Not true. The fixed rate component changes every 6 months. It started at 3.4% in September 1998, and was over 3% (as high as 3.6% in mid-2000) until November 2001. Then 2% for a year, then 1% or a little more until 2007, and 0 or close to 0 ever since.
The fixed rate has declined over the years with interest rates in general. To say that anyone has "been trying to kill them off almost as soon as they created them" is not supported by any fact that I know of.
Again, is any mod reading this thread? We desperately need a sticky thread to collect the facts about I-bonds, since they have become so popular lately.
Dude, we are saying the same thing. The 3% ish fixed component lifetime is of course for the life of the bond which is 30 years. Maybe Im a bit too slang for you, and I apologize. And certainly you are correct they must have wanted more contributions to Ibonds by cutting max contribution from 30k to 10k. Makes sense to me….
Yes now you wont provide help for people with research and understanding I have seen before, but I will assist you with one.
You want a theory? Here ya go, from Forbes.
One of the most frequent questions relates to annual purchase limits. Here's how dpbsmith put it: "What I don't understand is why the Treasury cut the annual purchase limit from $30,000 to $5,000 in one fell swoop in December 2007, with only thirty days warning and no convincing explanation. Why did they change the amount you can buy?"
Good question. Here's how the Treasury tried to explain the lowering of the annual purchase limits when it announced on Dec. 3, 2007 that the new limits were to take effect on Jan, 1, 2008: "The reduction from the $30,000 annual limit in effect for both series since 2003 was made to refocus the savings bond program on its original purpose of making these non-marketable Treasury securities available to individuals with relatively small sums to invest."
The problem with that explanation is that regardless of how high the annual purchase limits were set by Treasury, Savings Bonds were always available to individuals with relatively small sums to invest. So, in my opinion, that explanation simply doesn't fly. Remember, EE Bonds had purchase limits of $30,000 face value per person or $60,000 per couple for many years prior to the introduction of I Bonds.
What does make sense to me, though, is the flip side of Treasury's explanation. With the introduction of I Bonds and then TreasuryDirect (TD), a couple could buy $30,000 in paper I Bonds and another $30,000 via TD. They could also buy $30,000 face value paper EE Bonds and another $30,000 via TD. That meant a couple could purchase $120,000 annually in tax-deferred U.S. Savings Bonds. And if they had children, they could purchase even more, using the children's Social Security numbers. In essence, a couple now had the ability to create a huge tax-deferred savings account and one that came with no expense ratio. Many savvy investors realized this and piled in.
I think officials at Treasury belatedly took a look at all of the additional tax-deferred savings space that was available to investors and didn't like what they saw. In addition to deferring tax, investors could engage in tax shifting, since they could buy Savings Bonds while in a high tax bracket and redeem them later when they were in a lower tax bracket, such as in retirement.
By limiting I Bond purchases, Treasury was able to limit the potential tax revenue loss. Investors would have to stick to traditional taxable vehicles such as savings accounts, CDs, bonds and bond funds, nominal Treasuries, etc. Those who wanted to invest more dollars in a government backed inflation hedge would have to buy Treasury Inflation Protected Securities (TIPs). However, since the accruing interest on TIPs must be recognized annually, TIPs are best held in already tax deferred accounts such as IRAs and 401(k)s.
https://www.forbes.com/2010/02/25/i...bogleheads-view-lindauer.html?sh=5b8ba27952b8
I'mma gonna max these suckers out every year!
