Saving Bonds Wizard

[lawman]

I have some I-Bonds that I keep track of on the Saving Bond Wizard Program..I log in the bond and it calculates my rate, yield and gain..I know I pay a penalty if I cash one before it is five years old but I still don't understand the rate and yield as listed..I have the following I-bonds with the following rates and yields..Anyone care to explain

issue date: 05/2000.....
rate: NA
yield: 6.62%

issue date: 04/2001
rate 8.4%
yield 6.26%

issue date: 2006
rate: 6.35%
yield: 4.05%

I can understand that on the 2006 bonds my yield would be lower due to the penalty if I cashed them now but I don't understand the rates and yields of the older bonds.

 

[WilliamG]

I find this pretty straightforward....

Individual - I Savings Bonds Rates & Terms

 

[lawman]

I guess my question would be:
Does the indicated yield give the overall yield to date of the bond including penalties?

Or does the yield just refer to a six month period?

 

[thefinancebuff]

Rate is what the bond is currently earning. Yield is what the bond has earned (annualized) since you bought it, taking into consideration the penalty.

 

[ziggy29]

Rate is what the bond is currently earning. Yield is what the bond has earned (annualized) since you bought it, taking into consideration the penalty.

Yep. And someone can look at a bond that's about to turn five years old and observe a sudden jump in yield as soon as it turns five. That's because the yield no longer reflects a penalty for redemption.

 

[lawman]

gotcha! thanks guys.....I loaded up on them years ago and glad I did!

 

[Bikerdude]

gotcha! thanks guys.....I loaded up on them years ago and glad I did!

Me too. Although the yield is going to take a hit for 6 months.

 

[lawman]

Me too. Although the yield is going to take a hit for 6 months.

That's okay...They've been my best investment and I think in a couple of years they will shine as the government monetizes all this debt...

 

[Sparky]

So, the consensus is, hang on for 6 months of 0% interest? Or sell and go to a cd for 1.2%? I'm unsure what to do.

 

[Bikerdude]

So, the consensus is, hang on for 6 months of 0% interest? Or sell and go to a cd for 1.2%? I'm unsure what to do.

I guess that would depend on your base rate going forward. I-bonds at worst will match (official) inflation plus they are tax deferred investments.

 

[shotgunner]

They may also be state tax exempt

In my case interest earned on US Savings Bonds is exempt from New Hampshire's Dividends and Interest Tax of 5%. Which is applied to amounts over $2400 for singles filers and $4800 for married.

 

[ziggy29]

I guess that would depend on your base rate going forward. I-bonds at worst will match (official) inflation plus they are tax deferred investments.

Actually the best scenario for I bonds is high deflation. You have a high rate of real return (even at 0% nominal yield) with absolutely no taxes.

Of course, it's not the best outcome for our economy, but that's another can o' worms...