Sell I Bonds....or not?

[Willers]

But why not just ditch Treasury Direct and buy TIPS (in a tax deferred account to avoid the "phantom" income)?

I would think you could get similar economic benefits without having to endure Treasury Direct. Less restrictions and more flexibiity too.

+1

This is what we're doing since we plan to hold our TIPS to maturity.

 

[jldavid47]

But if you cash out and reinvest at 4.51% or more you are whole after a year.

4.51%*9/12 = 3.38%

And it is gravy after that.

Maybe. It depends on what the next two adjustments are.

 

[pb4uski]

Maybe. It depends on what the next two adjustments are.

I bond inflation adjustment is Sep CPI-U/Mar CPI-U. March 2023 CPI was 301.836 September CPI 2023 will be known next week. Suppose it is 308.1 (it was 307.026 for August, so that is 4.2% inflation from August to September if annualized). Then, the Nov 1st inflation adjustment will be 308.1/301.836 = 1.0208, which is a 4.16% APR.

To get up to 4.5% for the inflation adjustment, September CPI would have to come in at 308.627, which would mean inflation between August and September of 6.3% (annualized). I think that is extremely unlikely.

Fair point jldavid47, but if we assume that the interest rate the next 6 month period is 4.2% from Gumby's post above then if you stay you will earn 6 months at 3.38% and 6 months at 4.2% so at the end of 12 months you'll have 103.82 and have earned 3.82%.

3.82%/(9/12) is 5.1%. If you leave you and can reinvest for 9 months at 5.1% or more you will earn 0% 3 months + 5.1% for 9 months = 103.82.

It is easy to find 5.1% for 9 months these days... Schwab shows a 9 month CD at 5.65% but it is callable.

 

[misanman]

I would think you could get similar economic benefits without having to endure Treasury Direct.

What's the problem with Treasury Direct?

 

[pb4uski]

It's klunky. I can only access one account at a time whereas with my brokerage account I can see and act on all of them through a single login. Having to enter a one-time password for every login is annoying, especially with 5 different Treasury Direct accounts. Multiple steps to look at the details of each purchase.

 

[tulak]

But at least TD got rid of the virtual keyboard. That was truly a pain.

Personally, I want to consolidate, so having one less account is a plus.

 

[pb4uski]

+1, except I did it yesterday.

The i-bond redemptions that I initiated on Oct 1 posted to my bank today, Oct 3.

 

[jldavid47]

Fair point jldavid47, but if we assume that the interest rate the next 6 month period is 4.2% from Gumby's post above then if you stay you will earn 6 months at 3.38% and 6 months at 4.2% so at the end of 12 months you'll have 103.82 and have earned 3.82%.

3.82%/(9/12) is 5.1%. If you leave you and can reinvest for 9 months at 5.1% or more you will earn 0% 3 months + 5.1% for 9 months = 103.82.

It is easy to find 5.1% for 9 months these days... Schwab shows a 9 month CD at 5.65% but it is callable.

I'm aware of all of that and I don't care. I just bought an 18 month CD this morning paying 5.55%. I can do the math which doesn't tell me anything about the future. This is our allocation into I-bonds. They've delivered well-above the alternatives up to now and are currently underperforming. I'm not going to try to time inflation.

When we got into these we were going to hold them for 5 years unless inflation went to zero. It ain't going there any time soon.

 

[pb4uski]

That's cool. I got into them for different reasons, mosty as a substitute for 2-3 year bonds. The 7.12% rate was a slam dunk decision for short term money given other rates available at the time. The 9.62% renewal rate was even better. Ditto for the 6.48%. The current 3.38% is no longer compelling.

I never intended my ibonds as a long term hold, just as long as rates were better than 2-3 year bonds.

 

[Accidental Retiree]

I'm aware of all of that and I don't care. I just bought an 18 month CD this morning paying 5.55%. I can do the math which doesn't tell me anything about the future. This is our allocation into I-bonds. They've delivered well-above the alternatives up to now and are currently underperforming. I'm not going to try to time inflation.

When we got into these we were going to hold them for 5 years unless inflation went to zero. It ain't going there any time soon.

I bought I-Bonds starting back in 2021 for our individual accounts and our trust.

Like Gumby, PB4USki and others, I also purchased for our gift boxes out to 2025.

We’ve decided to buy one more for our trust this year and maybe next year and hang on to the rest for the time being.

We initially got into I-Bonds for the great interest rates, but we also have come to appreciate the inflation protection afforded by this component of our portfolio.

(I don’t understand TIPS yet, although we bought a 5-year in an IRA to help me figure them out.)

We have been laddering CDs for a while, and more recently Treasurys, so we have enough opportunity to chase rising interest rates in those assets and leave the I-Bonds alone until we want or need them.

 

[Chuckanut]

I may sell my 0% fixed rate Ibonds, but if we continue with 0.9% fixed I may buy more next year. If we see a higher fixed rate Ibond, say 1.4%, that will tempt me even more. I have two small TIPS, one at aprox 1.2% + inflation, and the other at 1.9% + inflation. Both are at the farther reaches of my ladder where I think the bigger payoff is more likely as compared to under current 5 year rates.

Who know for sure? Not me. The Time Machine is still broken and taking up too much space in the basement.

 

[finnski1]

Sold 2 out of my 4 Ibonds yesterday. Will redeploy to something else.

 

[PaunchyPirate]

I sold my 2 iBonds over the past 2 months. I'm iBond free again. I doubt I'll dabble in them again unless things get pretty remarkable like they did a couple years ago.

 

[11522914]

That's cool. I got into them for different reasons, mosty as a substitute for 2-3 year bonds. The 7.12% rate was a slam dunk decision for short term money given other rates available at the time. The 9.62% renewal rate was even better. Ditto for the 6.48%. The current 3.38% is no longer compelling.

I never intended my ibonds as a long term hold, just as long as rates were better than 2-3 year bonds.

This was basically my plan also. I've already sold 2 I-Bonds and plan to sell another on December 1st. All sold after completing the 6.48% cycle. I still have one in the gift box for 2024 and will probably sell as soon as it is gifted.

 

[pb4uski]

Yes, I will do sales on 11/1/23, 12/1/23, 1/1/24 and 1/1/25.

The 1/1/24 and 1/1/25 sales are currently in the gift box. I'll distribute the $10k gift and then immediately sell. Ditto $10k for 1/1/25.

I wonder if I delivered $20k from the gift box on 1/1/24 and immediately sold it whether they would catch it before the money hits my bank and if so what they would do.

 

[Koolau]

If you have some I-bonds paying at fixed rate of 0% + inflation , you could sell one, and immediately buy a new one (assuming you haven't already bought 2023) which would pay a fixed rate of .9% + inflation.
Basically upgrade one of them.

If married then you can do unlimited upgrades by buying gifts (stays in your gift box) for each other.

Heh, heh, no thanks. Mine are something over 3% fixed already as I bought them early in the century.

 

[mopar lover]

I have a question for everyone, I went to sell my Ibonds and the routing number and account number does not match any that I have. Which is odd to me. I am not able to edit with out mailing them a form. I prefer not to do this as my son turned 18 a few months back and we sent an account authorization form to change from a minor under my account to his own account. He still does not have authorization yet. Is this common?

 

[temartin]

I have a question for everyone, I went to sell my Ibonds and the routing number and account number does not match any that I have. Which is odd to me. I am not able to edit with out mailing them a form. I prefer not to do this as my son turned 18 a few months back and we sent an account authorization form to change from a minor under my account to his own account. He still does not have authorization yet. Is this common?

I was able to ADD a second bank account and redeem to there. Are you saying the routing and account don't match any bank you've ever had? That would concern me. A lot.

 

[braumeister]

the routing number and account number does not match any that I have.

That's worrying. You should be able to look up the routing number shown and find out the name of the bank. That should help you identify it.

https://routingnumber.aba.com/Search1.aspx

https://bank-code.net/routing-numbers

 

[mopar lover]

Thank you, as I added a bank and changed it to my primary and transfer all my I bonds. Much appreciated.

 

[mopar lover]

FYI, we finally got ahold of Treasury Direct on the phone after 55 minutes, they told us that my sons account authorization form to change from a minor to his own account will take about 20 weeks to process. Sheeesh!!

 

[karel]

FYI, we finally got ahold of Treasury Direct on the phone after 55 minutes, they told us that my sons account authorization form to change from a minor to his own account will take about 20 weeks to process. Sheeesh!!

Wow that's ridiculous.... Can't you just redeem the bond and move funds to your already linked account, then give him the proceeds?

 

[mopar lover]

Unfortunately not, when he turned 18 back in July, we had him start a primary account, which he cannot get until the authorization form is complete. So his account is frozen, as they know he turned 18 with the information that was given when we set up the minor account.

 

[Koolau]

FYI, we finally got ahold of Treasury Direct on the phone after 55 minutes, they told us that my sons account authorization form to change from a minor to his own account will take about 20 weeks to process. Sheeesh!!

Heh, heh, and everyone says Vangaurd service has slipped.