The I Bond Thread

[Chuckanut]

On $20,000 in bonds it is only an extra $180 a year, but hey, that is a nice dinner out (unless inflation really kicks in)

Not to argue, with the above. But, the story below has always affected how I think about fairly small amounts of money.

I remember talking to my father years ago about how he could earn more interest on his savings. He said something similar to the above. I had just bought my first home and the payment was huge for me and my then $10,000 a year salary. I remember thinking, "Dad, I could use those dollars today to help with furnishing my new home. Why are you giving them to the bankers?"

Today, a $10 savings on a big purchase may not be a big deal to me. But, if nothing else, I can give it one of the grands and the kid will be delighted to have it. So why give it to some soulless corporation?

FWIW, $180 is about 15% of my property tax increase this year. 15% here, 10% there, 20% someplace else, and I have nearly covered 50% of the increase.

 

[imbatman]

Wow, that fixed rate is higher than I expected, largest value since November 2007 (1.2%).

Still 4.3% is a little low for the alternatives available but decent for an alternate investment vehicle.

Before bailing early and paying back 3-months interest, I would definitely hold out until you have earned three months at the new lower rate - no reason to throw back 6-7%

 

[pb4uski]

+1 I'm suprised that the fixed rate is so high. I think I'll probably swap out some 0% fixed rate I-bonds for some 0.9% fixed rate I-bonds in October... I don't mind paying the three-month penalty and locking up the money for a year to get that nice 0.9% fixed rate forever.

 

[BlueberryPie]

for anyone using ibonds for long term stability, that 0.90% is excellent news, regardless of where the variable rate is at.
While ibonds have been popular in the last 2 years for short-term yield, that's not really what they're meant for, and I agree there are other options for short-term hold.

 

[Mulligan]

+1 I'm suprised that the fixed rate is so high. I think I'll probably swap out some 0% fixed rate I-bonds for some 0.9% fixed rate I-bonds in October... I don't mind paying the three-month penalty and locking up the money for a year to get that nice 0.9% fixed rate forever.

Yep, at least I will have the option to cash out 0% if I desire. But for now since I bought 10k already this year, looks like the GF will be gifting me 10k sometime between May 1 and end of coming cycle.
I was hoping against hope the Treasury members would get drunk and set the EE at 4%, but they only raised it to a paltry 2.5%.

 

[CRLLS]

+1 I'm suprised that the fixed rate is so high. I think I'll probably swap out some 0% fixed rate I-bonds for some 0.9% fixed rate I-bonds in October... I don't mind paying the three-month penalty and locking up the money for a year to get that nice 0.9% fixed rate forever.

We will probably will do the same. So glad I didn't pull the trigger on the 0.4% fixed rate.

I have to add 5% to the I-bond rate to compare to CD rates due to state taxes. 4.3% I-bond rate = 4.53% CD rate. Yeah, I can do better right now with CD's but the fixed rate is virtually forever for me @age 70.

 

[Gumby]

+1 I'm suprised that the fixed rate is so high. I think I'll probably swap out some 0% fixed rate I-bonds for some 0.9% fixed rate I-bonds in October... I don't mind paying the three-month penalty and locking up the money for a year to get that nice 0.9% fixed rate forever.

You and I have, I believe, almost identical holdings. Right now, I can't buy I-bonds for my own account this year because the young wife and I already delivered our gifts to each other. We have two more tranches in the gift box - one for delivery 1/24 and the second for 1/25. Which means that if we buy gifts for each other in October to get the 0.9% fixed, that money will be locked up until 1/26 at the earliest. So, over 26 months rather than one year.

 

[Chuckanut]

While ibonds have been popular in the last 2 years for short-term yield, that's not really what they're meant for, and I agree there are other options for short-term hold.

+1

I consider Ibonds for the part of my bond ladder that goes out past 5 years. They have the advantage of being variable time steps. I can redeem them at 5, 6, 7, 8...... all the way to 30 years. No need to worry return of capital, or other market variables that might reduce their value.

The 0% bonds I have currently have are nice place to store 'emergency cash'. The 0.9% fixed rate of the new Ibonds makes for a more favorable risk/return ratio for the longer term, IMO. YMMV of course.

 

[audreyh1]

Wow, 0.9% fixed? Amazing.

I didn’t know they would release the fixed rate before May 1?

Glad I didn’t buy any yet this year.

 

[Phroig]

Buying in April wasn’t all that bad. You get 6.9% for your first six months of ownership, and 3.8% for the next six. If you buy in May, you get 4.3% for the first six months, and potentially 2-3% for the next six if the inflation rate drops significantly.

 

[RetiredAt55.5]

You and I have, I believe, almost identical holdings. Right now, I can't buy I-bonds for my own account this year because the young wife and I already delivered our gifts to each other. We have two more tranches in the gift box - one for delivery 1/24 and the second for 1/25. Which means that if we buy gifts for each other in October to get the 0.9% fixed, that money will be locked up until 1/26 at the earliest. So, over 26 months rather than one year.

We're in the same boat, except we still have 3 years in the gift box (haven't done anything with ibonds yet this year).

The 0.9% fixed is enticing for long term buy and hold, but I'm probably going to have to pass given the $60k in the gift box "queue".

 

[steelyman]

I see that the new (as of May 2023) semi-annual inflation rate is 1.69%. If my spreadsheet is correct that means my existing I Bonds with a 0% fixed rate will be earning a 3.38% annualized composite rate for the next 6 months.

I hope I’m calculating that correctly, it’s mostly a sanity check. I’ve already maxed out my 2023 purchase limits so I’m on the sidelines until 2024.

 

[Gumby]

I see that the new (as of May 2023) semi-annual inflation rate is 1.69%. If my spreadsheet is correct that means my existing I Bonds with a 0% fixed rate will be earning a 3.38% annualized composite rate for the next 6 months.

I hope I’m calculating that correctly, it’s mostly a sanity check. I’ve already maxed out my 2023 purchase limits so I’m on the sidelines until 2024.

I agree with your calculation.

 

[Montecfo]

.9 fixed is nice. Might need some but I think we each have a slice in the gift box still.

 

[cyber888]

Ok, so 0.9% Fix rate looks fine. But if 3% - 5% inflation persist for awhile
Is it possible is it for the Treasury to increase fix rates above 1%-1.5% in October 2023 ?
I hope the Teasury releases the next ibond rate on Oct. 27, 2023, so we have time to make the decision to invest in 0.9% fixed or better.

 

[Fermion]

Ok, so 0.9% Fix rate looks fine. But if 3% - 5% inflation persist for awhile
Is it possible is it for the Treasury to increase fix rates above 1%-1.5% in October 2023 ?
I hope the Teasury releases the next ibond rate on Oct. 27, 2023, so we have time to make the decision to invest in 0.9% fixed or better.

I'll likely grab the 0.9% this summer and then if the fixed does go up to 1.3% I will grab that in Jan 2024.

 

[Sunset]

.9 fixed is nice. Might need some but I think we each have a slice in the gift box still.

We also have some in the gift box.
So far my plan is to gift our 10K to each other.

Then sell after 3 months of lower interest rate earning (after the summer probably), and use the money to buy some gifts for each other to upgrade from fixed 0% to .9%

Effectively replacing our 0% bonds as much as possible with .9% ones.

Then next year, gift another old 0% fixed bond and replace it with a higher fixed rate, if they are still available. <edited due to smart comment below>

 

[Gumby]

Just remember that the .9% could go down on November 1.

 

[Sunset]

Just remember that the .9% could go down on November 1.

I edited my post, as you are right, maybe I will preemptively buy an extra one, knowing my gift will be deposited 2 months and 2 days later. Rather than wait to sell and then buy, thereby catching the .9% rate.

 

[Gearhead Jim]

^^^^^
So because of the 10k/year limit, we can't just sell our older 0% iBonds and buy an equal amount of new ones with .9%.
Instead, we can buy new bonds directly for ourselves if able, or as gifts to be given in accordance with the 10k/year limit? Then sell the older bonds at the appropriate time considering early sale penalties?

 

[Sunset]

^^^^^
So because of the 10k/year limit, we can't just sell our older 0% iBonds and buy an equal amount of new ones with .9%.
Instead, we can buy new bonds directly for ourselves if able, or as gifts to be given in accordance with the 10k/year limit? Then sell the older bonds at the appropriate time considering early sale penalties?

Not sure if you are asking, so will just state for everyone our process.

What we did:
DW & I gave each other a gift from the gift box, each got a 10K bond + interest into regular I-bond account.
This used up our $10K purchase limit each because a gift counts as a purchase.
We now have $30K + interest in total, in each of our accounts .

What we will do now:
Come September or October 15th, we will sell the 3 bonds ($30K+) in each account.
Then we will each buy for each other $30K in gifts at $10K per gift. (there is no limit to the number of gifts you can buy).

Effectively trading in for each of us three of our fixed 0% bonds for fixed .9% bonds, with the knowledge we have to hold them for a few years, while we gift to each other 1 per year.

 

[Gearhead Jim]

Changing the subject slightly, is it possible that the recent increase in the fixed rate for iBonds is designed to attract people to invest in them regardless of the debt ceiling problem? If so, the fixed rate could be more likely drop to 0 again at the next adjustment.

 

[USGrant1962]

Changing the subject slightly, is it possible that the recent increase in the fixed rate for iBonds is designed to attract people to invest in them regardless of the debt ceiling problem? If so, the fixed rate could be more likely drop to 0 again at the next adjustment.

Doubtful. IBonds would be the securities least affected by the debt ceiling as they are not traded and are generally held long term. I would guess redemptions on any specific day are a tiny fraction of the amount of Treasury bonds maturing.

 

[Accidental Retiree]

I'll likely grab the 0.9% this summer and then if the fixed does go up to 1.3% I will grab that in Jan 2024.

We’re gift-boxed out a couple of years like Gumby and PB4USki but have room to add to our trust account so will do that.

 

[Sunset]

I'll likely grab the 0.9% this summer and then if the fixed does go up to 1.3% I will grab that in Jan 2024.

Why do you think it would go up to 1.3% in Nov 2023 or 2024 ?