Bond fund is down 4% YTD?

[Retireby45ish]

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Originally Posted by pb4uski Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that. Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

I didn’t know about the ability to gift to your spouse. So, can you also buy, say, the 2025 and 2026 allocations? And as you say they would get the current rate? It seems like if this is possible it’s a loophole in buying a bunch of these for your spouse…having the interest earning clock start now on them even if they only pick them up in a year or two or three? I’m sure I’m missing or misunderstanding something here?

I haven’t bought any of these because the 10k per person per year would be so small that it wasn’t worth the trouble. But the ability to get 7% on, say, 80k right away might be worth the effort.

Follow up: Did a bit of research via boggles and found this:

https://www.bogleheads.org/forum/viewtopic.php?t=306297

[oldtimer]

Quote:

Originally Posted by pb4uski Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that. Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

One negative is you are locking in the 0% fixed rate for future years.

[pb4uski]

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Originally Posted by oldtimer One negative is you are locking in the 0% fixed rate for future years.

How do you get that? 0% real, true... but you will inflation and any ibonds that you buy before the end of April will get 7.12% annualized for the first 6 months and the May reset rate (rumored to be a minimum of 5%) for the second 6 months. After 1 year you can redeem with a 3-month early withdrawal penalty.

Everything that I buy today the 0% real rate is only really locked in for 1 year... even the 2023 tranche of ibonds in the gift box. OTOH, if the inflation adjustment continues to be better than UST and CDs then it would be foolish to not take advantage of it.

It is a slam dunk no-brainer.

What is your better option for bonds with no credit risk?

[Magus]

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Originally Posted by Chuckanut FWIW, I have been through several market declines in the area of 40% in my life. I don't really want to have to sell during such a badly damaged market so I can pay the rent and put food on the table. I am thinking that over 4-6 years, I could buy enough Ibonds to cover several years of withdrawals from my total market melt down emergency fund. It would be an inflation protected emergency fund. After all, I am going to keep some funds aside for a serious emergency. Why not make it inflation protected? I could do worse, and probably have.

Great strategy and I agree and am working on the same thing...would like to get at least 2 years of expenses in i-bonds plus keep 6 months cash on hand.

[Magus]

Quote:

Originally Posted by pb4uski Generally agree, but a married couple could buy $40k today... $10k each for their 2022 limit and $10k each for their spouse as a gift that would be held in a gift box and delivered in 2023 as their 2023 purchase allocation. For all, the one year clock would start and they would get the 7.12% annualized rate for the first six months they hold it and the May reset rate (~5% or more from what I'm reading) after that. Actually, if you wanted to you could even buy your 2024 allocation today and put it in the gift box... so that would be $60k for a couple.

Plus add $20k if you did some last year like a lot of us did.

[pb4uski]

Yes, we did $20k in late 2021, $20k in early 2022, $20k in gifts in 2022 that we'll deliver to each other in early 2023 and $5k in paper i-bonds with our 2021 tax refund... so $65k in total at that juicy 7.12% annualized rate.

I'm tempted to do another $20k of gifts for our 2024 allowance, but that is a bit far out for my liking.

[Linney]

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Originally Posted by pb4uski Yes, we did $20k in late 2021, $20k in early 2022, $20k in gifts in 2022 that we'll deliver to each other in early 2023 and $5k in paper i-bonds with our 2021 tax refund... so $65k in total at that juicy 7.12% annualized rate.

Ditto.

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Originally Posted by pb4uski I'm tempted to do another $20k of gifts for our 2024 allowance, but that is a bit far out for my liking.

Same here too.... for now. We'll have a really good idea of what the next 6 month variable rate will be in mid-April, two weeks before the official rate announcement on May 1st. So I am going to wait until late April to make the call on purchasing gift I-Bonds for delivery in 2024. I'll take a look at the new rate, how inflation is going, the situation in Europe, and make the call.

I keep hoping things will improve and I won't feel the need to make that purchase. But right now my sentiment is rather pessimistic and I've been thinking about which account I'm going to pull $20K from in order to make another purchase