I Bond interest rate set for next 12 months

[Mulligan]

For the small potato investors like me, it looks like the I Bond interest rate if you buy before Oct. 31 is 4.6% for first 6 months and then will reset the following 6 months for 3.06%. Since I maxed out my 10k already, I will go ahead and get 5k more in January for the 3.06 %. Although we aren't talking big money here, there is little downside with getting 3.06 % for 6 months even if it resets to 0% the following 6 months. Looks like Ziggy who had the high fixed rate bought 10 years ago is going to make a killing on the I Bonds for the next year.

 

[d]

with bank interest rates where they are these days, the I-Bond is mighty attractive

 

[Alan]

For the small potato investors like me, it looks like the I Bond interest rate if you buy before Oct. 31 is 4.6% for first 6 months and then will reset the following 6 months for 3.06%. Since I maxed out my 10k already, I will go ahead and get 5k more in January for the 3.06 %. Although we aren't talking big money here, there is little downside with getting 3.06 % for 6 months even if it resets to 0% the following 6 months. Looks like Ziggy who had the high fixed rate bought 10 years ago is going to make a killing on the I Bonds for the next year.

Nice to know. Like you I have already maxed out my $10k, but will plan to buy again in January. I also wish I'd been like Ziggy and bought early. However I did buy $30k in 2003 and they are currently earning 5.83% and the $20k I bought in 2006 are paying 6.03%. Given the current climate in recent years they have been a nice little haven of stability. (IRR on the 2003 bonds is 3.79% so I ain't gonna get rich on them).

 

[LARS]

But isn't the fixed component still 0.0%?

 

[Alan]

But isn't the fixed component still 0.0%?

I expect it is but where can you find CD's that match this performance? If, in 6 months time the fixed & variable rate goes to 0.0% you can sell the bonds immediately so you will have had 6 months at 4.6% followed by 9 months at 3.06%. If you hold them another 3 months you will have had 6 months at 4.6% followed by 6 months at 3.06% followed by 3 months at 0.0%

I think it is a nice place to park $10k of cash that you may need to use in 12 - 18 months.

 

[Mulligan]

Nice to know. Like you I have already maxed out my $10k, but will plan to buy again in January. I also wish I'd been like Ziggy and bought early. However I did buy $30k in 2003 and they are currently earning 5.83% and the $20k I bought in 2006 are paying 6.03%. Given the current climate in recent years they have been a nice little haven of stability. (IRR on the 2003 bonds is 3.79% so I ain't gonna get rich on them).

You still have plenty of reason to puff your chest out Alan, or I would anyways, with guaranteed 6%. The fat wallet guys said if you held them for 15 months to take the 3 month penalty before withdrawing, you would get 3.09% for 15 months which like you said is good short term money. Speaking of fat wallet, I started reading some of their posts. They will squeeze a penny out of anything. I was reading a thread on them bemoaning the fact of missing the good old days that ended about 3 years ago. According to some they were acquiring as many no transaction fee cash advance credit cards as they could acquire and them putting the money in cd's drawing up to 6%. They would then get more cards to pay the originals ones off and keep the CDs going. One guy said he was making over $18,000 a year on this until cd rates collapsed and 0% offers dried up. What a way to make a living!

 

[Alan]

Speaking of fat wallet, I started reading some of their posts. They will squeeze a penny out of anything. I was reading a thread on them bemoaning the fact of missing the good old days that ended about 3 years ago. According to some they were acquiring as many no transaction fee cash advance credit cards as they could acquire and them putting the money in cd's drawing up to 6%. They would then get more cards to pay the originals ones off and keep the CDs going. One guy said he was making over $18,000 a year on this until cd rates collapsed and 0% offers dried up. What a way to make a living!

That sounds way too much hard work for me. The last of my 'big paying' CD's mature next month at 5%. I might have to hold a little party, or maybe a wake.

 

[riskadverse]

. . . Since I maxed out my 10k already, I will go ahead and get 5k more in January for the 3.06 %. . . .

I believe you can over pay your federal tax witholding (estimated witholding) before December 31 and you can apply the overpayment refund up to $5k for an Ibond dated in 2011 (thus up to 5k beyond your 10k limit in 2011).

 

[Mulligan]

I believe you can over pay your federal tax witholding (estimated witholding) before December 31 and you can apply the overpayment refund up to $5k for an Ibond dated in 2011 (thus up to 5k beyond your 10k limit in 2011).

I always overpay about $4k a year. I have heard you can buy them with your excess withholding, but I just assumed it would count for 2012 when you completed your tax returns. I will have to investigate. Since my pension this year has had it's COLA reduced to 2% a year, I have started a plan of acquiring as many I Bonds as I can as a hedge on inflation against my pension eroding through inflation over the coming decades.

 

[Mulligan]

I believe you can over pay your federal tax witholding (estimated witholding) before December 31 and you can apply the overpayment refund up to $5k for an Ibond dated in 2011 (thus up to 5k beyond your 10k limit in 2011).

I did some research on this through Treasury Direct. Yes, you can buy up to $5k through your tax refund, but the total amount of paper transacted bonds is 5k. Next year they will continue to offer 5k paper I Bonds through your refund, but not at a bank. So you can continue to purchase 10k a year per person, if you buy $5k through TD and $5k through tax refund using form 8888, I believe.

 

[Chuckanut]

Alas, the limit on I bond purchases makes them of limited use to many of us. Interesting, how one Federal product that could really benefit the middle class saver is so restricted. Another example of the scraps given to most citizens while the Big Boys and Girls get the good stuff.

 

[brewer12345]

You still have plenty of reason to puff your chest out Alan, or I would anyways, with guaranteed 6%. The fat wallet guys said if you held them for 15 months to take the 3 month penalty before withdrawing, you would get 3.09% for 15 months which like you said is good short term money. Speaking of fat wallet, I started reading some of their posts. They will squeeze a penny out of anything. I was reading a thread on them bemoaning the fact of missing the good old days that ended about 3 years ago. According to some they were acquiring as many no transaction fee cash advance credit cards as they could acquire and them putting the money in cd's drawing up to 6%. They would then get more cards to pay the originals ones off and keep the CDs going. One guy said he was making over $18,000 a year on this until cd rates collapsed and 0% offers dried up. What a way to make a living!

The British actually have a slang word for the cc float game: stoozing. It was pretty sweet for a while.

I keep a pile of no risk cash and equivalents around. Normally this would all sit in a savings account,but with rates so skinny I had half in longer term CDs (thank you pen fed and navy fed). I recently moved 10k to I bonds and will do another 5 next year. As a cash or short term CD equivalent they are hard to beat.

 

[Alan]

The British actually have a slang word for the cc float game: stoozing. It was pretty sweet for a while.

I keep a pile of no risk cash and equivalents around. Normally this would all sit in a savings account,but with rates so skinny I had half in longer term CDs (thank you pen fed and navy fed). I recently moved 10k to I bonds and will do another 5 next year. As a cash or short term CD equivalent they are hard to beat.

Thanks for the memory Brewer. I had a friend in England who was a keen stoozer for quite a while. I'd completely forgotten that term.

 

[riskadverse]

I did some research on this through Treasury Direct. Yes, you can buy up to $5k through your tax refund, but the total amount of paper transacted bonds is 5k. Next year they will continue to offer 5k paper I Bonds through your refund, but not at a bank. So you can continue to purchase 10k a year per person, if you buy $5k through TD and $5k through tax refund using form 8888, I believe.

I did some further research and I now believe you are correct. The tax refund method looks like it applies to the current year not the previous tax year. Also, if your tax status is married filing jointly, only one "paper" ibond of $5K can be applied for in your refund.

 

[Mulligan]

Thanks for the memory Brewer. I had a friend in England who was a keen stoozer for quite a while. I'd completely forgotten that term.

Well, if CD rates ever head toward 6%, I got this filed away in my head. If the transaction fees are reasonable, I will change my status from retired, to "full time stoozer". I have plenty of CC's willing and able to assist in this endeavor if the chance arises!

 

[brewer12345]

Well, if CD rates ever head toward 6%, I got this filed away in my head. If the transaction fees are reasonable, I will change my status from retired, to "full time stoozer". I have plenty of CC's willing and able to assist in this endeavor if the chance arises!

It was even juicier back in the day in that the transfer fees were generally waived.