I bonds

[NoiseBoy]

Does anyone have an opinion on whether or not the current base rate of 0.1% will stay in effect in November? And yeah, I get the fact that's it seems pretty silly to worry about a whopping tenth of a percent. Still.....

[Koolau]

I have stopped buying I-Bonds as they pay virtually no interest anymore and also because the interest calculation depends on a rigged system which certainly does not reflect MY inflation rate - not even close. Now that you can buy so little and must do it net-based, it's even more of a pain for us dinosaurs. BUT, there was a time, back in the early 2000's when these instruments were a good deal. They had a decent underlying interest rate PLUS the COL kicker. I still have the ones I bought back then. So far, I have protected them (as in not cashing them in) as if they were part of my Roth funds. I-Bonds are so flexible - allowing you to "titrate" how much taxable money you want to receive since only the gain is taxed. One of my financial regrets is that I didn't start purchasing I-Bonds sooner (and more). The original concept fit in very nicely with my financial philosophy (relatively low stock allocation, with lots of "safe" cash instruments.) Now I look at new I-Bonds as more trouble than they are worth - but that's just me as YMMV.

[retiredunder50]

I purchased I bonds from the beginning of the program until 2011 as the fixed rate components had decayed to nothing from a high of about 3.6%. The inflationary component has some of the early bonds still yielding around 6% which is always income tax free in the state and federal income tax free for qualified education expenses. This was a decent, stress-free way to save towards the kids' college education; now, not so much.

[Alan]

Quote:

Originally Posted by burch64 I have been buying I Bonds since year 2000. I have accumulated interest of 145K

Only 14 years to go before the first bonds mature and stop earning interest

[Koolau]

Quote:

Originally Posted by Alan Only 14 years to go before the first bonds mature and stop earning interest

Yeah, I keep wondering if I'll be "with it" enough to remember to cash them in when they mature. Of course, I could easily be dead by then, too.

[retiredunder50]

Cashing paper I bonds is not a joy. One needs to fill out the info on the back and sign. It's a trivial level of effort except when you are doing it for 40-60 bonds at a time for tuition payments. The credit union tellers panic when when they see me because it takes them nearly an hour to process the stack of bonds. Like you, I'm also still keeping the 'high' fixed rate ones until they mature - who could have guessed that locking in on fixed rates of 3.x% + y% inflation component would be better than CDs, savngs, checking,... and even a market index for a long period of time (http://savings-bond-advisor.com/i-bo...tock-market/)?

[burch64]

I sold a bunch of I-Bonds in 2005 that had a fixed rate of 1%. But who knew at that time that 1% plus inflation would be good rate of return.

[Koolau]

Quote:

Originally Posted by retiredunder50 Cashing paper I bonds is not a joy. One needs to fill out the info on the back and sign. It's a trivial level of effort except when you are doing it for 40-60 bonds at a time for tuition payments. The credit union tellers panic when when they see me because it takes them nearly an hour to process the stack of bonds. Like you, I'm also still keeping the 'high' fixed rate ones until they mature - who could have guessed that locking in on fixed rates of 3.x% + y% inflation component would be better than CDs, savngs, checking,... and even a market index for a long period of time (http://savings-bond-advisor.com/i-bo...tock-market/)?

Heh, heh, one of the reasons I quit purchasing I-Bonds was that our last batch, purchased in person at my credit union, took over an hour to purchase - including the time 3 levels of CU employee had to spend figuring out the process. I'm sure you are right that the paper process to cash is a real pain as well. BUT, I can hold the paper in my hands and don't have to count on some gummint web site to make it all work. IIRC, even if you hold paper, you can STILL use the gummint web site to cash them (I know you can look them up on line to determine their current value because I did that - once.) YMMV

[ShokWaveRider]

I am sitting on PenFed 3% CDs till 2019

[brewer12345]

Quote:

Originally Posted by ShokWaveRider I am sitting on PenFed 3% CDs till 2019

Heh, 5% until 2021.

[FIREd]

Quote:

Originally Posted by brewer12345 Heh, 5% until 2021.

Ditto. I can't believe I have been holding those CDs for nearly 6 years already. Time flies!

[brewer12345]

Quote:

Originally Posted by FIREd Ditto. I can't believe I have been holding those CDs for nearly 6 years already. Time flies!

I keep hoping the idiots that run that place will make similar mistakes again soon...

[HtownRose]

"I-Bonds are so flexible - allowing you to "titrate" how much taxable money you want to receive since only the gain is taxed."

I'd like to hear more on this. Please & thank you!

[jazz4cash]

Quote:

Originally Posted by brewer12345 Heh, 5% until 2021.

High Five!!!

[Koolau]

Quote:

Originally Posted by HtownRose "I-Bonds are so flexible - allowing you to "titrate" how much taxable money you want to receive since only the gain is taxed." I'd like to hear more on this. Please & thank you!

Let's say you suddenly need $50K in cash (maybe a downpayment on vacation house.) You have $150K in face value I-Bonds with 3 different maturity dates. Each maturity date has a different amount of accrued interest. Let's say batch one was the oldest and the $50K face now is worth $100K. Batch two has $50K face now worth $75K and Batch three is very recent (over one year old) and is worth $52K. If you are in a very low tax bracket, you might choose to use some or all of your oldest I-Bonds (maybe cash in $50K leading to $25K taxable.) But say you are on the "line" between the 15% bracket and the 25% bracket. You cash in the newer bonds and have a taxable "event" of less than $2K. You can play this among the three batches to "titrate" the amount of taxable income you are willing to receive in a given year, thus paying the tax rate you desire. Naturally, this isn't foolproof, but it does give you options if you have bought a series of different maturity I-Bonds such as I have.

YMMV

[zesty]

Quote:

Originally Posted by Koolau I have stopped buying I-Bonds as they pay virtually no interest anymore and also because the interest calculation depends on a rigged system which certainly does not reflect MY inflation rate - not even close.

LOL, let me guess - shadowstats?

[Golden sunsets]

Quote:

Originally Posted by retiredunder50 I purchased I bonds from the beginning of the program until 2011 as the fixed rate components had decayed to nothing from a high of about 3.6%. The inflationary component has some of the early bonds still yielding around 6% which is always income tax free in the state and federal income tax free for qualified education expenses. This was a decent, stress-free way to save towards the kids' college education; now, not so much.

Does anyone know if "qualified education expenses" include grandchildren?


Sent from my iPad using Early Retirement Forum

[RE2Boys]

Qualified education expenses of you, spouse, and any children you can claim as a dependent on that year's tax rerun.

Sent from my HTC VLE_U using Early Retirement Forum mobile app

[HtownRose]

Good stuff ~ thank you! I wish I had bought the smallest available denominations so as to be able to spread out the taxes.

[Golden sunsets]

Quote:

Originally Posted by RE2Boys Qualified education expenses of you, spouse, and any children you can claim as a dependent on that year's tax rerun. Sent from my HTC VLE_U using Early Retirement Forum mobile app

Oh darn. Thanks.