Why Aren't I-Bonds Getting More Attention?

[Gumby]

Considering a portion of my IBonds wont even have the 9% plus kick in until September, this means I suspect I will buy more Jan. 1 and keep the gift in the gift box another year.

If you have a gift in the box now and it stays there until January 2024, then it cannot be redeemed until 2024. In the meantime, if you buy another bond on your own account in 2023, it must meet the one year holding period minimum, so it also cannot be redeemed until 2024. For liquidity maximization, I think a better option would to deliver the currently held gift on January 1, 2023 and buy a new gift to be delivered in 2024.

 

[Mulligan]

If you have a gift in the box now and it stays there until January 2024, then it cannot be redeemed until 2024. In the meantime, if you buy another bond on your own account in 2023, it must meet the one year holding period minimum, so it also cannot be redeemed until 2024. For liquidity maximization, I think a better option would to deliver the currently held gift on January 1, 2023 and buy a new gift to be delivered in 2024.

For me, I dont see a difference, Gumby. They both wouldnt be redeemable until 2024, and I wouldnt need the cash either way. But the biggest drag is I would have to give money to GF and then have her gift me another one. This past 2 years we gifted each other but she is tapping out going forward. So its just easier leaving that one knowing it wasnt screwed up as I supervised that transaction, ha.

 

[Mulligan]

Best to buy another gift, if you have someone who can gift it to you, and then move the old gift to your regular account.



I'm wondering if I should buy a 2026 gift, we already have 2023,2024,2025 gifts.

From what I understand the 12 months start at purchase. So if I received gift 11 months after purchase, I could redeem in one month anyways.

Interest and the holding period start in the month of your purchase. If you pre-purchase gifts and wait to deliver them to the recipient at a later time, bonds in the gift box still earn the same interest rates as other bonds. The holding period for cashing out also starts right away. If five months have passed between the time of purchase and the time of delivery, the recipient only has to wait another seven months before they can cash out as opposed to the full 12 months for freshly purchased bonds.

https://thefinancebuff.com/buy-i-bonds-as-gift.html

 

[madatrub]

Based on today's CPI release, at the next I-Bond rate reset on November 1, 2022, the rate will be at least 3.3% APR. And there are still four more months of CPI increases to add to that.

This is under the assumption the last 4 adds are 0%?

 

[Gumby]

This is under the assumption the last 4 adds are 0%?

Yes, the 3.3% is baked in. If the next 4 months have zero inflation, that's what it will be. But it will probably be higher. That's the reason for the words "at least".

 

[madatrub]

Yes, the 3.3% is baked in. If the next 4 months have zero inflation, that's what it will be. But it will probably be higher. That's the reason for the words "at least".

interesting. whats your crystal ball say on the next 4 months?

 

[Gumby]

interesting. whats your crystal ball say on the next 4 months?

Suppose inflation rate for the months of June - September runs at annual rates of 7.5%, 7.0%, 6.5%, 6.0%. Then the I-bond rate starting on November 1, 2022 would be 7.8% APR. You can read the news and make your own prediction as to how quickly inflation will ebb, but the above assumption does not seem unreasonable to me.

 

[Rianne]

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.

I thought the very thing in the early 2000s. Bought the maximum allowed for 4 years. Last summer, talking to my neighbor, he did not believe this was a good investment.

 

[pb4uski]

^^^ Let's see... 9+% government guaranteed, full faith and credit is not a good investment... not someone that I would be taking investment advice from.

 

[Sue J]

I opened an account and got the email with the account number, signed on and got the next email with the OTP one time passcode. All set up and made a purchase that will happen on Monday.

Tried to do the same for DH. So far have not gotten the email with the account number. It's been over an hour. I'm also checking the spam folder. So I tried to set it up all over again and I get a message that this taxpayer number already has an account.

Yeah, I just need the email!

Grrrr...


Nevermind- I did the Forgot My Password thing and it's all fine now. The OTP email came promptly.

 

[meierlde]

Well some banks are doing something similar. My mother has some paper EE bonds and her bank (Wells Fargo) refuses to cash them. I have not found any bank in her small town that will. I know she can mail them into Treasury and have them redeemed but I have read that takes months. I think I can get my Credit Union to cash them for her but it is going to be a big hassle.

Assuming she has an account recent updates say wells fargo does cash savings bonds. I know about a year ago I was able to cash them at wells fargo. Perhaps the branch may not however.

 

[Earl E Retyre]

I opened an account and got the email with the account number, signed on and got the next email with the OTP one time passcode. All set up and made a purchase that will happen on Monday.

Tried to do the same for DH. So far have not gotten the email with the account number. It's been over an hour. I'm also checking the spam folder. So I tried to set it up all over again and I get a message that this taxpayer number already has an account.

Yeah, I just need the email!

Grrrr...


Nevermind- I did the Forgot My Password thing and it's all fine now. The OTP email came promptly.

I just tried to create an account and the same thing happened. Never received an email. I do not see where a "Forgot My Password" link is available. I see a "Forgot Your Account Number" link - is that what you used? That requires you to re-enter all the account information. Thanks!

 

[Bruceski44]

$40 k is far less than I dedicate to good investments. It's also far less than I would keep in cash if inflation wasn't sky high.

 

[Mulligan]

I-bonds keep up with high inflation without risk. There are much worse things that can happen than zero real return.

I agree. Like about any other income vehicle, or any major index fund the past 12 months. It is what it is. And more importantly many people like X amount of money dedicated in safer income vehicles. Sometimes you just have to take what the pitcher gives you and hit to the opposite field for the base hit instead of trying to pull the outside pitch for a home run.

 

[Sue J]

I just tried to create an account and the same thing happened. Never received an email. I do not see where a "Forgot My Password" link is available. I see a "Forgot Your Account Number" link - is that what you used? That requires you to re-enter all the account information. Thanks!

Yes, I think it was Forgot Your Account Number link. Thanks for making that clear! I did reenter the information.

 

[Earl E Retyre]

Yes, I think it was Forgot Your Account Number link. Thanks for making that clear! I did reenter the information.

Ok. I tried that and got an error since I did not enter my drivers license number (which I did not do the first time) and it made me enter “none”. I did that and now it says I need to call. They are not open until Monday. Frustrating. This 10 minute process has grown.

 

[MichaelB]

<mod note>
This thread is timely and informative for many who want I-Bonds in their portfolios, so let’s please stick to that topic. “Do I-Bonds belong in a portfolio?” is a legitimate topic but it needs its own thread, so the recent posts on that we’re carved out and are now a separate topic, here https://www.early-retirement.org/forums/f28/do-i-bonds-belong-in-a-portfolio-114310.html

 

[Sue J]

I've read the whole thread and now I have a question. I'm brand new at this, my first purchase happens on Monday.

Can I buy gifts for minor grandchildren? Do I use their SSNs when specifying a gift? Will they have any tax implications? It won't be the full $10,000 so I think not. We already have 529s for them and this would be separate, in addition to those.

Do I keep the gift in my account and give it at maturity? What else do I need to know?

 

[Gumby]

I've read the whole thread and now I have a question. I'm brand new at this, my first purchase happens on Monday.

Can I buy gifts for minor grandchildren? Do I use their SSNs when specifying a gift? Will they have any tax implications? It won't be the full $10,000 so I think not. We already have 529s for them and this would be separate, addition to those.

Do I keep the gift in my account and give it at maturity? What else do I need to know?

You will need their information, including SSN, to add them as a registrant for whom you are buying the gift. Make sure you check the box "this is a gift".

You can "deliver" the gift to them any time after 5 days from the day you purchased it (I believe they need to have their own Treasury Direct account to receive the gift, but others probably know more about that). You don't need to hold it in your gift box to maturity. The one year minimum holding period is triggered when you first buy the gift, regardless of whether you hold it in your gift box or deliver it to the grandchildren.

Any one person can only receive as a gift or buy for themselves $10k (face value) in I-Bonds in any one year. There are no gift tax considerations unless you go over $16k in gifts to any one non-spouse person in one year, so that shouldn't be an issue here.

The recipient can elect to pay income tax on the interest every year or defer it until the Bond is redeemed.

 

[Sunset]

I've read the whole thread and now I have a question. I'm brand new at this, my first purchase happens on Monday.

Can I buy gifts for minor grandchildren? Do I use their SSNs when specifying a gift? Will they have any tax implications? It won't be the full $10,000 so I think not. We already have 529s for them and this would be separate, in addition to those.

Do I keep the gift in my account and give it at maturity? What else do I need to know?

Just thinking of the tax issues, and children, I think this is a great idea overall. I would consider keeping the gifts in the giftbox (your TD account giftbox) and actually gift it to them when they are older for a couple of reasons:

• Gift it now, and when the kids are young, they cash out and blow it on candy/cars/etc.
• If it's in their name, it could affect student grants/loans for college, but gifting them the bond once they are done College would boost their payoff's of debt if any and probably not interfere with their plans to buy I-bonds as new grads don't do that.

 

[Surewhitey]

You will need their information, including SSN, to add them as a registrant for whom you are buying the gift. Make sure you check the box "this is a gift".

You can "deliver" the gift to them any time after 5 days from the day you purchased it (I believe they need to have their own Treasury Direct account to receive the gift, but others probably know more about that). You don't need to hold it in your gift box to maturity. The one year minimum holding period is triggered when you first buy the gift, regardless of whether you hold it in your gift box or deliver it to the grandchildren.

Any one person can only receive as a gift or buy for themselves $10k (face value) in I-Bonds in any one year. There are no gift tax considerations unless you go over $16k in gifts to any one non-spouse person in one year, so that shouldn't be an issue here.

The recipient can elect to pay income tax on the interest every year or defer it until the Bond is redeemed.

I wanted to test out buying DW a gift of $10k on top of her own $10k. They do ask for her acct # to deliver it to. So far it seems to have worked.

Next, I'll try to do the same for my acct... From DW's acct.

 

[pb4uski]

I wanted to test out buying DW a gift of $10k on top of her own $10k. They do ask for her acct # to deliver it to. So far it seems to have worked.

Next, I'll try to do the same for my acct... From DW's acct.

It might have worked temporarily but from the posts I have read you or her will soon be getting an email that she has exceeded the $10k allowance for 2022 and it will ultimately be returned.

Not sure how they will return it in your situation though. If you are lucky then they will just reverse your delivery of the gift to her and put it back into your gift box.

 

[Rianne]

^^^ Let's see... 9+% government guaranteed, full faith and credit is not a good investment... not someone that I would be taking investment advice from.

His thoughts at that time, around July 2021, the I bond interest rate was 3.54 for 6 months. I guess he didn't see the value in that.

 

[Mulligan]

His thoughts at that time, around July 2021, the I bond interest rate was 3.54 for 6 months. I guess he didn't see the value in that.

Shows you how quickly inflation increased. I bought 10k last year because it was over 3.5%. In fact I wont be getting the current 9.6% rate from that purchase until starting in September.

 

[pb4uski]

His thoughts at that time, around July 2021, the I bond interest rate was 3.54 for 6 months. I guess he didn't see the value in that.

So a guaranteed minimum of 1.77% for one-year wasn't good enough for him... I wonder what he was receiving at that time on his short-term money. IIRC on-line savings accounts were about 0.5% and one-year CDs were about 1%.