I bond return disappointing

[perrytime]

Just checked value of my i-bond issued 10/2005, up almost 33%. Holding for ~16 years, that only 2% a year. I know some periods were 0%, but i sure thought the average would have been closer to 3 or 4%. Currenly pays 2.2% . They are what they are, if inflation kicks up, will be happy i have it.

 

[Alan]

Just checked value of my i-bond issued 10/2005, up almost 33%. Holding for ~16 years, that only 2% a year. I know some periods were 0%, but i sure thought the average would have been closer to 3 or 4%. Currenly pays 2.2% . They are what they are, if inflation kicks up, will be happy i have it.

I reckon that is actually 4%/year not 2%.

Do you use the Savings Bond wizard to track your bonds? For my I-bond issued 10/2005 it shows that it has increased by almost 33% and that equates to 4.08% /year.

I then checked it on a spreadsheet and 4.08%/year is correct.

 

[FIREd]

You have been holding your 10/2005 bonds for 6+ years, not 16.

 

[Mulligan]

I wouldn't be too upset with that rate of return as your principal is never at risk. I consider these the equivalent of 1 year CDs. Since they have been outpacing 1 year CDs lately, I think they have done reasonably well lately. Keeping pace with inflation is the only reason I plow $10k a year in them along with deferring the taxes on interest. If I were a few years younger, I would invest 10k in yearly EE bonds as they will double in value if you hold 20 years, which equates to north of 3.5% a year if held to duration.

 

[imoldernu]

Individual - Savings Bond Wizard

Currently, with the Bureau of Labor Statistics artificial CPI rate being so low, the formula keeps the interest rates low, and the only saving grace for I Bond holders, was the base rate of the time the bonds were issued.

Our 2001 and 2003 bonds are paying 6.01% and 4.38% respectively.

In 2008, when the CPI was higher, the same bonds were paying 8.31% and 6.43%



The FAQ for I Bonds is here:
Individual - I Savings Bonds

Here's the formula for calculating the interest rate.

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]

The Fixed rate is determined by the Secretary of the Treasury. The current rate has been Zero (0%) for the past two years. When we bought in 2001, the fixed rate was 3.4%.

If the CPI should rise to 4%, our composite rate would be

3.4% +8.0% +1.4% total 12.8%

At the time we were buying, one person was allowed a total of $30,000... today, $15,000. (per year)

We're going to hold on, and hope that the BLS will some day be honest about "REAL" inflation rates. (subject for another thread)

 

[pb4uski]

Your return has been ~ 4.3%.

PV = 100
FV = 133
Nper = 6.79 years (10/15/2005-7/29/2012)

 

[BigE]

One additional advantage of I bonds over CDs and most other fixed income options is the ability to defer taxes. I'm still working (booh, hissss) and I would take it on the chin if I had to pay taxes yearly on this. I plan on cashing in the I bonds selectively after retirement in the most tax efficient manner.

 

[imoldernu]

One additional advantage of I bonds over CDs and most other fixed income options is the ability to defer taxes. I'm still working (booh, hissss) and I would take it on the chin if I had to pay taxes yearly on this. I plan on cashing in the I bonds selectively after retirement in the most tax efficient manner.

Excellent point... we accidentally used our savings to avoid income taxes totally... In fact, for three years, could have used up more of our exemptions.
Just now, getting into the deferred stuff. Will still not have much in taxes.

Helps being NSR (not so rich).

 

[wanaberetiree]

Just checked value of my i-bond issued 10/2005, up almost 33%. Holding for ~16 years, that only 2% a year. I know some periods were 0%, but i sure thought the average would have been closer to 3 or 4%. Currenly pays 2.2% . They are what they are, if inflation kicks up, will be happy i have it.

I've had mine since 2001 and I think it was more then 4% on average, not too bad and with tax advantage. BTW, there was only one month on 11/1/09 when interest payment was 0.

 

[teejayevans]

BTW, there was only one month on 11/1/09 when interest payment was 0.

But that rate is for 6 months, not 1.
TJ

 

[perrytime]

wow, how embarassing I can't do simple math any more. Feel much better about I bonds now.

 

[wanaberetiree]

But that rate is for 6 months, not 1.
TJ

I-bonds INFLATION RATE was -2.78% from May 1, 2009

For my I-bonds that I started buying in 2001 there was 1 months when I actually got 0 monthly interest, all others were only positive.

 

[pb4uski]

wow, how embarassing I can't do simple math any more. Feel much better about I bonds now.

"Stuff" happens.