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Am I Correct About I-Bonds?
08-20-2011, 08:19 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Am I Correct About I-Bonds?
Now that the fed has essentially locked in low rates for some time to come, those I-Bonds are looking pretty attractive.
Please tell me if I am figuring the rates correctly.
First off, I'm assuming the inflation kicker in November will look pretty good. Of course the current total rate at 4.6 is quite nice.
So I'm thinking of waiting until the last week of October when I feel pretty certain we will be able to guess the new November rate fairly closely.
If the new inflation rate looks attractive, I would buy a new batch of bonds around the last day of October.
Here's the part I'm a bit fuzzy on.
If I buy in October, my assumption is that I will collect the current rate (4.6) for a full six months at which time I would collect the new (November 2011) rate for the next 6 months. Of course, before that second six month term expires I would know what rate I would receive next. If it looks good I could continue, if not I could bail out with one quarter forfeiture.
Am I understanding the interest rate bit correctly?
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08-20-2011, 08:25 PM
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#2
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Recycles dryer sheets
Join Date: Dec 2008
Posts: 299
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Quote:
Originally Posted by JPatrick
If I buy in October, my assumption is that I will collect the current rate (4.6) for a full six months at which time I would collect the new (November 2011) rate for the next 6 months. Of course, before that second six month term expires I would know what rate I would receive next. If it looks good I could continue, if not I could bail out with one quarter forfeiture.
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So far so good but if the rate for the 3rd six months is bad, you should still wait another 3 months before bailing out. That way you fully collect the good rate in the 2nd six months. Otherwise you will forfeit 3 months of a good rate.
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08-20-2011, 08:32 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Quote:
Originally Posted by thefinancebuff
So far so good but if the rate for the 3rd six months is bad, you should still wait another 3 months before bailing out. That way you fully collect the good rate in the 2nd six months. Otherwise you will forfeit 3 months of a good rate.
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Yup, that's a very good point. Hazy as it may be, my crystal ball says inflation may still be around when that time comes.
Thanks.
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08-20-2011, 08:38 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Also remember that as of Jan 1 2012 paper I-bonds will no longer be available Individual - I Savings Bonds In Depth. You will be limited to only $5k/SSN - unless you want to do the back door tax refund thing.
DD
__________________
At 54% of FIRE target
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08-20-2011, 09:47 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,012
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Quote:
Originally Posted by DblDoc
unless you want to do the back door tax refund thing.
DD
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please explain.
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08-20-2011, 09:55 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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__________________
At 54% of FIRE target
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08-20-2011, 10:44 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,012
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08-22-2011, 09:53 PM
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#8
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Dryer sheet wannabe
Join Date: May 2011
Posts: 12
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I've also been considering I-Bonds. Is it once per calendar year that you can buy, or once per rolling year? For example, could someone get $5k in paper I-Bonds at a bank and $5k in I-Bonds through TreasuryDirect on October 31, 2011, and then also get another $5k in I-Bonds through TreasuryDirect in January 2012? Or do they have to wait until November 1, 2012 instead to get the 3rd $5k? I didn't see this clarified anywhere on their website.
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08-22-2011, 11:35 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by Chickadee
I've also been considering I-Bonds. Is it once per calendar year that you can buy, or once per rolling year? For example, could someone get $5k in paper I-Bonds at a bank and $5k in I-Bonds through TreasuryDirect on October 31, 2011, and then also get another $5k in I-Bonds through TreasuryDirect in January 2012? Or do they have to wait until November 1, 2012 instead to get the 3rd $5k? I didn't see this clarified anywhere on their website.
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Individual - Buy I Savings Bonds
Quote:
The purchase limit for both paper and electronic I Bonds is $5,000 per calendar year.
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DD
__________________
At 54% of FIRE target
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08-23-2011, 07:47 PM
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#10
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Full time employment: Posting here.
Join Date: Nov 2008
Location: Louisville
Posts: 601
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Isn't the interest paid just at the rate of 2.3% for the next 6 months? That doesn't mean 4.6% as the original post mentioned?
For May 2011, 0% base rate + 2.3% inflation rate.
I assume that's an annualized rate for a six month period. Not a 2.3% return for six months?
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08-23-2011, 08:35 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by Masquernom
Isn't the interest paid just at the rate of 2.3% for the next 6 months? That doesn't mean 4.6% as the original post mentioned?
For May 2011, 0% base rate + 2.3% inflation rate.
I assume that's an annualized rate for a six month period. Not a 2.3% return for six months?
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It is 4.6% annualized or 2.3% for 6 months. But since you can only do $5k annually per SSN, its hard to get excited.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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08-24-2011, 11:12 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Quote:
Originally Posted by brewer12345
It is 4.6% annualized or 2.3% for 6 months. But since you can only do $5k annually per SSN, its hard to get excited.
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Someone check my IBond facts, but I think an individual can buy 5K in paper and 5K electronic this year for a 10K total or 20K if the DW does the same.
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08-24-2011, 11:25 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by JPatrick
Someone check my IBond facts, but I think an individual can buy 5K in paper and 5K electronic this year for a 10K total or 20K if the DW does the same.
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True this year, but no paper bonds next year so unless they bump the amount of electronic you can buy it is 5k per.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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08-24-2011, 11:29 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Quote:
Originally Posted by brewer12345
True this year, but no paper bonds next year so unless they bump the amount of electronic you can buy it is 5k per.
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Got it....Thanks
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08-24-2011, 05:18 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 2,842
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Quote:
Originally Posted by brewer12345
It is 4.6% annualized or 2.3% for 6 months. But since you can only do $5k annually per SSN, its hard to get excited.
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From the government site
Here's how the composite rate for I bonds issued May 2011 – October 2011 was set:
Fixed rate = 0.00%
Semiannual inflation rate = 2.30%
Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = [0.0000 + (2 x 0.0230) + (0.0000 x 0.0230)]
Composite rate = [0.0000 + 0.0460 + 0.0000000]
Composite rate = 0.0460
Composite rate = 0.0460
Composite rate = 4.60%
__________________
But then what do I really know?
https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
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08-30-2011, 11:17 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Ok, sorry one last time as I just read something that makes these more appealing. I just read on a website Savings Bond Advisor that the November reset would be 3.3% (6.6% annualized) if inflation rate continues at this pace the last 2 months of this cycle. So if I bought 5k online and 5k at the bank, next month I would in effect get 2.3% for six months , then quite possibly get 3.3% in march for 6 months (if projection bears out). This would be about 5.6% yearly rate of return. Then if I buy 5 k more in January, I would get the 3.3 % and even if inflation rate resets next May at 0%, I still in effect would get 3.3% for 12 months on that second purchase. Is my thinking correct?
For small time investors especially married ones you could get $30,000 (10k of it in January) into I bonds within the next 6 months and get some decent safe interest rate returns. If I am wrong on my math someone please tell me because it seems like it's something I should do for the short term anyways.
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09-16-2011, 10:03 PM
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#17
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Dryer sheet wannabe
Join Date: May 2011
Posts: 12
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I-Bonds seem like a good choice for me right now, as a counter-balance to my aggressive 401k choices. Here's my plan:
2011: bought $5000 in paper I-Bonds a couple weeks ago (received last week)
2011: will buy $5000 in I-Bonds through Treasury Direct as soon as I receive my access card (October)
2012: will buy $5000 in I-Bonds through Treasury Direct in January
2012: increased my tax withholding through work in 2011, to have a $5000 federal refund in early 2012, to get $5000 in paper I-Bonds
Additional info: will also fully fund Roth IRA ($5000), and will fund CDs/401k/savings with excess
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09-16-2011, 10:11 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Quote:
Originally Posted by Chickadee
I-Bonds seem like a good choice for me right now, as a counter-balance to my aggressive 401k choices. Here's my plan:
2011: bought $5000 in paper I-Bonds a couple weeks ago (received last week)
2011: will buy $5000 in I-Bonds through Treasury Direct as soon as I receive my access card (October)
2012: will buy $5000 in I-Bonds through Treasury Direct in January
2012: increased my tax withholding through work in 2011, to have a $5000 federal refund in early 2012, to get $5000 in paper I-Bonds
Additional info: will also fully fund Roth IRA ($5000), and will fund CDs/401k/savings with excess
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I agree, I first thought "well it's only $10000" but then I started thinking the government is begging me to take $400 in interest for a year with no state income tax coming out of it. I got my card from treasury direct this week and am buying them next week, and then walking down to the bank and buying $5k more.
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09-16-2011, 10:27 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Oct 2008
Posts: 1,608
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Hmm, I didn't know you had to get a card from Treasury Direct in order to buy bonds online. Guess I better get going and set up an account so I can buy another $5k in 2011.
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09-16-2011, 10:35 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Quote:
Originally Posted by powerplay
Hmm, I didn't know you had to get a card from Treasury Direct in order to buy bonds online. Guess I better get going and set up an account so I can buy another $5k in 2011.
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It's some kind of security mechanism. It took about 10 days for me to get it. I haven't used it yet, but will next week to capture this months interest.
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