Saving Acct, CD or I-Bond?!?

[Stillwater007]

I'm trying to find a place to park some cash for a few years. Savings accounts are less than 1% with the exception of HM Bradley (3%) but it seems a little sketchy. CDs are around 1% as well.

What are your thoughts on Gov't Issued I-Bonds? Pros? Cons?

Right now they are around 3.5%. Impressive. I know you have to keep it in for a year and if you take it out sooner than 5 years, you lose the previous 3 months interest. Otherwise, it seems ...safe,? It doesn't seem like you would lose anything less than what you "invest".

Thanks!

 

[Koolau]

I'm trying to find a place to park some cash for a few years. Savings accounts are less than 1% with the exception of HM Bradley (3%) but it seems a little sketchy. CDs are around 1% as well.

What are your thoughts on Gov't Issued I-Bonds? Pros? Cons?

Right now they are around 3.5%. Impressive. I know you have to keep it in for a year and if you take it out sooner than 5 years, you lose the previous 3 months interest. Otherwise, it seems ...safe,? It doesn't seem like you would lose anything less than what you "invest".

Thanks!

Sounds good except the base interest level is zero or near zero. The ones I have from the early 00's get the 3.5% on top of a real interest rate (forget what it was - maybe 2.5%). So, after you pay the taxes, you lose money. Having said all that, it's pretty much the only game in town. YMMV

 

[pb4uski]

MYGA... multi-year guaranteed annuity... essentially the insurance company version of a CD. Not FDIC insured but better yields.

https://www.blueprintincome.com/fixe...BoC-DQQAvD_BwE

Four 3-year offerings for insurers rated A+ or better with yields ranging from 1.2% to 1.85%.

Nine 5-year offerings for insurers rated A+ or better with yields ranging from 1.0% to 2.25%.

 

[plex]

I prefer G-fund . Failing that a gently grandfathered/grandmothered stable value fund. Failing that...there are slim differences at the moment, I wouldn't chase rates too hard at the moment because the increased risk to return isn't worth it, if there is sustained inflation that will change though. Especially avoid harsh cancellation penalties for now.

 

[BlueberryPie]

Remember that you can't redeem I-Bonds in the first year. As long as you're sure you won't need the money in the first year, then go for it, and reassess in a year.

The fact that the fixed percentage of today's I-bonds is what it is, lucky for people getting almost 7% on their early I-Bonds, but for the rest of us, it's still the best game in town and unlikely to be a bad deal for the next year.

Stable Value funds are a good alternative, but they are usually offered in 401(k) and some of us younguns are locked out of that for years to come...

 

[mrfeh]

I'm trying to find a place to park some cash for a few years. Savings accounts are less than 1% with the exception of HM Bradley (3%) but it seems a little sketchy. CDs are around 1% as well.

What are your thoughts on Gov't Issued I-Bonds? Pros? Cons?

Right now they are around 3.5%. Impressive. I know you have to keep it in for a year and if you take it out sooner than 5 years, you lose the previous 3 months interest. Otherwise, it seems ...safe,? It doesn't seem like you would lose anything less than what you "invest".

Thanks!

Of those options, yes, I-Bonds are best, IMO.

Just know that the rate of return changes every 6 months.

 

[retiredunder50]

Keep in mind that I-bonds are state income tax free. Also, if used for qualified higher education expenses, they are federal income tax free (https://www.treasurydirect.gov/indiv/planning/plan_education.htm).

 

[NoiseBoy]

I have a CD coming due this fall that was originally planned for supporting additional spending in my first year of retirement. Since I ended up working a few extra months this year, I probably won't need the extra capital so I am planning on putting part of it into a I-bond. The main knock against them is the $10k limit (per person) a year. That limit makes it hard to really use them as an inflation hedge. But right now, they're about the only "riskless" game in town.

 

[Out-to-Lunch]

And how much is "some cash"? There is an annual limit on I-bond purchases of (IIRC) $10k/per person.

 

[Exit 2024]

I like I-Bonds, only problem with them is a purchase limit - $10k/person, would love to find way around it other than creating some entities.

 

[steelyman]

I don’t think the $10K limit is a reason to not purchase I Bonds. I buy them for a portion of my emergency fund and think they’re a good fit.

 

[BlueberryPie]

one example often cited is nobody says they won't do an IRA because the limit is only $7K

if you plan ahead you can get another $5K in paper bond by overpaying on your taxes and using the return to buy them.

 

[Chuckanut]

one example often cited is nobody says they won't do an IRA because the limit is only $7K

if you plan ahead you can get another $5K in paper bond by overpaying on your taxes and using the return to buy them.

That is a descent strategy, and like IRA accounts over time it adds up to real money. I suspect many of us here built our retirement wealth just like that - smaller amounts year after year after year. "A billion here, a billion there, soon it adds up to real money" - Sen. Everett Dirkson.

But do keep in mind the IRS is many months behind on processing returns for 2020. So, if it turns out you need the money badly.... well, good luck getting it soon.

 

[RetireAge50]

I don’t think the $10K limit is a reason to not purchase I Bonds. I buy them for a portion of my emergency fund and think they’re a good fit.

This makes sense to me. I’ve been thinking of buying some of these anyway so today went ahead and got $10,000 each for DW and me.

 

[BlueberryPie]

I-Bonds are a bad place to put money you might need badly just because of the 1 year lock on redemption. So if your emergency fund is $30 you better not really need more than $20 for the first 3 years (buying $10K 3 years in a row). Either make sure you have another $10K cushion, or only put $20 in I-bonds until you think you can live for 1 year on an $20K emergency fund.

To many, it may be a bigger deal than the $10K maximum.

 

[BlueberryPie]

This makes sense to me. I’ve been thinking of buying some of these anyway so today went ahead and got $10,000 each for DW and me.

If you have a revocable living trust you can buy another $10K in the trust's name.

$30K per couple is now a decent chunk of change ($35K if you play the tax refund / paper bond game).

By the way, if you ever do the paper bond thing, they can be sent in to Treasury Direct to be converted to electronic form.

 

[steelyman]

This makes sense to me. I’ve been thinking of buying some of these anyway so today went ahead and got $10,000 each for DW and me.

Sounds good. The money I have earmarked is labeled “Emergency/LTC Funds” (long term care) and of course I hope to never use it but things can and do happen down the road. So it’s not really an investment per se.

 

[Sunset]

If you have a revocable living trust you can buy another $10K in the trust's name.

$30K per couple is now a decent chunk of change ($35K if you play the tax refund / paper bond game).

By the way, if you ever do the paper bond thing, they can be sent in to Treasury Direct to be converted to electronic form.

Could a person just have a dozen revocable living trusts ?

 

[BlueberryPie]

Yes, they're not necessarily cheap to establish and that would be a pain in the butt, but likely possible

 

[LoisLane]

Today may be a good time to buy the I Savings bonds if you haven’t already. You’ll still get interest as if you had bought it at the first of the month.