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Old 04-23-2019, 05:32 PM   #1
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IBonds

Just a quick review of actual IBond results for 18 years.

IBond 2001 $10,000

2018 comparison
Inflation $14,000
Dow $26,000
IBond $27,000

In the early years, the buy limit was $30,000/person/year.

Something to consider?
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Old 04-23-2019, 06:16 PM   #2
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Quote:
Originally Posted by imoldernu View Post
Just a quick review of actual IBond results for 18 years.

IBond 2001 $10,000

2018 comparison
Inflation $14,000
Dow $26,000
IBond $27,000

In the early years, the buy limit was $30,000/person/year.

Something to consider?
I have a few Ibonds from exactly that year....buttttt, I'm starting to think the tax ramifications will be a real B^&ch...Will cash them out at the 30 year mark and have huge gain as well as MRD on both mine and my DH's IRA's. It won't be pretty. I had planned to use the education exemption to help with taxes but found out from reading this board that GK don't fit the rules in regards to that.
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Old 04-23-2019, 06:29 PM   #3
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Quote:
Originally Posted by imoldernu View Post
Just a quick review of actual IBond results for 18 years.

IBond 2001 $10,000

2018 comparison
Inflation $14,000
Dow $26,000
IBond $27,000

In the early years, the buy limit was $30,000/person/year.

Something to consider?
Where did you get that info?
We purchase 2500.00 in JANUARY 2002 to use as an emergency fund and now they are worth 5019.00.
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Old 04-23-2019, 06:32 PM   #4
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I would love to see more details on this.
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Old 04-23-2019, 06:55 PM   #5
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Confirmed via treasury direct. An iBond purchased 01/2001 for $10,000 paid out $17,456 in interest or 5.6%.

The Dow number is largely uninteresting, but the S&P numbers are interesting:

$10,000 invested in 01/2001 in the S&P 500 is worth $21,658. BUT if you reinvest dividends over that time it is worth $30,604.

Apples to apples is more interesting. Certainly a LOT less risk in I Bonds vs. equities.
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Old 04-23-2019, 06:56 PM   #6
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I would love to see more details on this.
Agree, the numbers donít make sense.
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Old 04-23-2019, 07:21 PM   #7
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Here are my numbers up to the min. To wit:

$15,000 in I-bonds Oct 2001. Had some extra and didn't know what to do with it and had recently heard of I-Bonds somewhere so I figured "What da heck? Let's see what this does".

As of April 2019 $36,774.00
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Old 04-23-2019, 07:25 PM   #8
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Here are my numbers up to the min. To wit:

$15,000 in I-bonds Oct 2001. Had some extra and didn't know what to do with it and had recently heard of I-Bonds somewhere so I figured "What da heck? Let's see what this does".

As of April 2019 $36,774.00
8.3% return.
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Old 04-23-2019, 07:27 PM   #9
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8.3% return.
Those 2001 Ibonds were very near the top of fixed interest rates paid on the bonds.
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Old 04-23-2019, 07:31 PM   #10
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Originally Posted by imoldernu View Post
Just a quick review of actual IBond results for 18 years.

IBond 2001 $10,000

2018 comparison
Inflation $14,000
Dow $26,000
IBond $27,000

In the early years, the buy limit was $30,000/person/year.

Something to consider?
Inflation 2.3%
Dow 9.2%
I Bond 9.8%
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Old 04-23-2019, 07:35 PM   #11
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Those 2001 Ibonds were very near the top of fixed interest rates paid on the bonds.
3% coupon rate on mine at time of issue
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Old 04-23-2019, 07:40 PM   #12
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Originally Posted by ivinsfan View Post
Those 2001 Ibonds were very near the top of fixed interest rates paid on the bonds.

Yes, the early I bonds had a huge fixed rate plus inflation.. so yes they made sense...


Today, not so much...


I would love to see someone do a 1, 5, 10, 15 and 20 year comparison using the same metric as the OP... I would bet that the 20 beats (only because the OP said so... I would not think so if not posted), but the rest probably not..




EDIT to add... OH, the DOW does not include reinvested dividends... makes a big difference... after that it probably does not look anywhere as good...
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Old 04-23-2019, 07:57 PM   #13
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FWIW, I had $5k of EE bonds purchased 08/1986 that were cashed for $23,064.00 in 08/2016. This is a CGR = 5.23% (annual), 5.16% annualized considering monthly compounding.
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Old 04-23-2019, 08:05 PM   #14
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FWIW 2: The iBonds of 05/2000 through 10/2000 have the highest fixed component, 3.60%. The next highest are the six months prior and six months after at 3.40%.

After that the party was over, and the fixed rate came down quickly. I was buying a little monthly, but managed to buy a bunch more in Sept 2001 (yes that month) while the fixed rate was still a reasonable 3.00%.
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Old 04-23-2019, 08:37 PM   #15
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I bought $30K under my SSN and another $30K under wifes in 2001. The tax return in 2031 will not be pretty. Very roughly, each is up about 250% of face value as of late 2018. Need to study if I need to spread the redemptions over several years.

Purchased more in 2002 but fixed portion of rate dropped quickly so stopped purchases. With rates near zero for so long, kept the I bonds.

I'll be 81 when they mature, maybe use for LT care??
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Old 04-24-2019, 06:02 AM   #16
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Originally Posted by imoldernu View Post
Just a quick review of actual IBond results for 18 years.

IBond 2001 $10,000

2018 comparison
Inflation $14,000
Dow $26,000
IBond $27,000

In the early years, the buy limit was $30,000/person/year.

Something to consider?
Picking an arbitrary date for such a comparison is never wise.

I Bonds have their purpose. I wouldn't list total return as one of them.
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Old 04-24-2019, 06:04 AM   #17
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I would love to see more details on this.
https://www.bogleheads.org/forum/viewtopic.php?t=271631
https://www.bogleheads.org/forum/viewtopic.php?t=164121
https://www.bogleheads.org/forum/viewtopic.php?t=256637

Many other threads over there if you do a search.
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Old 04-24-2019, 06:08 AM   #18
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Picking an arbitrary date for such a comparison is never wise.

I Bonds have their purpose. I wouldn't list total return as one of them.
+1 They are an inflation hedge. I personally consider any interest above inflation to be a bonus. I'll use them (along with TIPs) to create an inflation adjusted supplemental income stream once I start SS at age 70 that will last approx. 15 years after which we will consider a SPIA if we're still around.
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Old 04-24-2019, 06:53 AM   #19
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My OP was not intended as a suggestion that I Bonds were a preferred investment vehicle, but just a case of what "was". We have others , purchased around that time, that have returned somewhat less, but overall, satisfactory for us, and the reason we bought them.

We have no plans to cash in the bonds, and (though we didn't plan on this at the time) are using them as part of our plan for later Long Term Care that is now on the horizon.

In addition, because our cost of living is low, we have been on the verge of being taxable... (very close)... and because the bonds are not taxable until redemption we have not had to pay any income taxes (State or Federal) since 1989.

I readily confess to being very investment unsavvy, and have a continuing fear of what I remember seeing back in 2008.

Certainly not for everyone, but to date, IBonds have served their purpose for us. The links offered by mrfeh dig in deeper, for specific advantage purposes such as paying for education.
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Old 04-24-2019, 07:23 AM   #20
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+1 They are an inflation hedge. I personally consider any interest above inflation to be a bonus. ...
Absolutely. To compare yields to alternatives is to completely miss the point. TIPS (in our case) and IBonds provide absolutely bulletproof inflation protection. Really, for many of us, runaway inflation is the only thing that could ruin our retirement.

In a calm inflationary environment we accept a slight total return penalty over, say, Treasuries. I consider that difference to be an insurance premium, just like I pay an insurance premium to protect my house. Runaway inflation is a low probability, high impact event. Just like a house fire.
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