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Old 09-21-2022, 06:38 PM   #1021
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The video discusses the math and the range for the Nov. iBonds and concludes it is around the 7.8% - 8.6% range, with 8.4% as the most probably number. She drops the 8.4% number around 6:49 minutes of the video.
You misunderstood what she said. Her prediction for the November I-Bond rate was 5.9%-7.6%. She correctly stated that the November-April rate would be 6% if the index remained the same in October. The 7.8%-8.6% range was the blended annual rate if you bought I-Bonds today combining the current 6-month rate with the projected next 6-month rate.
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Old 09-22-2022, 07:57 AM   #1022
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Rob Berger predicts 6.03%
....
To touch on an issue he raised in his video, gasoline prices have fallen 5.7% in the four weeks from 8/22/22 to 9/19/22. I don't expect a big change in the next week. So that has a moderating effect on inflation.


https://www.eia.gov/petroleum/gasdiesel/
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Old 09-23-2022, 07:02 AM   #1023
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I just finished funding my child's I-Bonds for the year to grab the current 9+% six-month rate.

These deals are costing me money.
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Old 09-23-2022, 08:45 AM   #1024
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I just finished funding my child's I-Bonds for the year to grab the current 9+% six-month rate.

These deals are costing me money.

Iíve seen this mentioned before. Do you get the rate you buy at for 6 months?

Sorry for the dumb ?. Iíve just started paying attention to the I bonds.

Thanks
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Old 09-23-2022, 09:23 AM   #1025
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Iíve seen this mentioned before. Do you get the rate you buy at for 6 months?

Sorry for the dumb ?. Iíve just started paying attention to the I bonds.

Thanks
Murf
Yes. Then every 6 months it sets to the new rate.
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Old 09-23-2022, 10:22 AM   #1026
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Iíve seen this mentioned before. Do you get the rate you buy at for 6 months?

Sorry for the dumb ?. Iíve just started paying attention to the I bonds.

Thanks
Murf
So if you buy before the end of October then you'll get 9.62% (annualized rate) for the first 6 months, the rate announced in November (expected to be ~6%) for the second 6 months and then the announced rate very 6 months thereafter.

No withdrawals in first year, then 3 month early withdrawal penalty for next 4 years, then no withdrawal penalties. Max of $10k/person/year but you can buy more than $10k as a gift for future delivery and get today's juicy rates and a head start on the holding periods.

DW and I bought each other gifts for our 2023, 2024 and 2025 allowances earlier this year. You can also buy up to $5k a year with your tax refund.
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Old 09-23-2022, 10:40 AM   #1027
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So if you buy before the end of October then you'll get 9.62% (annualized rate) for the first 6 months, the rate announced in November (expected to be ~6%) for the second 6 months and then the announced rate very 6 months thereafter.
Isn't the rate starting in November actually announced (or at least known) by October 10th or so? So you can buy in October after that date, already knowing what the interest rate for the next 12 months will be.
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Old 09-23-2022, 10:43 AM   #1028
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Isn't the rate starting in November actually announced (or at least known) by October 10th or so? So you can buy in October after that date, already knowing what the interest rate for the next 12 months will be.
That is my consideration as well, but it will push us out to 2026 redemption time.
Need a crystal ball.
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Old 09-23-2022, 11:25 AM   #1029
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Isn't the rate starting in November actually announced (or at least known) by October 10th or so? So you can buy in October after that date, already knowing what the interest rate for the next 12 months will be.
Probably, but it is a nit that doesn't really change the decision unless the announced rate is very different from 6%.
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Old 09-23-2022, 12:58 PM   #1030
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Isn't the rate starting in November actually announced (or at least known) by October 10th or so? So you can buy in October after that date, already knowing what the interest rate for the next 12 months will be.
The rates are not arbitrarily set, there is a defined formula that takes each of the monthly inflation rates into account. we know 5 our of the 6 months used in the formula but we don't know the last month. The video some posts back discusses the range of possible returns depending on that last month of data. So we know there is "no way" the November rate will equal or beat the current 9.62%

But you are right that there is no risk in waiting for mid-October till the next rate is published and make your decision then.
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Old 09-23-2022, 01:39 PM   #1031
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The rates are not arbitrarily set, there is a defined formula that takes each of the monthly inflation rates into account. we know 5 our of the 6 months used in the formula but we don't know the last month. The video some posts back discusses the range of possible returns depending on that last month of data. So we know there is "no way" the November rate will equal or beat the current 9.62%

But you are right that there is no risk in waiting for mid-October till the next rate is published and make your decision then.

But do it before the last week of October, so that the funds will clear before the end of the month.
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Old 09-23-2022, 01:54 PM   #1032
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But you are right that there is no risk in waiting for mid-October till the next rate is published and make your decision then.
Thanks. That was the point I was trying to make, I probably was not clear. Waiting until after the rate is known (but, as Gumby points out, not until the every end of October) does not hurt you. The fact that it will not be as high as it current is does matter much to me - for our situation anything above 5% in this environment is great.
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Old 09-25-2022, 08:42 AM   #1033
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So, if Inflation is down to say an average of 5% in 2023 vs. around 8.5% in 2022, will the IBond rate go back to 0.00% in the April 2024 reset ?
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Old 09-25-2022, 09:22 AM   #1034
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Here is a good I-bond video on how to maximize family returns.

Also recommend following the Wealthion Youtube channel.

https://youtu.be/nQUfCcXRNts
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Old 09-25-2022, 09:27 AM   #1035
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So, if Inflation is down to say an average of 5% in 2023 vs. around 8.5% in 2022, will the IBond rate go back to 0.00% in the April 2024 reset ?
The rate will reset on May 1, 2024. It will be based on the following formula:

(CPI-U Mar 24/CPI-U Sep 23)-1)x200) = new APR in May 24

Here are some important CPI-U numbers

Sep 2021 = 274.301
Dec 2021 = 278.802
Mar 2022 = 287.504
Aug 2022 = 296.171

So, if we assume 8.0% average annual inflation in 2022, that means Dec 2022 CPI-U will be (Dec 21 CPI x 1.08) = 301.106 And if we assume an average of 5% inflation in 2023, then than means the Dec 2023 CPI will be (301.106 x 1.05) = 316.161. Finally, if we assume an average inflation rate of 3% in 2024, the December 24 CPI will be (316.161 x 1.03) = 325.646

Assume that the CPI increases by an equal monthly number over the next 4 months (Sep-Dec 2022). So, ((Dec 22 CPI - Aug 22 CPI)/4) = 1.234 per month. That means Sep 22 CPI would be (296.171 + 1.234) = 297.405 And the reported annual inflation rate in Sep 22 will be (297.405/274.301) = 1.084 = 8.4%

Assume that the 5% of increase of CPI in 2023 is also evenly spread through the year. So, each month in 2023, the CPI increases by ((316.161 - 301.106)/12) = 1.255. That means the Mar 2023 CPI will be (301.106 + (1.255 x 3)) = 304.871 And the reported annual inflation rate in March 23 will be (304.871/287.504) = 1.0604 = 6.04%. That also means the Sept 23 CPI will be (301.106 + (1.255 x 9) = 312.401 and the reported annual inflation rate will be 5.04%

Finally, assume the 3% increase in CPI for 2024 is also evenly spread over the year. That means the CPI increase will be ((325.646 - 316.161)/12) = 0.790 per month. So the Mar 24 CPI would be (316.161 + (.790 x 3) = 318.531

From that, we can calculate the May 2024 I-bond reset rate will be (318.531/312.401) -1) x 200) = 3.92%

If inflation goes down quicker, the rate will be lower. I personally think 8.4% annual inflation rate in September is too high, that the average inflation rate in 2022 will be slightly less than 8% and that the average in 2023 will be less than 5%.
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Old 09-25-2022, 07:22 PM   #1036
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Thanks! So I guess, it is still worth it to hold iBonds till the end of 2024.

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The rate will reset on May 1, 2024. It will be based on the following formula:

(CPI-U Mar 24/CPI-U Sep 23)-1)x200) = new APR in May 24

Here are some important CPI-U numbers

Sep 2021 = 274.301
Dec 2021 = 278.802
Mar 2022 = 287.504
Aug 2022 = 296.171

So, if we assume 8.0% average annual inflation in 2022, that means Dec 2022 CPI-U will be (Dec 21 CPI x 1.08) = 301.106 And if we assume an average of 5% inflation in 2023, then than means the Dec 2023 CPI will be (301.106 x 1.05) = 316.161. Finally, if we assume an average inflation rate of 3% in 2024, the December 24 CPI will be (316.161 x 1.03) = 325.646

Assume that the CPI increases by an equal monthly number over the next 4 months (Sep-Dec 2022). So, ((Dec 22 CPI - Aug 22 CPI)/4) = 1.234 per month. That means Sep 22 CPI would be (296.171 + 1.234) = 297.405 And the reported annual inflation rate in Sep 22 will be (297.405/274.301) = 1.084 = 8.4%

Assume that the 5% of increase of CPI in 2023 is also evenly spread through the year. So, each month in 2023, the CPI increases by ((316.161 - 301.106)/12) = 1.255. That means the Mar 2023 CPI will be (301.106 + (1.255 x 3)) = 304.871 And the reported annual inflation rate in March 23 will be (304.871/287.504) = 1.0604 = 6.04%. That also means the Sept 23 CPI will be (301.106 + (1.255 x 9) = 312.401 and the reported annual inflation rate will be 5.04%

Finally, assume the 3% increase in CPI for 2024 is also evenly spread over the year. That means the CPI increase will be ((325.646 - 316.161)/12) = 0.790 per month. So the Mar 24 CPI would be (316.161 + (.790 x 3) = 318.531

From that, we can calculate the May 2024 I-bond reset rate will be (318.531/312.401) -1) x 200) = 3.92%

If inflation goes down quicker, the rate will be lower. I personally think 8.4% annual inflation rate in September is too high, that the average inflation rate in 2022 will be slightly less than 8% and that the average in 2023 will be less than 5%.
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Old 09-25-2022, 08:01 PM   #1037
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Thanks! So I guess, it is still worth it to hold iBonds till the end of 2024.
I will hold them as long as the yield is competitive with 1-3 year GSE bonds, and I expect that will be for at least a few years.... time will tell.
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Old 09-25-2022, 08:12 PM   #1038
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If we take the Fed at its word as far as further rate increases, 2 year Treasuries may go above 5% in 2023, just as the I-bond rate falls below 5%. I might switch if that happens.
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Old 09-26-2022, 04:09 AM   #1039
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Here is a good I-bond video on how to maximize family returns.

Also recommend following the Wealthion Youtube channel.

https://youtu.be/nQUfCcXRNts
+1

Thank you for posting this. I did not know about the gift box strategy. This is one of the most useful posts I have ever read.
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Old 09-26-2022, 10:23 AM   #1040
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+1

Thank you for posting this. I did not know about the gift box strategy. This is one of the most useful posts I have ever read.
Seems like you haven't read the entire thread, as this has been discussed in detail by many.
We have gifted to each other a few years out into the future.
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