IBonds

[Mulligan]

Re: Returns on I Bonds. Maybe I was too obscure







this was a comparison of a $10,000 bond bought in 2001, when the base rate was 3.4%

Compared to CPI inflation from 2001 to 2014... $13,452

Compared to the DJIA $10,000 in 2001 equals $16287 today

The I Bond is now worth $21736.



Who do ya trust?

No doubt I would love your 3.4% fixed I Bonds. Are you including all the dividends from the Dow the past 13 years though in your calculation? If not I imagine that would change it by a decent amount.


Sent from my iPad using Tapatalk

 

[imoldernu]

No doubt I would love your 3.4% fixed I Bonds. Are you including all the dividends from the Dow the past 13 years though in your calculation? If not I imagine that would change it by a decent amount.


Sent from my iPad using Tapatalk

Point well made... no,

 

[Mulligan]

Point well made... no,

Just curious, not trying to be Mr. Know It All. Besides probably like you, the money I have in IBonds would never have been in the stock market anyways.


Sent from my iPad using Tapatalk

 

[amfox1]

We put $10,000 into Ibonds several years ago as sort of an emergency fund. The problem is the money doesn't grow.

Made me realize that having money sitting idle like this bothers me more than the risk of an emergency or market downturn.

since mid-2011 - 2.26% annualized
since early-2012 - 1.87% annualized
since early-2013 - 1.49% annualized
since early-2014 - 1.71% annualized (includes 0.2% fixed)

These investments are guaranteed and the interest may be tax-deferred at your option (Federal only - no state tax is imposed). To me, they fit the need for an emergency fund.

 

[Nords]

Have you ever redeemed an ibond? Is it a simple process?

Yes also on the partial redemptions. I think Nords has done this.
How easy to redeem? If from the bank where you originally bought - easy. Otherwise a medallion signature may be required.

If the question refers to using TreasuryDirect to redeem electronic bonds then it's simple. Tedious but simple.

If you're asking about paper... especially paper purchased through an employer's payroll deduction bond-buying program... ouch. Do yourself a favor and convert them to an electronic bond, then redeem them that way. The advantages outweigh the hypothetical downsides. Converting may be a time hassle, but it's less time (and lots less hassle) than finding a friendly bank to redeem them for you.

We had EE and I bonds for our daughter's college fund. We cashed those out for her college expenses as soon as we could, and now our TreasuryDirect accounts are empty. We have no intention of ever buying any more bonds, let alone EE or I bonds. My federal pension is the gold-plated equivalent of TIPS or I bonds and we don't need more of that in our asset allocation.

 

[FIYes]

Just went to treasury direct to see what the fixed portion of I bond rates will be November 1. I couldn't find anything. I recall some posters purchasing I bonds at the very end on April because the fixed rate was less favorable beginning in May.

Where do you find the upcoming fixed rate in time to make a buy now or buy later decision?


Sent from my iPad using Early Retirement Forum

 

[Mulligan]

Just went to treasury direct to see what the fixed portion of I bond rates will be November 1. I couldn't find anything. I recall some posters purchasing I bonds at the very end on April because the fixed rate was less favorable beginning in May.

Where do you find the upcoming fixed rate in time to make a buy now or buy later decision?


Sent from my iPad using Early Retirement Forum

It won't be released until the first of the month...Unofficially, the inflation component will be 1.48%. The fixed part isn't released until Nov. 1 I believe. Fixed has been 0%, .02%, and .01% the last 3 times. I would be willing to bet a significant amount of money it will one of those three.


Sent from my iPad using Tapatalk

 

[karluk]

JWhere do you find the upcoming fixed rate in time to make a buy now or buy later decision?

As far as I know, the fixed rate adjustment is a secret which only officials in the Treasury Department know until it is made public at the beginning of November. It's the variable rate that's available early, and it will be 1.47% (plus or minus .01%, depending on how the Treasury handles rounding). It's calculated to be twice the change in CPI as measured from March through September. That number is

2*(238.031-236.293)/236.293 = 1.47%

The new variable rate will be 0.37% lower than the current variable rate of 1.84%. You can still get the higher 1.84% variable rate +0.1% fixed rate for six months if you purchase by the end of October. This is what I would advise, rather than waiting until November and hoping for an increase in the fixed rate. Even if the fixed rate does go up, it's not likely to be a large enough increase to fully compensate for the lower variable rate.

 

[FIYes]

Thanks Mulligan and Karluk


Sent from my iPad using Early Retirement Forum

 

[Mulligan]

Thanks Mulligan and Karluk


Sent from my iPad using Early Retirement Forum

FIY, I agree with Karluk. I already purchased my allowed limit for the year, but if I hadn't I would buy now. As you know, IBonds are not the quickest way to instant wealth, but it serves a purpose for me....To get the money out of my sight so I'm not trying to buy a stock with it.


Sent from my iPad using Tapatalk

 

[MooreBonds]

As you know, IBonds are not the quickest way to instant wealth, but it serves a purpose for me....To get the money out of my sight so I'm not trying to buy a stock with it.

LOL....that's my problem: I work out my cashflow budget for the year for estimated tax withholding, net weekly paycheck cash flow, HSA/IRA contributions, expenses, etc...and whatever free cash flow I have left from my paycheck and dividends that aren't reinvested, I quickly figure out how much I will have available each month so I can invest into more stocks!

I should probably join spendaholics anonymous. But probably wouldn't quite fit in when it comes my turn to introduce myself, and say that I have a binge addiction to buying more companies with any free cash I have laying around, and letting the dividends/capital gains reinvest for compounding.

 

[Mulligan]

LOL....that's my problem: I work out my cashflow budget for the year for estimated tax withholding, net weekly paycheck cash flow, HSA/IRA contributions, expenses, etc...and whatever free cash flow I have left from my paycheck and dividends that aren't reinvested, I quickly figure out how much I will have available each month so I can invest into more stocks!

I should probably join spendaholics anonymous. But probably wouldn't quite fit in when it comes my turn to introduce myself, and say that I have a binge addiction to buying more companies with any free cash I have laying around, and letting the dividends/capital gains reinvest for compounding.

Your still better off buying a stock and getting a quick 25% haircut, than spending it all on clothes or bar hopping. I have enough locked down in IBonds and CDs and systematic purchases of a couple of index funds, but I have a stock purchase itch to scratch with my HSA account. As I have come to terms with what a person on Fatwallet said. You don't put money in an HSA for your health expenses, as money is fungible. You put it in for the tax deduction.


Sent from my iPad using Tapatalk

 

[NW-Bound]

I still have 8.5% in I-bonds. It used to be higher, but the stocks have been growing like weed, and the I-bonds grow like Bonsai.

... I have a binge addiction to buying more companies with any free cash I have laying around...

I like stocks so much that I have to lock away some money, like the I-bonds, so that I would not plunge it all into stocks. If stocks go down, they are on sale, and I want to get more. If stocks go up, why would I want to sell?

I do not have a buy-low problem, but I need a sell-high discipline. I am working on that.

 

[brewer12345]

I like stocks so much that I have to lock away some money, like the I-bonds, so that I would not plunge it all into stocks. If stocks go down, they are on sale, and I want to get more. If stocks go up, why would I want to sell?

I do not have a buy-low problem, but I need a sell-high discipline. I am working on that.

I have had that problem in the past. A near-death, pants-filling experience courtesy of the great recession cured me. Now I hew pretty closely to my chosen asset allocation and I keep a year plus of funds in CDs and I bonds (plus an untapped HELOC). I also figure out a sell point on every individual equity I own, write it down, and force myself to seriously consider selling when it approaches. Sometimes it is appropriate to hang on, but my default expectation is that at least half of a position will get blown out when I hit my predetermined sell price unless there is a darn good reason.

The upside is that when you proactively lighten up on appreciated stuff, you have room in the portfolio when things get hammered. As of the end of 2013 I dropped 80% of what had been my largest position. It got absolutely bludgeoned in the Fall sell-off. Since I knew the company intimately and understood that the valuation had gotten very, very attractive, I was able to belly up to the bar and start sucking down shares by the quart.

 

[karluk]

For the record, the newly announced fixed rate is 0% and the variable rate is 1.48%. So there was a decline in both the fixed and variable rate in the November adjustment. I hope everyone who was contemplating buying i-bonds this year was quick enough to make their purchases before the end of October.

 

[Samething]

Got mine Oct 30th. 10k limit sucks. Wish I could have bought more.

 

[RetireAge50]

Sold all my Ibonds today. Not keeping up with inflation (for me): College expenses, food, gas.


Sent from my iPhone using Early Retirement Forum

 

[brewer12345]

Sold all my Ibonds today. Not keeping up with inflation (for me): College expenses, food, gas.


Sent from my iPhone using Early Retirement Forum

Not the point for me. I view these as a CD alternative.

 

[RetireAge50]

My CD alternative is to download from iTunes. Oh wait, you meant the other CD. Have never had a certificate of deposit before.


Sent from my iPhone using Early Retirement Forum

 

[brewer12345]

My CD alternative is to download from iTunes. Oh wait, you meant the other CD. Have never had a certificate of deposit before.


Sent from my iPhone using Early Retirement Forum

Uh, OK. Bizarre.

 

[RetireAge50]

I was trying to make a joke but was also trying to convey that Ibonds and/or CD's pay out so little they are hardly worth messing with. Maybe as an extreme safety measure I guess.

Does anyone buy bonds and CDs while still accumulating assets? Maybe once I retire I will be able to wrap my mind around why people buy Ibonds/CDs.



Sent from my iPhone using Early Retirement Forum

 

[brewer12345]

I was trying to make a joke but was also trying to convey that Ibonds and/or CD's pay out so little they are hardly worth messing with. Maybe as an extreme safety measure I guess.

Does anyone buy bonds and CDs while still accumulating assets? Maybe once I retire I will be able to wrap my mind around why people buy Ibonds/CDs.



Sent from my iPhone using Early Retirement Forum

I always did. It was a better place to stash my emergency fund than a savings account (higher yield) and an alternative to bonds for a portion of my fixed income allocation. Never had a ton, but there were good deals to be had from time to time.

 

[imoldernu]

Times change.

 

[LOL!]

Does anyone buy bonds and CDs while still accumulating assets? Maybe once I retire I will be able to wrap my mind around why people buy Ibonds/CDs.

Certainly my bond funds have returned more YTD than some of my international funds. So I buy bond funds in order to make more money when my equity funds don't do so well.

My bond funds allow my money to live and fight another day in the equity markets.