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Old 08-31-2014, 11:49 AM   #21
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Originally Posted by Tortoise View Post
FIREd is correct about partial redemptions of electronic i-bonds.

From the Treasury Direct Redeeming (Cashing in) I Bonds web page:
Another good reason to register any older paper US Gov't bonds on Treasury Direct.
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Old 08-31-2014, 12:12 PM   #22
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I stand corrected, but the point effectively still stands.

You missed out on the big payout, Lars, fixed was .02% a few months ago. I have been buying the full allotment allowed for 5-6 years now. But since I missed out on the high fixed rate payouts, I question if I have been doing the wrong thing. Since this is money I will not spend I think I should have just been putting the money in 10 year brokered CDs.


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Old 08-31-2014, 12:12 PM   #23
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Originally Posted by audreyh1 View Post

How easy to redeem? If from the bank where you originally bought - easy. Otherwise a medallion signature may be required.
I have redeemed an I-bond from Treasury Direct - the cash was swept into my linked bank account with a simple click of the mouse.
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Old 08-31-2014, 12:32 PM   #24
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The only problem with I-bonds today is a) the fixed portion is zero and b) you can only buy small amounts. Still, very happy I backed the truck up back in the day when you get $120,000 per person (electronic and paper 60,000 each) and could turbo charge the return by buying with a cash rebate credit card. Man those were the good ole days...
+1
We started in 2001... with the max. (at that time $60K/person)
Current per $10K to 2014

10000 2001
13452 Inflation
16387 DJIA
21736 Ibond
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Old 08-31-2014, 01:44 PM   #25
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You missed out on the big payout, Lars, fixed was .02% a few months ago. I have been buying the full allotment allowed for 5-6 years now. But since I missed out on the high fixed rate payouts, I question if I have been doing the wrong thing. Since this is money I will not spend I think I should have just been putting the money in 10 year brokered CDs.


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Yes, but look at it this way: a 10 year brokered CD will pay, what, 2.5%? 2.75%? This while exposing you to lots of market volatility plus you have to pay cash on the barrelhead taxes every year. The I bond currently yields 1.94%, has no market volatility, allows you to defer taxes and you never have to pay state taxes on the income.
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Old 08-31-2014, 02:22 PM   #26
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Yes, but look at it this way: a 10 year brokered CD will pay, what, 2.5%? 2.75%?
They have been coming down with the recent slide in yields, but I bought a 3.44% YTM 10 year brokered CD (secondary market) in my tax deferred account last Friday.
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Old 08-31-2014, 02:25 PM   #27
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Yes, but look at it this way: a 10 year brokered CD will pay, what, 2.5%? 2.75%? This while exposing you to lots of market volatility plus you have to pay cash on the barrelhead taxes every year. The I bond currently yields 1.94%, has no market volatility, allows you to defer taxes and you never have to pay state taxes on the income.

It was 3.35% when I checked last Friday, Brewer. I don't know what they paid 5 years ago as I have only tracked them the past couple. Either way it's no quick way to the Penthouse! I just keep thinking if IBonds continue to pay in the 1.5%- 2.25% range for several more years, it would have to take a significant increase in the back 5 years to beat 3.35%. I will never sell them either way but I am probably making a false comparison. The 10 year CD is a long term "investment". I don't know if the zero fixed IBonds could be considered as such, though currently I am for better or worse.


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Old 08-31-2014, 03:21 PM   #28
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It was 3.35% when I checked last Friday, Brewer. I don't know what they paid 5 years ago as I have only tracked them the past couple. Either way it's no quick way to the Penthouse! I just keep thinking if IBonds continue to pay in the 1.5%- 2.25% range for several more years, it would have to take a significant increase in the back 5 years to beat 3.35%. I will never sell them either way but I am probably making a false comparison. The 10 year CD is a long term "investment". I don't know if the zero fixed IBonds could be considered as such, though currently I am for better or worse.


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The interest rate risk in low coupon, long maturity brokered CDs scares the crap out of me, so I don't buy that stuff. I find it a lot better to either hide out in I bonds or wait for Pen Fed to get stupid and pick them off.
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Old 08-31-2014, 04:02 PM   #29
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DW and I purchase I bonds on a weekly basis. We don't come close to max. annual limit. We've been buying I-bonds for years via treasurydirect.gov so we've built up a reasonable amount of cash value. Our weekly contributions are adjusted each year (usually up) to account for big ticket auto repairs, roof on the house, new water heater, etc. When we need to redeem... a few clicks of the mouse and within a business day or two the money is in our checking account.

I don't know if it was mentioned in earlier posts but you have to hold the bond for a year before it can be redeemed. It may be possible to redeem early with a penalty (of the interest only).

Keep in mind when redeeming that you don't want to sell the bond just prior to the interest being paid. I could be wrong on that but I think the interest is paid periodically and there's sort-of an ex-dividend date associated with redeeming the bonds. I'm sure somebody here will elaborate if they haven't already.
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Old 08-31-2014, 04:21 PM   #30
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Yes, but look at it this way: a 10 year brokered CD will pay, what, 2.5%? 2.75%? This while exposing you to lots of market volatility plus you have to pay cash on the barrelhead taxes every year. The I bond currently yields 1.94%, has no market volatility, allows you to defer taxes and you never have to pay state taxes on the income.
And if inflation and interest rates go up, the I-Bond interest will go up, too. The CD interest will stay put, and if you need to sell before maturity you'll take a hit on the value of the CD.
Not so much of a factor with CD's bought directly. If you sell before maturity (because you need the $$ or want the higher rates) the lost interest typically ain't much at present rates.
I-Bonds seem to be an okay place for fixed income allocations today. But let's all make a pledge to nag each other to climb aboard if we ever see the I-Bond fixed component at 2%+ again. I've got some at the old 3%+ fixed component rate, and the only thing bad about them is I doubt I could ever make myself sell them until they hit 30 yrs.
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Old 08-31-2014, 05:27 PM   #31
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And if inflation and interest rates go up, the I-Bond interest will go up, too. The CD interest will stay put, and if you need to sell before maturity you'll take a hit on the value of the CD.
Not so much of a factor with CD's bought directly. If you sell before maturity (because you need the $$ or want the higher rates) the lost interest typically ain't much at present rates.
I-Bonds seem to be an okay place for fixed income allocations today. But let's all make a pledge to nag each other to climb aboard if we ever see the I-Bond fixed component at 2%+ again. I've got some at the old 3%+ fixed component rate, and the only thing bad about them is I doubt I could ever make myself sell them until they hit 30 yrs.

Beat me over the head with a steel pipe if I don't load up max with 2%+ again! I certainly don't know anything, but I got this feeling that 2 years from now those 10 year CDs will be 2.5% or less and I will be wondering why I didn't load up on them when I could have. Just like 4 years ago I refused to buy 5 year 3.75% CDs because that was way too low. And then 3 years from now our govt bonds will be paying what Germany and Japan's are and we are still writing rates gotta go up sometime!


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Old 08-31-2014, 10:54 PM   #32
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Have you ever redeemed an ibond? Is it a simple process?


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Part if my inheritance was $300k in treasuries, notes and bills. For some reason dad didn't buy I bonds. I've been managing them through treasury direct, and the process is very simple. You can also research interest rates and all the rules that apply to any type of US government investment. Buying, redeeming and reinvesting is very simple.

You don't need to open an account to research the products offered. For the I bonds, they are 30 year bonds that are designed to be held 5 years or more. If you sell early you forfeit the last 3 months interest. Per what I just read on the website.


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Old 09-01-2014, 06:43 AM   #33
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Good feedback from all, this is a great place to get realistic common sense financial info!


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Old 09-01-2014, 12:10 PM   #34
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This subject was also mentioned at: Mutual Fund Observer Discussions

See TIPS Back in Vogue and "TIP" toeing through the world of bonds..... Same poster.
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Old 09-01-2014, 12:52 PM   #35
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If you have access to a stable value fund in your retirement accounts it makes an excellent alternative to CDs and I-Bonds.

Stable value funds preserve principal, give competitive interest rates that aren't locked in for many years like CDs, and you can get at you money easily too. They don't have the inflation indexing of I-bonds but the interest rate will track the prevailing rates.
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Old 09-01-2014, 04:35 PM   #36
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The only problem with I-bonds today is a) the fixed portion is zero and b) you can only buy small amounts. Still, very happy I backed the truck up back in the day when you get $120,000 per person (electronic and paper 60,000 each) and could turbo charge the return by buying with a cash rebate credit card. Man those were the good ole days...
True, but DW and I are buying our $10k per year each and getting another $5k as a tax refund, so we are creating our little I bond ladder. We're up to $90k of bonds in four years. At a minimum, we'd like to accumulate ten years' worth of bonds and then review.
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Old 09-01-2014, 04:54 PM   #37
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I do have a stable value fund in my 401k but that is primarily all stock since i wont be touching it for almost 20 years. I did not want to use that account for that purpose.


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Old 09-01-2014, 05:20 PM   #38
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If you have access to a stable value fund in your retirement accounts it makes an excellent alternative to CDs and I-Bonds.

Stable value funds preserve principal, give competitive interest rates that aren't locked in for many years like CDs, and you can get at you money easily too. They don't have the inflation indexing of I-bonds but the interest rate will track the prevailing rates.
We have 3 stable value funds in our various 401K plans and use them all as well as I bonds and CD ladders.
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Old 09-01-2014, 06:13 PM   #39
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I do have a stable value fund in my 401k but that is primarily all stock since i wont be touching it for almost 20 years. I did not want to use that account for that purpose.


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You can use the stable value fund in a 401k as a place to park cash and as an alternative to, or compliment to, CDs, savings accounts and I-Bonds. Right now I have 17% of my portfolio in my 457 stable value fund so that I have enough capital to live off between now when I'm 53 and 59.5 independent of what happens in the stock market where most of my other assets are invested.
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Old 09-01-2014, 09:52 PM   #40
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Part if my inheritance was $300k in treasuries, notes and bills. For some reason dad didn't buy I bonds. I've been managing them through treasury direct, and the process is very simple. You can also research interest rates and all the rules that apply to any type of US government investment. Buying, redeeming and reinvesting is very simple.

You don't need to open an account to research the products offered. For the I bonds, they are 30 year bonds that are designed to be held 5 years or more. If you sell early you forfeit the last 3 months interest. Per what I just read on the website.


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The reality is they need to be held 15 months to gain the interest of the first year, it would be at the end of the 15th month that they would give the value of the second 6 month inflation adjustment. So it would make most sense to plan on holding 15, 21 or 27 months, etc.
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