Why Aren't I-Bonds Getting More Attention?

[Happyras]

Thanks for sharing that, I did not know you could purchase a gift for the future calendar year and receive current interest on it.

+1, does this really work? Do you simply hold the gift in your gift section and manually deliver them those years or can you set up the gifts to be delivered in the future? That would be almost cheating the system if you could do so.

 

[FindingForward]

that ibond thread link earlier is super helpful for those that haven't seen it. Unfortunately, I didn't know about it until reading this thread, so missed the 4/28 cutoff to get those gift orders in time for the current high rate. Win some, lose some!

 

[Sk08]

+1, does this really work? Do you simply hold the gift in your gift section and manually deliver them those years or can you set up the gifts to be delivered in the future? That would be almost cheating the system if you could do so.

I have not done the gift i-bond yet, so not sure how it works, but quoting Gumby "For the first six months, each of those bonds will earn at a rate of 7.12%, for the next six months at a rate of 9.62%" I took it as it starts paying interest starting now.

 

[MissMolly]

that ibond thread link earlier is super helpful for those that haven't seen it. Unfortunately, I didn't know about it until reading this thread, so missed the 4/28 cutoff to get those gift orders in time for the current high rate. Win some, lose some!

You haven't missed it. You can buy now and get the current high rate of 9.62% for the next 6 months. You only missed the 7.12%.

 

[jollystomper]

With today's inflation rates, they seem like a great option for medium-term investing, as a hedge against inflation. Yet it seems like they're not getting much attention.

On this site, they get lots of attention. But among friends and acquaintances, when I sent out a text mentioning them as a thing to consider, I found more than a few confused them with the "traditional" Series EE savings bond, and where not aware of the interest rate. In addition, though there is the annual 10K limit, almost none of them were aware of the gifting strategy that is available.

I have never seen them brought up in the traditional financial "markets up today, things are wonderful...markets down today, here comes the apocalypse" media reports. You constantly here about the 10 or 30 year T-Bill rate, but never the I-Bond rate.

Had I not been on this site, and read the threads and the thorough analysis, and discussion taking place, I might not had thought about them either.

 

[Gumby]

+1, does this really work? Do you simply hold the gift in your gift section and manually deliver them those years or can you set up the gifts to be delivered in the future? That would be almost cheating the system if you could do so.

I have not done the gift i-bond yet, so not sure how it works, but quoting Gumby "For the first six months, each of those bonds will earn at a rate of 7.12%, for the next six months at a rate of 9.62%" I took it as it starts paying interest starting now.

That is correct. You buy an I-Bond as a gift for a specific person and it is placed in your gift box. It starts accruing interest immediately and you start the clock on the one year minimum holding period and the 5 year period for early redemption penalties. You deliver the bond to the gift recipient whenever you choose to. However, the recipient can only either buy or receive as a gift $10k per year. So, if they receive a $10k gift in a year, they cannot also buy $10k on their own. What that means for us is that when we deliver the recently purchased gifts to each other on 1/1/23, 1/1/24, and 1/1/25, we will not also be able to purchase for our own account in those years.

As far as delivery, I am planning to manually direct delivery of the bonds (via the Treasury Direct website) on each January 1st. It's not hard to calendar that.

 

[Happyras]

I just completed several gift purchases now on TD. I am considering gifting out for the grand kids now for the next 5 yrs, but we are keeping our personal gifts to each other over the next 2 years for now. My concern is the specific language on the 10K per year limit is not so clear. If the gift bond is (will be) worth more than 10K in the year of the gift received, would it not be limited? I see that there is some option to gift out of the box in specific $ value, not just the bond issued. Anyone else have this concern? Actually, in theory, any 10K bond purchased as a gift will be worth more before the 5 day hold period in the gift box is completed, so I suspect it is the face value that is the limit?

 

[ncbill]

That is correct. You buy an I-Bond as a gift for a specific person and it is placed in your gift box. It starts accruing interest immediately and you start the clock on the one year minimum holding period and the 5 year period for early redemption penalties. You deliver the bond to the gift recipient whenever you choose to. However, the recipient can only either buy or receive as a gift $10k per year. So, if they receive a $10k gift in a year, they cannot also buy $10k on their own. What that means for us is that when we deliver the recently purchased gifts to each other on 1/1/23, 1/1/24, and 1/1/25, we will not also be able to purchase for our own account in those years.

As far as delivery, I am planning to manually direct delivery of the bonds (via the Treasury Direct website) on each January 1st. It's not hard to calendar that.

Do you do the trust (individual for each spouse) strategy as well?

Can your gifting strategy be used with those trusts?

 

[Gumby]

I just completed several gift purchases now on TD. I am considering gifting out for the grand kids now for the next 5 yrs, but we are keeping our personal gifts to each other over the next 2 years for now. My concern is the specific language on the 10K per year limit is not so clear. If the gift bond is (will be) worth more than 10K in the year of the gift received, would it not be limited? I see that there is some option to gift out of the box in specific $ value, not just the bond issued. Anyone else have this concern? Actually, in theory, any 10K bond purchased as a gift will be worth more before the 5 day hold period in the gift box is completed, so I suspect it is the face value that is the limit?

My understanding is that it is the face value that controls when looking at recipient gift limits.

Do you do the trust (individual for each spouse) strategy as well?

Can your gifting strategy be used with those trusts?

No, we don't have trusts. So I don't know the answer.

 

[Omega]

Thanks for sharing that, I did not know you could purchase a gift for the future calendar year and receive current interest on it.

You can also use your tax refund to purchase an extra 5K.

 

[braumeister]

Interesting that the OP joined the forum, made one post, left immediately, and hasn't been back since.

But it apparently did some good by getting noticed, so no harm done.

 

[pb4uski]

Honestly, too much effort for a minimal investment of $10 or $20k a year with ~$2k return does not make a dent or make it worth the effort. If it were $100 or $500k then I would do it.

I used to have the same view, but since Oct 2021 DW and I have bought $135k in i-bonds... $20k for our 2021, 2022, 2023, 2024 and 2025 allowances of $10k per person*, plus $30k in 2022 for our 3 trusts plus $5k with our tax return... it adds up.

*2023, 2024 and 2025 allowances are in gift boxes for each other.

 

[pb4uski]

... Can your gifting strategy be used with those trusts?

No.

Gift Box and Delivery
You must give the recipient's name and Social Security Number in the buying stage. The recipient doesn't need to have a TreasuryDirect account at this stage. Only a personal account can buy or receive gifts. A trust or a business can neither buy a gift nor receive a gift.

 

[Chuckanut]

Originally Posted by ShokWaveRider
Honestly, too much effort for a minimal investment of $10 or $20k a year with ~$2k return does not make a dent or make it worth the effort. If it were $100 or $500k then I would do it.

I'm the kind of guy who will stop to pick up a dime I see on the ground. I wish I had enough wealth that $2000 was not worth the effort, but I don't.

I figure that the time I have spent on I-Bonds works out to about $400 an hour after only one year. I don't know where I would find somebody willing to pay me that, especially since I can earn it working at home in my spare time. You know, just like those ads we used to see in the Sunday newspaper. Except they offered $100 a day while I-bonds payed me $100 an hour.

 

[Mulligan]

Many smart people on here have been buying I-bonds since last November and some have used the legal ways to buy more than 10K using the gift box, trusts etc.



https://www.early-retirement.org/forums/f28/the-i-bond-thread-113668.html

Im single and will have accumulated 40k in them since last September by end of this month. I thought the 3.56% cycle was great and started buying then. 9% is just a bonus, lol.

 

[Mulligan]

Because I Bond limit is only 10K/yr so there is nothing much to talk about. It's not really an investment. Having said that... every investor is surely buying it... I did

I noticed Vanguard had a banner last week on their bond section, they do not sell IBonds. A rep told we a couple weeks ago they have been constantly peppered with requests to buy Ibonds, ha.

 

[F.I.R.E User]

I bought $1k at 9.62%.

 

[RobbieB]

Yeah, just a "hit buy" once a year and let it coast.

 

[tulak]

I started buying last year and have 35k. Single, no gifting, only overpaying taxes and setting up a trust. It’s a little bit of work to get beyond the standard 10k, but worth the effort.

At this pace I’ll have over a 100k in a few years. Who knows what rates will be, but I’m leaning towards keeping these long term as an inflation hedge and as a larger part of my FI allocation.

 

[Midpack]

You can only buy 10 grand a year, so yeah, get as much as you can -

+1. They don’t do much for most retirement nest eggs.

 

[JoeWras]

Interesting that the OP joined the forum, made one post, left immediately, and hasn't been back since.

But it apparently did some good by getting noticed, so no harm done.

Very odd. Usually those one shots are people trying to secretly sell stuff, or who just want to be the ultimate troll throwing sand in the gears.

Maybe OP works for the government's social media influence team, drumming up interest in Treasury Direct.

 

[bookman51]

The strategy was discussed at length in the other, very long I-Bond thread here https://www.early-retirement.org/forums/f28/the-i-bond-thread-113668.html

But I'll recap:

In Dec 2021, the young wife and I each purchased $10k for our own account.
In Jan 2022, we each purchased $10k for our own account
In Feb 2022, we each purchased $10k as a gift for each other, to be delivered on 1/1/23.
In Mar 2022, we each purchased another $10k gift to be delivered on 1/1/24
In Apr 2022, we each purchased yet another $10k gift to be delivered on 1/1/25.

So a total of $100k for the two of us. For the first six months, each of those bonds will earn at a rate of 7.12%, for the next six months at a rate of 9.62%, for an annual return of 8.54% the first year. Yes, one must consider the 3 month early redemption penalty and the annual limits that cause the last of the gifts to be tied up until 1/1/25, but all-in-all, it is a very substantial return for minimal effort.

That looks very interesting in my wife's and my situation. My wife and I (neither of quite so young) purchased a total of $20,000 Series I this last December and then another $20,000 in January. It looks like (and I took a looked at the Treasury site after reading this) that the above scenario is quite possible. We have some 30 year Series EE bonds maturing this year, plus simply a fair amount of cash I have not wanted to invest in down sliding stock market. I am trying to think of the downside for purchasing ahead on Series I bonds. I suppose the money is tied up until it is delivered, and there are penalties if withdrawn early then. Also, I assume interest rates on them can go down if inflation goes down. However, almost anything beats the miniscule interest rates of virtually zero in money market and savings accounts. And in my perusal of Vanguard mutual funds, almost all are in the minus returns for this year and those that are not appear to have a substantial minimal investments. Plus, I am admittedly not a savvy investor when it comes to the stock market. I have been invested in Series I bonds since the fall of 2000 and have been pleased with the returns. Are there other downsides I am not thinking about regarding buying ahead on the Series I bonds?? Inquiring minds want to know. Thanks

 

[Sunset]

... Are there other downsides I am not thinking about regarding buying ahead on the Series I bonds?? Inquiring minds want to know. Thanks

No.
Just buy a $10K gift for your wife, and she buys a $10K gift for you.
Each leaves it in the gift box.
It earns interest and the current great rate, and ages like any other bond all while in the gift box. It can sit there years.

Beyond the annual 10K limit for each of us.
DW and I have bought gifts for each other of $30K , to be delivered in 2023, 2024, 2025
We also overpaid our income taxes by $5K, and got a $5K i-bond as the refund for 2022.

 

[Mulligan]

No.
Just buy a $10K gift for your wife, and she buys a $10K gift for you.
Each leaves it in the gift box.
It earns interest and the current great rate, and ages like any other bond all while in the gift box. It can sit there years.

Beyond the annual 10K limit for each of us.
DW and I have bought gifts for each other of $30K , to be delivered in 2023, 2024, 2025
We also overpaid our income taxes by $5K, and got a $5K i-bond as the refund for 2022.

My GF and I have played that gift game too. But we have to stay under 16k. This gets me 40k in from last year and this. A chunk of mine just rolled over to the 7.12% yield because I thought the 3.56% previous cycle was good then so I bought all capturing that. Im still 5 or so months away from the 9.6% cycle from that many. Delayed gratification at its finest, lol.

 

[pb4uski]

My GF and I have played that gift game too. But we have to stay under 16k. ...

Why 16k? Gift tax? If so, you can buy more and then just each file Form 709.

Or get married.

...If you give more than $15,000 in cash or assets (for example, stocks, land, a new car) in a year to any one person, you need to file a gift tax return. That doesn't mean you have to pay a gift tax. It just means you need to file IRS Form 709 to disclose the gift.