The I Bond Thread

[BlueberryPie]

if it matters remember that you will pay taxes on interest for any 0% fixed bond you sell. If they were bought in 2021 or earlier, it probably adds up to over $1000 per $10k depending how long you;ve had it.
In my case I expect my income to be lower next year, so I won't sell until January so that the interest is accrued next year, not this year.

 

[Sunset]

^^^^^^^^
If you have been claiming the I-bond interest each year, then selling it in any one year is not too extreme in extra interest.

 

[BlueberryPie]

people claim interest yearly? I know that's an option but it seems more work than it's worth?

 

[JDARNELL]

This site for the 10/1/21 says to me it should be cashed Jan 2 2024
https://eyebonds.info/ibonds/10000/ib_2021_10.html

BUT.... I'd like someone else to confirm I'm reading this correctly (its the 3rd month of lower interest rates)..

The generalized site location to pick any I bond is: https://eyebonds.info/ibonds/home10000.html

Thanks for confirming. This is how I read it also. Appreciate the new site in the link.

JDARNELL

 

[Sunset]

people claim interest yearly? I know that's an option but it seems more work than it's worth?

I'm sure many don't.

We do.

That's because I'm careful not to set up some tax bombs for later (having already done that before )

Imagine, having an I-bond for 25 years, and now collecting SS and RMD's, so the income is pretty high, Then cash an I-bond, there will be the 25 years of interest suddenly added in for each one cashed.
All while income tax rates may be higher, as they've not been this low for a long time (ever?).

I don't find it that hard, I use a spreadsheet to keep track of each one, and the accumulated interest, and declared interest for each one per year.

 

[audreyh1]

Selling the last of fixed 0% I bonds tomorrow and will deposit funds in VMFXX. I might buy the 1.3% fixed bond in Jan 24.

I have a 0.2% fixed I’ll be replacing. This fixed rate is higher than the first one I bought in 2003. That one is 1.1%.

 

[BlueberryPie]

There is not really such thing as "an" iBond. Even if you bought $10,000 in one shot, you can cash in $2000 and incur the prorated tax right? No different than an IRA. If my taxes are lower in retirement I'm still ahead?
I guess you have to collect at the 30 year maturity so it would be a tax bomb at that time if you don't plan for it like RMDs

 

[audreyh1]

Yes, tax is prorated based on redemption. Partial redemption is allowed, very slick.

 

[audreyh1]

if it matters remember that you will pay taxes on interest for any 0% fixed bond you sell. If they were bought in 2021 or earlier, it probably adds up to over $1000 per $10k depending how long you;ve had it.
In my case I expect my income to be lower next year, so I won't sell until January so that the interest is accrued next year, not this year.

Of course. It’s just a matter of managing which year you deal with the extra interest income. Gotta pay the taxes sooner or later.

 

[jldavid47]

I'm sure many don't.

We do.

That's because I'm careful not to set up some tax bombs for later (having already done that before )

Imagine, having an I-bond for 25 years, and now collecting SS and RMD's, so the income is pretty high, Then cash an I-bond, there will be the 25 years of interest suddenly added in for each one cashed.
All while income tax rates may be higher, as they've not been this low for a long time (ever?).

I don't find it that hard, I use a spreadsheet to keep track of each one, and the accumulated interest, and declared interest for each one per year.

+1


I do the same thing for the same reasons.

 

[MarieIG]

I bought my first I bond last year and will probably sell it after the one year holding period is done. I marked my account for TD to withhold taxes in excess of my current tax bracket. (I am required to pay estimated taxes anyway.)

 

[Chuckanut]

I recently sold my first 0% Ibond. I'll put the cash into some short term CD's and probably buy a new 1.3% Ibond next year.

FYI, my Ibonds are mostly my emergency stash of money. They are also a small hedge in the case of very high inflation. Due to the current increase in the fixed TIPS rate, I don't think I need to increase the amount I hold in Ibonds. But, I would like to get the new higher fixed rate for those bonds I retain.

YMMV. Take what you wish and leave the rest.

 

[Gumby]

I will buy for the gift box in April, for the same reason.

 

[beowulf]

Unfortunately, as a retired person, it’s a tough decision to sell 0% fixed rate I bonds to buy new ones with a higher fixed rate. We are subject to IRMAA, which for you young whippersnappers means once we go over a certain income, we become subject to significantly higher Medicare premiums for my wife and myself. My calculations show, that between the extra taxes from cashing the bonds and the extra Medicare premiums, it would take many years to recover that money. OTOH, I did buy the max amount of I bonds for my wife and I in 2022 and 2023. We are hoping this becomes our kids problem and not ours.

 

[Zona]

For those of you who have sold old bonds and repurchased for the higher fixed rate, I have a question about the funding logistics. I have a 10K ibond purchased in Nov 2021. I haven't bought any ibonds yet this year. I was hoping to sell this one (and forfeit 3 months of 3.38% interest, I'm fine with that) and immediately purchase a 10k bond with the 1.30% fixed component to hold longer term. I've never sold any of my ibonds before within Treasury Direct before.

My question is: can I sell the existing bond and then repurchase immediately in TD with the same funds? Or will I need to sell, wait for the money to move from Treasury Direct to my bank account and then purchase, moving funds back to TD from my bank account?

Apologize for the newbie question, but despite several attempts I cannot for the life of me figure out how to phrase this to get google to give me a relevant search result.

 

[Sunset]

For those of you who have sold old bonds and repurchased for the higher fixed rate, I have a question about the funding logistics. I have a 10K ibond purchased in Nov 2021. I haven't bought any ibonds yet this year. I was hoping to sell this one (and forfeit 3 months of 3.38% interest, I'm fine with that) and immediately purchase a 10k bond with the 1.30% fixed component to hold longer term. I've never sold any of my ibonds before within Treasury Direct before.

My question is: can I sell the existing bond and then repurchase immediately in TD with the same funds? Or will I need to sell, wait for the money to move from Treasury Direct to my bank account and then purchase, moving funds back to TD from my bank account?

Apologize for the newbie question, but despite several attempts I cannot for the life of me figure out how to phrase this to get google to give me a relevant search result.

Since an i-bond bought within the month is considered to be purchased on the 1st of the month, and any sold is considered to be sold on the 1st of the month. There is no panic to time it.

You could sell one today, and next week buy a new one and not miss out on any interest.

That is how I understand it, and will be happy to hear it's correct or be corrected. !!

 

[mrfeh]

Since an i-bond bought within the month is considered to be purchased on the 1st of the month, and any sold is considered to be sold on the 1st of the month. There is no panic to time it.

You could sell one today, and next week buy a new one and not miss out on any interest.

That is how I understand it, and will be happy to hear it's correct or be corrected. !!

You are correct.

And to answer the other question 2 posts above - no need to transfer funds to your bank account.

 

[Zona]

Excellent, thank you for the quick replies! Helpful to know for future reference that the funds don't leave Treasury Direct immediately upon a sale.

 

[Sunset]

Excellent, thank you for the quick replies! Helpful to know for future reference that the funds don't leave Treasury Direct immediately upon a sale.

It's a choice you make.

 

[Gumby]

It's a choice you make.

Correct. You can have the proceeds transferred to your bank account or held by the Treasury in a "Certificate of Indebtedness". The COI does not pay interest, but is a good vehicle for holding money until you purchase a new I-bond from Treasury Direct.

 

[BlueberryPie]

Can you cash out (transfer tot the bank) any unused amount? For example if you sell the "entire iBond" you bought in 2021 you may end up with $11250 (making it up). So can you repurchase $10K and then transfer the remaining $1250 to your bank account?
Or maybe you sell $10K from the initial iBond, leave the remaining $1250 to keep growing without penalty, etc ..?

 

[Gumby]

Can you cash out (transfer tot the bank) any unused amount? For example if you sell the "entire iBond" you bought in 2021 you may end up with $11250 (making it up). So can you repurchase $10K and then transfer the remaining $1250 to your bank account?
Or maybe you sell $10K from the initial iBond, leave the remaining $1250 to keep growing without penalty, etc ..?

Yes, I believe you can purchase a new I-bond for $10k and then send the remainder ($1125 in your hypothetical) to your bank account. You can also can partially redeem I-Bonds.

 

[Markola]

Vanguard Bond Investing Commentary

I hope this isn’t pw protected. Basically,

“ For those who remained invested in bond funds throughout 2022 and 2023, selling bonds now may be a poor investment decision. In fact, now may be the most attractive time to invest in bonds in more than a decade.”

https://investor.vanguard.com/investor-resources-education/campaign/are-bonds-a-good-investment-right-now?cmpgn=RIG:EM:eNewsletter:TMCOM:11102023:XXX:XXX:C016383_TLC_BondCon_Nov_EM_029245:Inform:XXX:XXX:XXX:CLwAnyOS01:XX&CMPSP=9349012295&EMGRP=RT050143712

 

[lawman]

I don't want to hi-jack the thread but since it's been brought up can someone tell me my options for limiting my tax liability? I have a lot of I bonds that are coming up on 25- 29 years old. I too have the IRMMA problem..The best I can think of is to begin cashing a few at a time starting this year or next and just hold my nose while paying my Medicare premiums . Any suggestions?

 

[Sunset]

I don't want to hi-jack the thread but since it's been brought up can someone tell me my options for limiting my tax liability? I have a lot of I bonds that are coming up on 25- 29 years old. I too have the IRMMA problem..The best I can think of is to begin cashing a few at a time starting this year or next and just hold my nose while paying my Medicare premiums . Any suggestions?

This is why I decided to pay the interest each year, to avoid a tax bomb at the end.

Your idea to spread the selling over years does reduce the effect, but if you are going to go into the IRMMA problem, then better to sell enough to fill up the level of IRMMA you are in as that may decrease the number of years of selling and the number of years at that IRMMA level.

Also of course, sell any stocks that are losers, and if you like them, buy them back in 31 days or something similar immediately.