Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-13-2021, 12:40 PM   #61
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,296
This article https://www.depositaccounts.com/blog...savings-bonds/ on the Deposit Accounts Blog, goes through a mathematical example of what the rate of return would be based on point of entry and exit. It doesn't address your point Audrey, but I'd be willing to bet that the author is thinking that a combination of 6 months of the current rate plus 6 months of the higher rate to come will yield more than 6 months of the new rate and 6 months of whatever the rate will be next May. I'm thinking the assumption is inflation will have tamed by next spring and if so the May rate may not match the current rate??


He also points out that buying near the end of October will lower the net early withdrawal penalty, as interest will be earned for the whole month on 11-1, when the holding has only be owned for a few days.
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-13-2021, 01:18 PM   #62
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: NC Triangle
Posts: 4,995
Ill be in for $10K first week of November!
__________________

steelyman is offline   Reply With Quote
Old 10-13-2021, 02:45 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 7,124
Quote:
Originally Posted by Golden sunsets View Post
Wow and for those of us with a fixed rate component (ours are is 1%), the rate will be 8.1154%. I'll take it.
IIRC mine from the early '00s were around 3% plus inflation. That would mean 10% with the inflation figure on top.

Wait! Why am I celebrating inflation??
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-13-2021, 02:59 PM   #64
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,296
Quote:
Originally Posted by Koolau View Post
IIRC mine from the early '00s were around 3% plus inflation. That would mean 10% with the inflation figure on top.



Wait! Why am I celebrating inflation??
Yep. When you use your verb "were", (past tense) did you mean yours are or do you not own them any longer?


Re inflation, I will attest that our personal inflation rate is no where near the 8%+/- that we'll earn.
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Old 10-13-2021, 03:04 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 7,124
Quote:
Originally Posted by Golden sunsets View Post
Yep. When you say your "were" did you mean yours are or do you not own them any longer?


Re inflation, I will attest that our personal inflation rate is no where near the 8%+/- that we'll earn.
Sorry, I meant when I purchased them, it was around 3%. Yes, I still have them!! I'll hang on until the 30th year unless something unexpected happens - like dying.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-13-2021, 04:14 PM   #66
Recycles dryer sheets
LarryMelman's Avatar
 
Join Date: Jul 2019
Location: Phoenix
Posts: 243
Quote:
Originally Posted by njhowie View Post
So, 264.877 to 274.31 is 3.56%, suggesting new I Bond rate beginning November 1 will be 7.12%.
If the fixed rate stays at zero. Which we won't know till 11/1.
LarryMelman is offline   Reply With Quote
Old 10-13-2021, 04:32 PM   #67
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,458
Quote:
Originally Posted by LarryMelman View Post
If the fixed rate stays at zero. Which we won't know till 11/1.
Do you like betting on the 00? That's about the odds of it going to 0.1%, or anything above 0.0%.

But yes, you are correct technically. We won't know for certain until Nov 1. What we can say right now is that the absolute minimum will be 7.12%.
njhowie is offline   Reply With Quote
Old 10-13-2021, 04:53 PM   #68
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,296
Quote:
Originally Posted by Koolau View Post
Sorry, I meant when I purchased them, it was around 3%. Yes, I still have them!! I'll hang on until the 30th year unless something unexpected happens - like dying.
Great deal. Who would have thought that the returns could be so much higher than inflation.
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Old 10-13-2021, 05:23 PM   #69
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 677
Quote:
Originally Posted by njhowie View Post
What we can say right now is that the absolute minimum will be 7.12%.
How do you know with absolute certainty that the fixed rate won't go negative? The Treasury has never issued an I-bond with a negative fixed rate, but I'm unaware of anything preventing them from doing so.

I see that Vanguard's TIPS fund, VIPSX, has a current yield of -1.85%. If the Feds want to make I-bond yields comparable to TIPS, one would expect a fixed rate of either -1% or -2%
karluk is offline   Reply With Quote
I Bond rate 5/2021
Old 10-13-2021, 05:28 PM   #70
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: NC Triangle
Posts: 4,995
I Bond rate 5/2021

I thought the I bond composite rate is not allowed to go below zero.
__________________

steelyman is offline   Reply With Quote
Old 10-13-2021, 05:37 PM   #71
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 677
Quote:
Originally Posted by steelyman View Post
I thought the I bond composite rate is not allowed to go below zero.
The composite rate combines the fixed rate with the inflation adjustment. The Feds have promised never to allow the composite rate to go below zero, but appear to have remained completely silent on whether the fixed rate could ever go negative.

"
karluk is offline   Reply With Quote
Old 10-13-2021, 05:49 PM   #72
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,458
Quote:
Originally Posted by karluk View Post
How do you know with absolute certainty that the fixed rate won't go negative? The Treasury has never issued an I-bond with a negative fixed rate, but I'm unaware of anything preventing them from doing so.

I see that Vanguard's TIPS fund, VIPSX, has a current yield of -1.85%. If the Feds want to make I-bond yields comparable to TIPS, one would expect a fixed rate of either -1% or -2%

Think what you like.
njhowie is offline   Reply With Quote
Old 10-13-2021, 06:07 PM   #73
Recycles dryer sheets
LarryMelman's Avatar
 
Join Date: Jul 2019
Location: Phoenix
Posts: 243
Quote:
Originally Posted by njhowie View Post
What we can say right now is that the absolute minimum will be 7.12%.
Perhaps. Probably.
Some people are saying that the fixed part of the rate could be negative. I don't expect that to ever happen. But what do I know.
LarryMelman is offline   Reply With Quote
Old 10-20-2021, 08:14 AM   #74
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 677
Quote:
Originally Posted by Trailwalker View Post
Anyone have guidance on whether to buy these before or after November 1st? Tipswatch says before, and I'm not sure I understand why.
I bought the maximum amount of i-bonds this summer, reasoning that the 3.54% was way above the return on comparable safe investments and even back then it was already looking as if the November inflation adjustment would be well above 5%.

It's not as clear cut now. True, you can buy in October and get the same deal I found attractive this summer, but the problem is that you are committing yourself to a fifteen month holding period. The Treasury will allow you to cash your i-bonds in 12 months, but the penalty would cost you three months interest at 7.12%. To get the full benefit of the 7.12% rate, you need to hold for 15 months, so that the penalty is three months assessed at the May, 2022 inflation adjustment (which will presumably be smaller than 7.12%). Purchases made after November 1 don't have this problem. You can cash them in after 12 months and get a full six months at 7.12%.

One reason to buy now rather than wait until November is that it's a sneaky way to get more money invested at 7.12%. I-bond interest compounds semiannually, so $10,000 invested at 3.54% grows to $10,177 before the 7.12% begins. Wait until November and you have only $10,000 invested.

I mentioned in another post the possibility of the Feds reducing the fixed rate below zero in November. I, like most people, don't expect a negative fixed rate, but this is an expectation, not a guarantee. If you have any concern about a negative fixed rate you should buy in October.

Over the years I have bought i-bonds several times after a spike in interest rates and then cashed them in when CPI subsided. That way the three month interest penalty didn't cost me too much. (One time the penalty was 0% for three months, so I lost no money, just had to hold for an extra three months.) I expect to do so again, but perhaps we are in store for a prolonged period of high inflation. I wouldn't mind at all if i-bonds turn out to be a good long term investment, not just a way to get above market interest for a year.
karluk is offline   Reply With Quote
Old 10-20-2021, 05:04 PM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 7,124
Quote:
Originally Posted by karluk View Post

One reason to buy now rather than wait until November is that it's a sneaky way to get more money invested at 7.12%. I-bond interest compounds semiannually, so $10,000 invested at 3.54% grows to $10,177 before the 7.12% begins. Wait until November and you have only $10,000 invested.
Very good point. It's stealth investing!
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-20-2021, 11:12 PM   #76
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 12,317
I think I'm learning something new here.

I bought $10K of I bonds probably in August, I thought I'd get the 3.54% until Nov 1 and then get whatever rate was the new rate.
But now, I'm hearing I'll get the 3.54% for 6 months, and then in Feb get the rate of 7.xx% for 6 months.
And I'll always be behind the new rate by 3 months, but get my full 6 months worth each time.

Have I got that right
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 10-21-2021, 12:39 AM   #77
Recycles dryer sheets
Linney's Avatar
 
Join Date: Nov 2006
Posts: 278
Quote:
Originally Posted by Sunset View Post
I bought $10K of I bonds probably in August..... I'm hearing I'll get the 3.54% for 6 months, and then in Feb get the rate of 7.xx% for 6 months. And I'll always be behind the new rate by 3 months, but get my full 6 months worth each time.

Have I got that right
Yes! You will get 3.54% from Aug-Jan, and then 7.12% from Feb-Jul.

If you buy another $10K in January, you will get a full six months of 7.12% from Jan-Jun, then ??(new rate) from Jul-Dec.

Don't forget that you forfeit the last 3 months of interest if you cash them before 5 years. After that there is no penalty. One tactic some people use is to wait until their I bond is at a very low rate, add 3 months, and then cash them out with minimal-to-no impact.
Linney is online now   Reply With Quote
Old 10-21-2021, 03:45 AM   #78
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 7,124
Quote:
Originally Posted by Linney View Post
Yes! You will get 3.54% from Aug-Jan, and then 7.12% from Feb-Jul.

If you buy another $10K in January, you will get a full six months of 7.12% from Jan-Jun, then ??(new rate) from Jul-Dec.

Don't forget that you forfeit the last 3 months of interest if you cash them before 5 years. After that there is no penalty. One tactic some people use is to wait until their I bond is at a very low rate, add 3 months, and then cash them out with minimal-to-no impact.
Sounds like a reasonable strategy but my SWAG at this point is it will be a long wait for that "very low rate" that will allow cashing out with "minimal to no impact." No crystal ball, here, just looking at empty store shelves, no TP, gas at $4, 100 ships waiting to be unloaded, etc., etc. I think inflation may be here for a few years - or more. I HOPE I'm wrong so YMMV.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-21-2021, 12:52 PM   #79
Recycles dryer sheets
Linney's Avatar
 
Join Date: Nov 2006
Posts: 278
Quote:
Originally Posted by Koolau View Post
....my SWAG at this point is it will be a long wait for that "very low rate" that will allow cashing out with "minimal to no impact." No crystal ball, here, just looking at empty store shelves, no TP, gas at $4, 100 ships waiting to be unloaded, etc., etc. I think inflation may be here for a few years - or more.....
I wouldn't disagree with that SWAG. If IBond rates continue to be high why not continue to hold them and enjoy the higher interest. If/when the rate drops they can be sold at that time. It's a strange kind of win-win, but still a win if you can afford to buy and hold them.

Over the years I built up a ladder of Ibonds so I have a lot of flexibility now. It's like having money spread across deferred IRAs, Roth AND Taxable -- it gives you more knobs to turn to control your income and taxes. I had originally planned to start selling my older Ibonds this year but with these current rates I will hold onto them, buy more in January, and use other funds for living expenses.
Linney is online now   Reply With Quote
Old 10-21-2021, 01:12 PM   #80
Confused about dryer sheets
 
Join Date: Sep 2021
Posts: 5
Thank you all, you smart internet people, I just bought $10,000 and will buy another 10k in January. Ditto for DH.
wearefinishedworking is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 5 (1 members and 4 guests)
Born2Fish
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Potential tax rate increase in 2021 Jim in PA FIRE Related Public Policy 32 12-06-2020 07:27 AM
ACA Rate Increases for 2021 scrabbler1 Health and Early Retirement 5 11-04-2020 02:31 PM
Focused Bond, Bond Mutual Fund, And Bond ETF Questions clobber FIRE and Money 15 05-10-2020 12:10 PM

» Quick Links

 
All times are GMT -6. The time now is 02:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.