Interest on iBonds

[lem1955]

When does interest on iBonds begin to show up on TreasuryDirect? I bought a $10K iBond 11/10/2021 and so far it still shows the bond is $10K.

 

[Gumby]

When does interest on iBonds begin to show up on TreasuryDirect? I bought a $10K iBond 11/10/2021 and so far it still shows the bond is $10K.

It will show after May 1, 2022


From the Treasury Direct website:

How do I bonds earn interest?

An I bond earns interest monthly from the first day of the month in the issue date. The interest accrues (is added to the bond) until the bond reaches 30 years or you cash the bond, whichever comes first.

The interest is compounded semiannually. Every six months from the bond's issue date, interest the bond earned in the six previous months is added to the bond's principal value, creating a new principal value. Interest is then earned on the new principal.

You can cash the bond after 12 months. However, if you cash the bond before it is five years old, you lose the last three months of interest. Note: If you use TreasuryDirect or the Savings Bond Calculator to find the value of a bond less than five years old, the value displayed reflects the three-month penalty; that is, the amount of the penalty has been subtracted already.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm

 

[JARON46]

When does interest on iBonds begin to show up on TreasuryDirect? I bought a $10K iBond 11/10/2021 and so far it still shows the bond is $10K.

March 1, it should show your original $10,000 plus 1 month of interest.

The interest is always 3 months short until you have held the bond for 5 years.

 

[Gumby]

March 1, it should show your original $10,000 plus 1 month of interest.

The interest is always 3 months short until you have held the bond for 5 years.

Interest is compounded semi-annually. See the quote from Treasury Direct above. So it won't show any interest until May 1. and then it will show only $10,178, because it automatically takes off three month's interest until you have held for 5 years. Let's assume that the interest reset rate for April 1, 2022 is 6.6%. Then, on November 1, 2022, lem1955 should see his I bond principal as $10,526.87, which is calculated at follows

$10,000 + 7.12%/2 = 10,356.00 (+interest from 11/01/21 to 4/30/22)

$10,356 + 6.60%/2 = 10,697.74 (+interest 5/1/22 to 10/31/22)

-$10,356 x 6.6%/4 = -170.87 (-interest penalty from 8/1/22 to 10/31/22)


So, principal value shown on 11/1/22 will be $10,526.87

 

[JARON46]

Interest is compounded semi-annually. See the quote from Treasury Direct above. So it won't show any interest until May 1. and then it will show only $10,178, because it automatically takes off three month's interest until you have held for 5 years. Let's assume that the interest reset rate for April 1, 2022 is 6.6%. Then, on November 1, 2022, lem1955 should see his I bond principal as $10,526.87, which is calculated at follows

$10,000 + 7.12%/2 = 10,356.00 (+interest from 11/01/21 to 4/30/22)

$10,356 + 6.60%/2 = 10,697.74 (+interest 5/1/22 to 10/31/22)

-$10,356 x 6.6%/4 = -170.87 (-interest penalty from 8/1/22 to 10/31/22)


So, principal value shown on 11/1/22 will be $10,526.87

I think what above is referring to is compound interest, every 6 months you start earning interest on the new principle which includes the interest the bond has earned for the last six months.

 

[lem1955]

Thank you all!

 

[pb4uski]

Interest is compounded semi-annually. See the quote from Treasury Direct above. So it won't show any interest until May 1. and then it will show only $10,178, because it automatically takes off three month's interest until you have held for 5 years. Let's assume that the interest reset rate for April 1, 2022 is 6.6%. Then, on November 1, 2022, lem1955 should see his I bond principal as $10,526.87, which is calculated at follows

$10,000 + 7.12%/2 = 10,356.00 (+interest from 11/01/21 to 4/30/22)

$10,356 + 6.60%/2 = 10,697.74 (+interest 5/1/22 to 10/31/22)

-$10,356 x 6.6%/4 = -170.87 (-interest penalty from 8/1/22 to 10/31/22)


So, principal value shown on 11/1/22 will be $10,526.87

Intereresting, I didn't know that they showed the surrender value. But even if you surrendered after 1 year, you would still have earned 5.27%... much better than a 1-year CD in Nov 2021!

 

[gt5059b]

You can use the following to see how much your I-bond is worth (this ignores the 3 month penalty):

https://eyebonds.info/ibonds/index.html

 

[Gumby]

I think what above is referring to is compound interest, every 6 months you start earning interest on the new principle which includes the interest the bond has earned for the last six months.

As the Treasury Direct website explains, the interest also is credited every 6 months, not continuously, so the principal value shown on Treasury Direct site will jump up every six months, but not in between. If you want to account for interest on a monthly basis in your own spreadsheet, you certainly may.

 

[JARON46]

I have a lot of I Bonds, I track them pretty closely, they go up every month. Not every 6 months

 

[Gumby]

I have a lot of I Bonds, I track them pretty closely, they go up every month. Not every 6 months

I will defer to your experience. But what they describe on their website is crediting and compounding every six months.

 

[zaqxsw]

The interest will show up after the 3rd month. I bought in October and the first interest showed up Feb. 2. I believe it will show up every month now. We'll see next week.

Yes, the interest is only added to the previous balance every 6 months for compounding calculations.

 

[11522914]

I have a lot of I Bonds, I track them pretty closely, they go up every month. Not every 6 months

This has been my experience also.

 

[Linney]

When Gumby notes that the I-bond interest is credited every 6 months ----increasing the principal, so that higher value compounds in the next cycle----that statement is correct. However, I don't know anywhere on the Treasury Direct website that displays the current principal value of your I-Bonds. It's not too hard to figure it out manually. But if someone knows where that amount is shown on the website, I'd be curious to know that.

I've only seen Treasury Direct display the original purchase amount + the current cash-out value (which has the 3 month penalty applied until the 5 year mark). I also see the cash-out value change every month starting 3 months after purchase.

 

[Mulligan]

March 1, it should show your original $10,000 plus 1 month of interest.



The interest is always 3 months short until you have held the bond for 5 years.

Jaron, yes, they impound last 3 months interest. I bought 10k in September, and my first accrual of interest showed up in January.