. For the next four years after that they'll keep the most recent three months of interest when you cash out, meaning if you cashed out a year + a day after purchasing you'd only receive nine months of interest in the end.

4. One can stack different amounts up to $10K or add to an existing I Bond up to $10K, right?

5. One can redeem any amount -
 so I could redeem $3K out of my $10K after 15 months and keep the remaining $7K of my $10K I-Bond intact?

Yes. $10k per person purchase limit per year, you can buy and sell in lower increments than that.

6. I'm not clear on why someone would hold the I-Bond for five years? Is there a significance to holding it for five years? and if I did, would it simply earn a different rate every six months but somehow give me an additional advantage?

Five years is when the early redemption three-month interest clawback ends. You basically get a bonus three months of interest on the 5th anniversary. The interest rate resets every six months for the entire life of the bond.

7. Taxes - I just declare it under my income tax as interest income at the time of redemption, correct?

Yes. You have the option to claim the interest every year if you like, but it's generally beneficial to defer that tax. Also there's a tax rule that if you pay college expenses in the same year you sell, the interest is tax-free if you meet certain income limits.

@seattlecyclone - we will both be going for it before it ends - thank you!:).
I found a how-to-sign-up article from CNet so I think we are off to our first foray into I-Bonds.

I'd like to do this but want to be certain that I understand it all correctly - so let me get this straight:

1. If I buy $10K now or any amount over $25. - before Oct 28 - I will receive:
Guaranteed 9.62% in interest for six months (which represents prior months - ending this Oct)

2. Starting Nov 1 or Oct 29? - I will get a guaranteed 6.47% interest for the next six months.
Beyond that nobody knows until the new rate is announced.

Yes to both.

I just want to clarify this a little bit -

- If you buy before Oct 28, you get 9.62% for Oct 1 2022 (purchases any time in Oct get you full interest for the month) through Mar 31 2023.  Then 6.47% for Apr 1 2023 through Sept 30 2023.

- If you buy Nov 1 (transactions take a business day to process, so putting in an order Oct 29, 30, or 31 will count as a purchase on Nov 1), you will get 6.47% for Nov 1 2022 through Apr 31 2023, and then whatever new rate for May 1 2023 through Oct 31 2023.

Yes, though there is also the possibility that the bonds offered in November will have a fixed rate component as well.  Given how high interest rates are getting on TIPS (almost 2% real on some durations), they really should offer a fixed rate.  I'm probably going to start looking long and hard at buying individual TIPS, especially without a significant fixed rate on I bonds.

Thank you for the clarification @Not Jen and @Arbitrage - good points.
 

[SuperNintendo Chalmers]

Uh oh.  Waited too long and looks like the system has crashed because too many people are rushing to buy.  Stupid procrastination!

[HPstache]

Uh oh.  Waited too long and looks like the system has crashed because too many people are rushing to buy.  Stupid procrastination!

Even worse... the time to buy was 6 months ago.

[SuperNintendo Chalmers]

Uh oh.  Waited too long and looks like the system has crashed because too many people are rushing to buy.  Stupid procrastination!

Even worse... the time to buy was 6 months ago.

Well, I did buy a chunk early in the year, and legit reasons why we couldn't do this one before October.  Just pissed we didn't do it a couple weeks ago when we could have....

[Rosy]

We decided on one $10K plus one $10K gift box - in plenty of time, thanks to this thread.

But OMG the site doesn't even upload today because they were so swamped with demands at the last minute.
That 9.62% interest is just too good to pass up even if it is only good for six months - the next 6.47% is still pretty damn good and if it settles at around 5% for another year or so as predicted, all in all well worth doing.

It's nice to have more than one option and integrate it into your savings and retirement strategy since Mr. R. is between six months or two and a half years of retirement depending on how his work situation shapes up next year.

[PDXTabs]

Uh oh.  Waited too long and looks like the system has crashed because too many people are rushing to buy.  Stupid procrastination!

Even worse... the time to buy was 6 months ago.

Well, I did buy a chunk early in the year, and legit reasons why we couldn't do this one before October.  Just pissed we didn't do it a couple weeks ago when we could have....

Don't be pissed yet, the treasury department might choose to give you some fixed yield next month.

[pressure9pa]

Stumbled into some good luck.  For some reason I thought I had through November instead of October for the current rate.  However, I ended up getting some funds before I expected to, so I bought my last $2000 last week.  Turns out I narrowly beat a deadline I thought I was a month in front of ....

[EchoStache]

Don't be pissed yet, the treasury department might choose to give you some fixed yield next month.

This isn't announced before the 1st like the variable portion?

[PDXTabs]

Don't be pissed yet, the treasury department might choose to give you some fixed yield next month.

This isn't announced before the 1st like the variable portion?

It is announced the first business day in May and November. Technically so is the variable rate, but it is based on statute so people can calculate the variable rate ahead of time AFAIK. https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

[lifeisshort123]

Suze says iBonds are yesterday’s news….buy TBills instead….

[FIPurpose]

I would agree. Inflation coming down, means that the next year of i bond rates, likely won't be that great. Locking in on long-term bonds that are hovering around 5-6% for 10 years to 20 years sounds like a much better deal. I'm hoping those rates stick through Dec when some options I have expire.

[Gardencat]

Yeah, I told all my friends to buy those I bonds over a month ago, and they told all their grown kids, then the site crashed, sorry!

(Kidding - tho my spouse was like, “ look what you did! Good job!)

I avoid offering unsolicited financial advice and since I made an exception this time I think the people listened…

[mistymoney]

I would agree. Inflation coming down, means that the next year of i bond rates, likely won't be that great. Locking in on long-term bonds that are hovering around 5-6% for 10 years to 20 years sounds like a much better deal. I'm hoping those rates stick through Dec when some options I have expire.

where are these?

for tbills, I'm only seeing 4%

[FIPurpose]

I would agree. Inflation coming down, means that the next year of i bond rates, likely won't be that great. Locking in on long-term bonds that are hovering around 5-6% for 10 years to 20 years sounds like a much better deal. I'm hoping those rates stick through Dec when some options I have expire.

where are these?

for tbills, I'm only seeing 4%

Well the market correcting upward this week has given people thinking that inflation is on a downtrend so the rates have dropped about 1% from a week or 2 ago. I see 5-10 year CD's that you can get around 5%. Just wait a month for the next week where people feel shaky about the economy again. Bond rates will go back up again.

[Omy]

We're looking at a 7 year annuity that's paying 5.35% per year. It grows tax deferred until you withdraw. After the 7 years, you can roll it into another annuity via a 1035 exchange to continue deferring taxes.

[EchoStache]

Nov 1 rate is now 6.89%.  0.4% fixed + 6.48% inflation.

[HPstache]

Nov 1 rate is now 6.89%.  0.4% fixed + 6.48% inflation.

Acceptable.  I'll take it.

[geekette]

I’m assuming that older bonds will only get the 6.48% for their next 6 months?

[dandarc]

I’m assuming that older bonds will only get the 6.48% for their next 6 months?

Yeah - the "real" return component is set when you purchase.

[EchoStache]

I’m assuming that older bonds will only get the 6.48% for their next 6 months?

If by old, you mean "recent" old, probably.  I have a tiny little Ibond($200) from more than ten years ago that has a 1.2% fixed rate and is now worth $370.  I was getting 10.88 and now 7.68.

[Arbitrage]

I’m assuming that older bonds will only get the 6.48% for their next 6 months?

If by old, you mean "recent" old, probably.  I have a tiny little Ibond($200) from more than ten years ago that has a 1.2% fixed rate and is now worth $370.  I was getting 10.88 and now 7.68.

Just imagine...from 1998 to 2001 a married couple could've amassed $240,000 in I bonds with 3-3.6% real rates.  As of next summer, that $240k will have compounded to over $970k.  Not too shabby for 100% safe investments.  Actually has beaten the S&P 500 over that time with no risk, unless we have a big runup over the next 9 months. 

[FIPurpose]

I would agree. Inflation coming down, means that the next year of i bond rates, likely won't be that great. Locking in on long-term bonds that are hovering around 5-6% for 10 years to 20 years sounds like a much better deal. I'm hoping those rates stick through Dec when some options I have expire.

where are these?

for tbills, I'm only seeing 4%

Well the market correcting upward this week has given people thinking that inflation is on a downtrend so the rates have dropped about 1% from a week or 2 ago. I see 5-10 year CD's that you can get around 5%. Just wait a month for the next week where people feel shaky about the economy again. Bond rates will go back up again.

On Vanguard I see bonds at:

CD's ~5%
Treasury 4.5% - 5%

I see 30 year non-callable agency bonds going for 5.25%

With the fed signaling more raises in the near future, I expect these rates to creep up a bit more.

If I can get an agency bond at 7% for 30 years. I'm jumping on that train.

[gary3411]

I'm new to these bonds, and individual bonds in general. I bought 10k worth earlier in the year. I'm wondering what happens to the money that is earned in interest (coupon payments). Can you re-invest it? Is it automatically reinvested? Does it just sit there earning nothing unless you withdraw (tax-event)? Any help is appreciated.

[FIPurpose]

I'm new to these bonds, and individual bonds in general. I bought 10k worth earlier in the year. I'm wondering what happens to the money that is earned in interest (coupon payments). Can you re-invest it? Is it automatically reinvested? Does it just sit there earning nothing unless you withdraw (tax-event)? Any help is appreciated.

The interest is compounded every 6-months, so there is no payment from it. It can sit there deferring taxes until you withdraw or up to 30 years.

[bacchi]

If I can get an agency bond at 7% for 30 years. I'm jumping on that train.

I'm waiting for 30 year TIPS at >4% yield.

[TomTX]

I'm new to these bonds, and individual bonds in general. I bought 10k worth earlier in the year. I'm wondering what happens to the money that is earned in interest (coupon payments). Can you re-invest it? Is it automatically reinvested? Does it just sit there earning nothing unless you withdraw (tax-event)? Any help is appreciated.

The interest is compounded every 6-months, so there is no payment from it. It can sit there deferring taxes until you withdraw or up to 30 years.

And the gains are tax free if used to pay for qualified education expenses.

[Arbitrage]

I'm new to these bonds, and individual bonds in general. I bought 10k worth earlier in the year. I'm wondering what happens to the money that is earned in interest (coupon payments). Can you re-invest it? Is it automatically reinvested? Does it just sit there earning nothing unless you withdraw (tax-event)? Any help is appreciated.

The interest is compounded every 6-months, so there is no payment from it. It can sit there deferring taxes until you withdraw or up to 30 years.

And the gains are tax free if used to pay for qualified education expenses.

(subject to income limitations)

[monarda]

Where do I find out what the next 6 months of interest rate would be?
If I buy in April, it's 6.89% for 6 months,  but then goes to 3.39% after May 1? Correct?


Are people still buying these, - my Citi savings account earns 3.78% and it's not tied up for 5 years...

[HPstache]

Where do I find out what the next 6 months of interest rate would be?
If I buy in April, it's 6.89% for 6 months,  but then goes to 3.39% after May 1? Correct?


Are people still buying these, - my Citi savings account earns 3.78% and it's not tied up for 5 years...

I bonds are also not tied up for 5 years.  They are tied up for 1 year and then 3 months of interest is the penalty for pulling it out before 5 years

[monarda]

Where do I find out what the next 6 months of interest rate would be?
If I buy in April, it's 6.89% for 6 months,  but then goes to 3.39% after May 1? Correct?


Are people still buying these, - my Citi savings account earns 3.78% and it's not tied up for 5 years...

I bonds are also not tied up for 5 years.  They are tied up for 1 year and then 3 months of interest is the penalty for pulling it out before 5 years

Yes, I realize that. I meant to say tied up without penalty. I suppose when the interest rate on I bonds goes far enough below what my savings account pays, I can sell the I bond when 3 months of interest penalty isn't a big deal.  I assume the 3 month penalty is the 3 most recent months interest rate?

I have a couple of 1 year CDs at 1.9%, and am considering cashing them in before they mature, because the penalty is pretty low. But one matures in July, so maybe I won't bother and will just wait.

I'm considering whether I should quick buy some more I bonds this week or not.

[rantk81]

I'm actually going to be bailing out of I-Bonds.  They were nice when keeping pace with inflation when it was nipping at 10%.... but as a long-term thing, for me and my family, it's not worth the hassle of dealing with the TreasuryDirect site (and the medallion signature bullshit for just adding a new bank account link) for a couple extra percent over short term T-Bill rates on a limited amount of principal.

[lifeisshort123]

I was buying them, but not anymore... Not attractive enough given the limitations.

Also, they are good as an investment strategy at times, but I would question using them as an emergency fund - or at least the beginnings of one - as you can't take them out for a year.

[FIPurpose]

Just remember that if you bought your i-bonds in April/Oct like I did, you're going to have the old rates until Oct/Apr. So even if May's rate is 3.5%, you'll still be earning >6% until October when your bonds flip to the May rate.

So don't dump your bonds too early. If I'm dumping my i-bonds due to a bad May rate, it won't be til basically Jan. of 2024.

[pdxvandal]

iBonds definitely have run their course for me. I'll liquidate all $21k by end of the year and invest in VTSAX and build up a small cash position in a money market account or similar. It was certainly nice while it lasted!

[jnw]

Same.  I've decided after seeing the numbers mid April that I wouldn't buy any i-Bonds so far this year.  I'll re-asses mid October and purchase only if there has been some incredibly high unexpected inflation over the next 6 months.  Otherwise it's short term treasury bills / money market for me.

[Mariposa]

I'm buying another set of i-bonds this week. At 6.89% for the first 6 months and (3.38% + 0.4% fixed=) 3.78% the following 6 months, I'll be getting a composite rate of 5.33% for the next year. Not having to pay local or state taxes on the interest makes them worth it for me.

I think that I-bonds will be a permanent part of our EF, now that I've already dealt with the TreasuryDirect website and linked our bank account to it. Heck of a lot better than a bunch of cash sitting around in a nearly 0% interest checking account. Once the high interest rates run out, I'll trade our holdings for ones with a higher fixed interest.

Sure, money markets are at 4.75% these days, but that's not going to last once the fed starts cutting rates again. This might be a good time to be buying VBTLX again. Also considering 30y treasuries for our bond portion.