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Anyone Like Savings Bonds?
01-22-2009, 07:12 AM
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#1
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Dryer sheet aficionado
Join Date: May 2008
Posts: 32
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Anyone Like Savings Bonds?
A friend of my family is a very conservative, safety-minded investor, and, he puts most of his investment dollars in Savings Bonds and has built up a pretty good retirement fund that has helped enable him to retire early. Wondering what your thoughts are on them. Thanks.
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01-22-2009, 08:14 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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I love my 2000-issue I-bonds that earn a fixed real 3.4%, tax-deferred. I'm not too much of a fan of savings bonds being issued today. There are worse places you can put "safe" money, but I think long term there are better places.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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01-22-2009, 08:26 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
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I've been buying bonds for over 20 years. This is a part of my investment direction that I have never regretted.
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There's no need to complicate, our time is short..
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01-22-2009, 08:58 AM
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#4
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 125
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Have I Bonds doing about 6 pct non-taxed right now. Was a good deal when one could buy enough annually to actually call them investments. Pretty certain the inflation numbers are going to drive their yield down to nothing for the next 6 month period, but that beats losing 33 pct.
Amazing how we can go from high inflation numbers to deflation overnight. While the government pours cash into the mix.
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01-22-2009, 09:19 AM
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#5
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Full time employment: Posting here.
Join Date: Aug 2006
Location: athens
Posts: 802
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I've got a little pile of those EE cardboard engravings in my SD Box. Some were small gifts; some I purchased through some mega corp program that I gathered was to help secure more government contracts; and a few I inherited from my late father. I never thought much about them as an investment though. But some are now paying around 4.5%, and they didn't lose a cent during the 2008 debacle. Hum, maybe I should rethink the role they can play. Let's call them the last bastion of refuge when everything else goes to hell in a hand basket. I think I'll just continue to hold on to them.
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Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."
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01-22-2009, 12:55 PM
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#6
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Gone but not forgotten
Join Date: Aug 2006
Posts: 6,924
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Quote:
Originally Posted by tightasadrum
I've got a little pile of those EE cardboard engravings in my SD Box. Some were small gifts; some I purchased through some mega corp program that I gathered was to help secure more government contracts; and a few I inherited from my late father. I never thought much about them as an investment though. But some are now paying around 4.5%, and they didn't lose a cent during the 2008 debacle. Hum, maybe I should rethink the role they can play. Let's call them the last bastion of refuge when everything else goes to hell in a hand basket. I think I'll just continue to hold on to them.
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They stop earning interest at 30 years.
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"Knowin' no one nowhere's gonna miss us when we're gone..."
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01-22-2009, 05:37 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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I have 2 gov't bond ladders:
$13k of EE series, vintage 1995-7, actual paper certificates, via p*yroll deduction.
$3.3K of I bonds, vintage 2004-6, via Treasury direct.
these babies will be there when I need them, much much later down the road.
they are destined to be used for some $ emergency I can't handle otherwise.
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"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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01-22-2009, 06:14 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Got some I's from circa 2000-2001 that are kicking out 8% plus returns.
Watch out come the May reset though--not so good.
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01-22-2009, 06:39 PM
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#9
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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I've been buying ibonds for 5-6 years, I have several hundred grand worth. I still buy them but the max is so low now its more of a token purchase. I'm also a fan of TIPS.
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Money's just something you need in case you don't die tomorrow.
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01-24-2009, 03:28 AM
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#10
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Full time employment: Posting here.
Join Date: Jun 2008
Posts: 534
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I have a some EE and I bonds in my portfolio I have had for several years. The I bonds in particular have given some periods of good returns and some bad. I had an additional motive for purchasing them at the time, divorce and child support. Right or wrong I came out of the marriage with less % of our estate but going in I had a much greater %. I inherited some money shortly after divorce and wanted to minimize my annual taxable income and savings bonds were the only vehicle that deferred interest and produced no taxable interest. Since these monies were on top of my regular earnings the calculations would have caused me to turn over about .50 net on every gross dollar earned in interest or dividends, getting to keep all the interest improved their performance in my portfolio tremdously. Of course now you can't buy enough bonds annually to make much of a difference. The days of paying CS are over but I still like and hold the bonds. Again they were about the only thing I owned in 2008 that went up.
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Never surrender what you really want for what you want right now.
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01-24-2009, 03:33 AM
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#11
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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I also bought iBonds for the tax deferment. At the time I started acquiring them, I had insufficient monies (and options) in tax-deferred accounts for my bond allocation, so it seemed like the way to go. I was also long-term bearish on the dollar and appreciated the inflation hedge.
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Money's just something you need in case you don't die tomorrow.
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01-24-2009, 07:27 AM
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#12
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 125
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The bonds are also decent tax avoidance assets if you use them for education. We're not there yet, but look forward to cashing them in tax free to help pay for college.
On that note, anyone use them for this purpose yet? Pitfalls?
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01-24-2009, 10:31 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,346
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Quote:
Originally Posted by deepc
The bonds are also decent tax avoidance assets if you use them for education. We're not there yet, but look forward to cashing them in tax free to help pay for college.
On that note, anyone use them for this purpose yet? Pitfalls?
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Don't know yet but in 2010 I will be cashing in my all of $3,500 ibonds for part of younger sons college education. Don't know what tax bracket I'll be in then but its time to stop managing this small block of funds.
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T.S. Eliot:
Old men ought to be explorers
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01-24-2009, 10:53 AM
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#14
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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Quote:
Originally Posted by deepc
On that note, anyone use them for this purpose yet? Pitfalls?
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I'm not there yet, but will use much of them for education.
So I have no experience, but the potential pitfalls I see -
1 - you can only use them for tuition, not r&b, fees, books, etc.
2 - The 'granularity' problem. I don't think you can do partial redemptions. That could be a pain if all your bonds are 30k+ and you need, say, 15k for tuition.
__________________
Money's just something you need in case you don't die tomorrow.
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01-24-2009, 11:29 AM
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#15
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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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Savings bonds used to be a good deal. They no longer are, IMO. I think TIPS and CDs are a lot more attractive.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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01-24-2009, 11:34 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Mar 2004
Location: Dallas
Posts: 1,211
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I inherited a bunch of EE bonds from my dear Mom who passed in August.
The bonds issued in 1994 and later were only drawing a paultry interest since they are indexed to U.S. Treasury rates, so I sold them. All the older bonds are drawing 4% which is pretty good in this environment.
The biggest knock against EE bonds is that they DO NOT step up in tax basis when inherited. Mom went to her grave thinking I would not have to pay tax on them ..... I never told her the truth.
Cheers,
charlie
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01-24-2009, 11:49 AM
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#17
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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I have over $100K in I-Bonds but didn't start until 2003 so don't have any of the high fixed rated bonds. I'll buy the max $10K again in April before the expected rate slash in May ( $5K each ). That will give 6 months at current rate of 5.64%.
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Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-24-2009, 03:05 PM
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#18
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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Alan - I'm going to buy 10k this year also, but was thinking that the flat rate might be better in May 1 than the current rate (0.7%). SO my plan has been to wait until then.
Of course, the way they set that flat rate is pretty opaque, but why do you think it'll be lower in May than now?
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Money's just something you need in case you don't die tomorrow.
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01-24-2009, 04:55 PM
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#19
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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Quote:
Originally Posted by Maurice
Alan - I'm going to buy 10k this year also, but was thinking that the flat rate might be better in May 1 than the current rate (0.7%). SO my plan has been to wait until then.
Of course, the way they set that flat rate is pretty opaque, but why do you think it'll be lower in May than now?
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Of course I don't know what they will do but I figured if I bought in April I'll lock in 6 months of the current high rate. If it sucks in a year's time I'll sell and forgo 3 month's interest. By then I'll be looking to spending cash to fund my retirement anyway.
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Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-24-2009, 05:01 PM
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#20
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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Fair enough. I'll be holding these for a long time so I'm holding out for a better fixed rate than 0.7%
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Money's just something you need in case you don't die tomorrow.
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