Sell I Bonds....or not?

[pb4uski]

+1
I just leave the IBonds untouched long term unless they have a 0% or very low fixed rate.

I'd sell them at the first opportunity that the 3 month interest penalty isn't that big of a hit. As I get further in retirement, simplifying my portfolio is what I'm striving to do. An investment limited to 10k once a year isn't impactful and thus not worth my time and effort.

Ours are all recent vintages that are 0% fixed rate. While I am awaiting what the new fixed rate will be, unless it is really attractive I will redeem at the first opportunity that the 3-month penalty isn't a big hit.

Another factor is that I am simplifying my portfolio to make things easier for DW and DD if I get hit by a beer truck and would like to see Treasury Direct gone from our life, so I'm leaning towards getting out and replacing with 5-year TIPS bought from our brokerage accounts.

 

[cyber888]

Will sell my iBonds on January 2024

I'm just waiting for my iBonds to complete the 6.48% interests payments, and then I will sell it. That would be first few days in January.
Then, will look for a 5% CD

 

[RunningBum]

I've got some with rates dropping in Oct and Nov. I will probably wait until Jan 2 to sell, to push off income until next year.

 

[friar1610]

We bought $60K in both 2001 and 2003, the next ones was a tax refund in 2013. Plan to redeem the 2013 ones this fall.

But check the current value of the 2001 I bonds! Time to start an exit strategy as the accrued interest and taxes will hurt if I wait until 2031

I’m starting to think about the same thing. Especially since neither of us is getting any younger. If either is redeeming them as a MFS the ordinary income tax rate will be higher.

 

[lucky penny]

We bought $60K in both 2001 and 2003, the next ones was a tax refund in 2013. Plan to redeem the 2013 ones this fall.

But check the current value of the 2001 I bonds! Time to start an exit strategy as the accrued interest and taxes will hurt if I wait until 2031

I too bought I bonds in 2001. Back then the limit was $30K/year. They're now paying 9.58% & I'm never selling those.

But I'm not rushing to sell others either.

 

[Out-to-Lunch]

so I'm leaning towards getting out and replacing with 5-year TIPS bought from our brokerage accounts.

Even with the phantom income problem? (I hold mine in a tIRA.)

 

[madatrub]

is there a good fixed rate interest estimator for ibonds floating out there? I just feel like with rates elevated and inflation flattening, the fixed rate has to be going up next (few) offerings.

 

[pb4uski]

Even with the phantom income problem? (I hold mine in a tIRA.)

I can easily hold mine in my tIRA brokerage account.

 

[retiredunder50]

You might want to also consider state and local income tax implications. I bonds are typically exempt. Will the new 5% interest gain also be exempt from from state tax?

 

[Gumby]

You might want to also consider state and local income tax implications. I bonds are typically exempt. Will the new 5% interest gain also be exempt from from state tax?

As of today, 1 yr Treasuries were yielding 5.429%. They are exempt from state income tax..

 

[Love This Community]

I bought $20,000 ibonds in Dec 2021 with zero fixed rate component. Remember the 9.6 or 9.8% craze. That’s when I first heard about ibonds. When is a good time to sell them, considering I don’t have an immediate need and may take the proceeds to contribute to 529 plan for this year.

 

[Gumby]

September 2023.

 

[Love This Community]

Thanks Gumby!

 

[pb4uski]

September 2023.

+1 You should receive $22,416 and depending on just when in Dec you bought them your annual return will be between 6.72% and 7.06%.

$10,000 I Bond December 2021

	6.72%	7.06%
12/01/21	-20,000.00
12/31/21		-20,000.00
09/02/23	22,416.00	22,416.00

 

[Love This Community]

Thanks pb4uski!

 

[Koolau]

Heh, heh, I bought my I-bonds in the early 00s so they actually paid something beyond inflation (3%??) So, I'm keeping mine.



I like that when you sell them, they are a combo of interest and principle SO, tax wise, you just pay on the interest. That's a nice feature to be able to "titrate" the amount of tax you want to pay - IOW control your MAGI for such things as IRMAA, etc.

 

[Mulligan]

is there a good fixed rate interest estimator for ibonds floating out there? I just feel like with rates elevated and inflation flattening, the fixed rate has to be going up next (few) offerings.

Here is a good article for you to read about it. This is from “Tips watch” which is a good source. The article was from right before this past reset. It goes into the thought process of a “guesstimate”. But ultimately concedes in totality nobody can really totally predict what it will be. As Treasury never discloses it.

https://tipswatch.com/2023/03/09/i-bonds-lets-handicap-the-may-fixed-rate-reset/

 

[imbatman]

Nice read, so seems to me at this point if trajectories continue, we may see a small bump up in fixed rate in November, if anything. For the 10-year, as of August 1st (1.68) we are up a little (7%) since March 1st (1.57) and a decent amount (23%) since May 1st (1.36)....

https://data.nasdaq.com/data/USTREASURY/REALYIELD-treasury-real-yield-curve-rates

 

[Chuckanut]

Here’s one guy’s view on when to redeem I-bonds and under what conditions. I like it because he takes into account the tax issues people face when they redeem an I-bond.

https://tipswatch.com/2021/11/05/first-rule-of-i-bonds-dont-rush-to-sell-your-i-bonds/

Note that this article was written in November of 2021 when the variable interest rate was above 7%. Still the points he makes about taxes, and the limits on new Ibond purchases are something to consider in your overall plan. Redemption may work for one person and not make sense for another.

 

[Gumby]

I wouldn't let the tax tail wag the investment dog. Those taxes will have to be paid some day, and you may prefer to pay them in smaller doses per year so you aren't pushed into a higher bracket.

 

[MarieIG]

I bought my first I bond last year. I set it for auto withholding of tax - on the high side. Auto withholding of tax makes my life a little easier.

If I ever buy individual TIPS, it would be in an IRA.

 

[Chuckanut]

I wouldn't let the tax tail wag the investment dog. Those taxes will have to be paid some day, and you may prefer to pay them in smaller doses per year so you aren't pushed into a higher bracket.

Very true. It’s a consideration. Since personal rates go up in 2026, it might be better to bite the bullet now. YMMV.

 

[Fermion]

yay, my paper ibonds were finally converted, after 12 weeks and 1 day.

 

[Out-to-Lunch]

I can easily hold mine in my tIRA brokerage account.

Cool. I guess I conflated "brokerage account" with "taxable brokerage account."

 

[RunningBum]

I wouldn't let the tax tail wag the investment dog. Those taxes will have to be paid some day, and you may prefer to pay them in smaller doses per year so you aren't pushed into a higher bracket.

I hear ya. I'm just a little worried I overshot my January Roth conversion because of higher interest rates in general this year so I may need to hold off on I Bond sales this year to keep from pushing QDivs from being taxed. Next year I'll be more conservative on the early Roth conversion.