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Projected I Bond inflationary component
Old 04-16-2021, 07:37 PM   #1
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Projected I Bond inflationary component

The expected rate for the inflationary component is projected to increase to 3.54% starting May 1.



https://www.mymoneyblog.com/savings-...-may-2021.html
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Old 04-17-2021, 02:43 AM   #2
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+1

at least for the coming year or two, it appears this is the route for CD lovers to go. I'm going to open a couple of Treasury Direct accounts right now for me and DW.
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Old 04-17-2021, 05:52 AM   #3
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but 10k per person limits on purchases makes this a bit unexciting.

Am I missing something?
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Old 04-17-2021, 06:27 AM   #4
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No. Ditto here though I guess that investing $20k/year/couple would add up over the years.
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Old 04-17-2021, 06:41 AM   #5
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Originally Posted by Montecfo View Post
but 10k per person limits on purchases makes this a bit unexciting.

Am I missing something?
You're not missing anything.

If you could lock in a 3% 5 year CD (that was free from state taxes) today for $10k or $20k of your money would you do it? Now, the I-bond yield is not guaranteed past the end of this year. However, there's a very high likelihood that the inflation component will remain at 2%+ going forward for the next few years, while Powell keeps the interest rate at/near 0% through 2023.

With the interest rate + inflation components, it seems the timing for the I-bond is right, for however much you can put in to it.

You may forget, that folks besides those with millions of dollars do participate here and purchase CDs for $10k/$20k or less. Through Treasury Direct the I-bond purchases can be done with as little as $25 and with nice features to do it automatically on a recurring schedule with little/no effort.
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Old 04-17-2021, 06:49 AM   #6
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Originally Posted by Montecfo View Post
but 10k per person limits on purchases makes this a bit unexciting.

Am I missing something?



This isn't actually the limit as of now, it's higher, check the TD website.
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Old 04-17-2021, 06:58 AM   #7
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The limit is 10K per person per year for electronic bonds. You can also purchase paper bonds with your tax refund up to 5K.

It may not be a lot of money to some people but to most it’s significant. If we can get 3+% on 20K each year that a whole lot better than the 0.5% the money market is paying.
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Old 04-17-2021, 06:59 AM   #8
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This isn't actually the limit as of now, it's higher, check the TD website.
You can only get the additional $5000/person/year paper I-bond through your income tax return/refund. To do that, you'd have to have at least $5000/$10,000 of overpayment of taxes. Generally, folks will not have that amount of tax overpayment. So for folks to take advantage of that, I'm guessing you'd have to make estimated payments in the amount of paper I-bonds you'd want to get through the refund process. However, if doing that, you'll lose interest in the period between the time you make the estimated (over) payment and when your tax return is processed. It's really not going to be applicable to most folks and appears to be more an option for how to receive your refund in the event you do have a refund.
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Old 04-17-2021, 07:01 AM   #9
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The limit is 10K per person per year for electronic bonds. You can also purchase paper bonds with your tax refund up to 5K.

It may not be a lot of money to some people but to most itís significant. If we can get 3+% on 20K each year that a whole lot better than the 0.5% the money market is paying.

You'd have to plan ahead to have a tax refund which is why I pointed directly to the website.
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Old 04-17-2021, 07:13 AM   #10
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You can only get the additional $5000/person/year paper I-bond through your income tax return/refund. To do that, you'd have to have at least $5000/$10,000 of overpayment of taxes.
It doesn't have to be $5,000. It's just a maximum of $5,000. Paper bonds are available in $50, $100, $200, $500, and $1,000 denominations.
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Old 04-17-2021, 07:14 AM   #11
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It doesn't have to be $5,000. It's just a maximum of $5,000. Paper bonds are available in $50, $100, $200, $500, and $1,000 denominations.
Of course - I was just responding to getting the limit/maximum.
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Old 04-17-2021, 07:19 AM   #12
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I’m happy to take it on my existing iBonds, but I’ve pretty much given up on buying more. My oldest mature in 2033, my newest in 2049. That’s long enough!
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Old 04-17-2021, 07:19 AM   #13
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Of course - I was just responding to getting the limit/maximum.
Ah, gotcha. Sorry if I misunderstood that. You're correct. Getting the 5K max would mean having a 5K refund. If your refund is smaller (which it hopefully is) you could still get I bonds in a lesser amount.
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Old 04-17-2021, 08:20 AM   #14
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The rate is interesting, but the prospect of buying such small quantities is not appealing IMHO. These and TIPS sadly have been losers generally speaking compared to regular Treasuries.
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Old 04-17-2021, 12:26 PM   #15
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The rate is interesting, but the prospect of buying such small quantities is not appealing IMHO. These and TIPS sadly have been losers generally speaking compared to regular Treasuries.
I seriously doubt regular treasuries (of any maturity) will return anything close to 3% over the remainder of the year. As the linked article indicates, for short-term TIPS, unfortunately, the interest rate component is currently negative, so it too is at a disadvantage to the I-bond.

It's ok that the I-bond is not for you. That doesn't mean it isn't good or isn't right for anyone else.
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Old 04-17-2021, 01:40 PM   #16
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I seriously doubt regular treasuries (of any maturity) will return anything close to 3% over the remainder of the year. As the linked article indicates, for short-term TIPS, unfortunately, the interest rate component is currently negative, so it too is at a disadvantage to the I-bond.

It's ok that the I-bond is not for you. That doesn't mean it isn't good or isn't right for anyone else.
+1

iBonds are far and away the best thing going in the cash or bond (of any duration) space at the moment and I suspect that'll be the case for awhile. Of course I agree than 10-15K a year isn't worth the bother for some folks with large portfolios but for those like myself who are of humbler means a few years of maxing out iBonds purchases provides a nice rainy-day cash stash that's inflation-adjusted and tax-free until redemption. iBonds and online bank CD's are about the only leg up we retail investors have for cash these days so why not take advantage.

TIPS.....forget it, at these levels (IMHO). I do follow this site religiously and highly recommend bookmarking it as the author does a great job of comparing TIPS vs nominal vs iBonds choices in real time.

https://tipswatch.com
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Old 04-17-2021, 01:40 PM   #17
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Looks like $10k will be transferred to TD in early May... I wonder if their website has improved since I last bought I-bonds over 10 years ago...
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Old 04-17-2021, 02:30 PM   #18
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Im my world, once the toothpaste is out of the tube, it's out of the tube.

I'm going to predict such nonsense.
Like with wallstreetbets nonsense, once everyone knows......the premiums vanish!

Good luck & Best wishes....
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Old 04-17-2021, 03:37 PM   #19
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Originally Posted by ivinsfan View Post
You'd have to plan ahead to have a tax refund which is why I pointed directly to the website.
The warning here is that if the scamsters file a fake return, that extra $5000 may go poof until you can prove to the IRS you did not file that return and never got that refund. In my mind it's not a big worry, but people should be aware that it has happened to others and could happen again.

Many of us started out saving an extra $20 here and $50 there just to get the minimum amount to buy that first mutual fund. It ads up. And personally, I would rather give any 'extra' money I earn from an I-bond to my kids than the banks.
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Old 04-17-2021, 04:02 PM   #20
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Iím happy to take it on my existing iBonds, but Iíve pretty much given up on buying more. My oldest mature in 2033, my newest in 2049. Thatís long enough!
You only have to hold them for 5 years to avoid losing any interest.
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