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05-03-2021, 04:52 PM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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I Bond rate 5/2021
Composite rate = 3.54%
Fixed rate = 0.00%
Inflation rate = 1.77%
https://www.treasurydirect.gov/indiv...esandterms.htm
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05-03-2021, 06:44 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Mar 2012
Posts: 3,925
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We have a thread on this from a few weeks ago. Most folks are very happy/excited about the new rate.
I opened a couple of new Treasury Direct accounts specifically to take advantage of this, and the expectation that the inflation component will be really good for the next couple years. Then the interest rate component will move higher when Powell has had enough inflation or economic forces push him. In any case, compared to what the options are for risk free return at this time, the I Bonds appear to be the way to go.
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05-03-2021, 06:51 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,514
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for small amounts of cash, yes .
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05-03-2021, 06:59 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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I Bond rate 5/2021
Quote:
Originally Posted by njhowie
We have a thread on this from a few weeks ago. Most folks are very happy/excited about the new rate.
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That’s right, it was/is an interesting read. The projection was right on target too!
I’ll hold off until November and see what the inflation reports say (and interest rates). It’s been a few years since I added to my I bonds.
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05-03-2021, 07:16 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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It’s great for my existing IBonds.
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Retired since summer 1999.
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05-03-2021, 07:49 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,464
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Hmm. I kind of expected the fixed rate to be above zero based on recent bond rates. I have plenty of zero-fixed-rate iBonds. Need to decide if it is worth buying any more, but they are paying better than most nominal government bonds.
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FI and Semi-ER March 24, 2017
Consulting to stay engaged
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05-04-2021, 04:47 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Mar 2012
Posts: 3,925
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Keep in mind that interest from I Bonds is free from state taxes.
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05-04-2021, 05:53 AM
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#8
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Recycles dryer sheets
Join Date: Dec 2018
Posts: 209
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Quote:
Originally Posted by steelyman
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A few questions from an ibond newbie:
1. The rate is 3.54% if nothing happens with inflation?
2. How much can someone deposit?
3. How do you invest? Fidelity or similar?!
4. How much can you invest?
5. Are you locked in at all? X years?
6. Maybe someone can run through an example for me…theirs wasn’t very clear.
I must be missing something or this seems too good to be true.
Thanks
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05-04-2021, 05:53 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jun 2013
Posts: 2,518
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We are fortunate to have a slug from the early 00's with a 1% fixed component, so this new combined rate for the next 6 months is very welcome. But I also recall a number of periods where the inflation component was 0, so I'm less impressed by just one 6 mo period with a 4.6% rate. We have never withdrawn any funds from our holdings and would be unlikely to do so with any new purchases, so I can't see us adding to the portfolio. Additions are now limited by year as well, so it would be only small deployments of new funds.
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"Luck favors the prepared mind"
Pasteur
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05-04-2021, 06:02 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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Quote:
Originally Posted by Retireby45ish
A few questions from an ibond newbie:
1. The rate is 3.54% if nothing happens with inflation?
2. How much can someone deposit?
3. How do you invest? Fidelity or similar?!
4. How much can you invest?
5. Are you locked in at all? X years?
6. Maybe someone can run through an example for me…theirs wasn’t very clear.
I must be missing something or this seems too good to be true.
Thanks
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There’s a FAQ on that page that answers common good questions like these as well as links to pages with more information. I’ve always been confused by their example of how the composite rate is calculated but apart from that it’s straightforward.
Key takeaways for me are: a) max $10,000 per calendar year and b) you’ll want to set up a Treasury Direct account (easy to do) linked to your bank account.
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05-04-2021, 09:15 AM
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#11
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Full time employment: Posting here.
Join Date: Oct 2014
Location: Tucson
Posts: 796
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OK, I need some explanation on the interest I received this week. I have a 10k Ibond issued 11/1/2020 and the stated rate is 3.54%. However, after the six months, i only had $40 added in interest (.4%). What am I missing?
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05-04-2021, 09:18 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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3 months interest penalty is not accrued to your iBond until the 5 year period passes?
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Retired since summer 1999.
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05-04-2021, 09:23 AM
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#13
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Full time employment: Posting here.
Join Date: Oct 2014
Location: Tucson
Posts: 796
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I saw that in the FAQ- you are correct. But even factoring that (half of interest not showing) in, my rate would only then be .8%
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05-04-2021, 11:23 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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The iBond inflation rate from 11/1/20 was 0.84% for 6 months and fixed rate 0.
The 3.54% rate starts this month, and that is the annualized rate. You’ll actually be getting 1.77% over the next six months.
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Retired since summer 1999.
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05-04-2021, 11:23 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2011
Location: NC Triangle
Posts: 5,807
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I Bond rate 5/2021
Quote:
Originally Posted by erkevin
I saw that in the FAQ- you are correct. But even factoring that (half of interest not showing) in, my rate would only then be .8%
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The inflation rate for 11/1/20 is listed in the table as 0.84%.
[ADDED] (Last two posts crossed in the ether)
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05-04-2021, 11:44 AM
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#16
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Full time employment: Posting here.
Join Date: Oct 2014
Location: Tucson
Posts: 796
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Thank you. That makes perfect sense
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05-04-2021, 11:55 AM
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#17
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Recycles dryer sheets
Join Date: Jul 2019
Location: Phoenix
Posts: 328
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The interest rate on I-bonds issued from 11/1/20 to 4/30/21, for the first 6 months after the issue date (the first day of the month in which the bond was purchased) is 0.84*2 (inflation based) + 0 (fixed rate) = 1.68%. 6 months after the issue date, the rate will change to 1.77*2 (inflation based) + 0 (fixed) = 3.54%. The inflation based part of the rate changes every 6 months, but the fixed part never changes.
Until 5 years from the issue date, if you cash out, you forfeit the latest 3 months of interest. The calculator on savingsbonds.gov knows this.
So for your 10K bond with an issue date of 10/1/20:
1. It is currently earning 3.54%.
2. Through 4/30/21, it earned 6 months of interest at 1.68 which is $84 or so. However if you cashed out today (actually you can't cash out until one year, but never mind that) you would forfeit 3 months of interest. So it shows the value higher by only about $42.
3. The current interest rate is 3.54% and it is earning it. But over the next 3 months, the redemption value will only go up by 1.68 / 12 % per month, as months 4 thru 6 of interest come out of the forfeiture window.
4. Starting in month 9, for 6 months after that, the redemption value will start going up by 3.54/12 % per month.
5. If you hold until 5 years, there will be a jump in the value when the forfeiture period ends.
I hope this makes sense. The calculator knows all this stuff.
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05-04-2021, 12:57 PM
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#18
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Recycles dryer sheets
Join Date: Oct 2008
Location: Pinehurst, NC
Posts: 65
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We have 11 ($5k face value) I Bonds purchased around 2000 with fixed rates of 3.4% and 3.6%. I wish that I had bought more.
A few years ago I was thinking that I needed a plan to sell these over time to avoid selling them all in one year (putting me into income brackets that would affect Medicare costs). Given the interest rates of these bonds vs the current interest rate environment, I wonder if it might be best to let these things mature at 30 years and 'trickle sell them' after they stop earning interest. But 9 years from now is a long time and things may look a whole lot different in a few years.
dave
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05-04-2021, 01:40 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by DaveLeeNC
We have 11 ($5k face value) I Bonds purchased around 2000 with fixed rates of 3.4% and 3.6%. I wish that I had bought more.
A few years ago I was thinking that I needed a plan to sell these over time to avoid selling them all in one year (putting me into income brackets that would affect Medicare costs). Given the interest rates of these bonds vs the current interest rate environment, I wonder if it might be best to let these things mature at 30 years and 'trickle sell them' after they stop earning interest. But 9 years from now is a long time and things may look a whole lot different in a few years.
dave
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That won’t work, because the interest accrued becomes taxable the year they mature.
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Retired since summer 1999.
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05-04-2021, 02:54 PM
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#20
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Recycles dryer sheets
Join Date: Oct 2008
Location: Pinehurst, NC
Posts: 65
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Quote:
Originally Posted by audreyh1
That won’t work, because the interest accrued becomes taxable the year they mature.
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Audrey - thanks. I was unaware of that. It could have been quite a 1099-INT shock!
dave
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