Series I Bonds, Individual and Trust

[BergLust]

Hi All,
I've been reading about I-Bonds which currently have a fixed rate of 0.0% and an inflation rate of 3.54%, and considering it as an alternative to CDs (which have terrible interest rates right now, and for the foreseeable future).

In my reading, I understand that an individual can purchase up to $10k per year, and an entity (which includes revocable trusts) can purchase up to $10k per year; a total of $20k per year. Does that sound correct?

It's also my understand that "I-bonds can be held for as little as one year or as long as 30 years, but if they are sold after fewer than five years, the holder sacrifices the last three months worth of interest."

I really don't see any downside to this as a form of inflation protection...but perhaps I'm missing something that I need to consider. I would appreciate any feedback. Thanks!

 

[audreyh1]

No downsides really for inflation protection other than annual purchase limits. Just know that the rate changes every six months. There have been plenty of periods where CDs, treasuries and/or MM funds were paying higher. It comes and goes.

It’s also nice being able to defer taxes on the interest.

There are lots of threads on this forum that discuss IBonds.

 

[homestead]

Learned something new on this thread. No state taxes on ibond interest.

 

[Chuckanut]

i've given some thought to this I Bond issue and the $10,000 limit on yearly purchases.

Here's what I think for my situation. YMMV.

I spend about 30 minutes a month making sure I use the correct credit card for my cash back purchases. I figure that this 6 hours a year earns me many hundreds of dollars, and can hit $1000 extra if I do a lot of high cash-back spending. That's over and above using my 2% card for everything buy.

Purchasing $10,000 of I bonds using money currently sitting in an online bank earning 0.55% will earn me about $200 extra each year. All for maybe another 30 minutes of effort. And that assume I have to cash in the bond and give up 90 days of interest.

So, why wouldn't I do that? If nothing else, I can give the $200 to my kids, or my grandkids, or some charity. I think all would appreciate my giving the money to them and not letting some bank keep it.

 

[audreyh1]

You don’t know what the interest on the iBond will be compared to other short-term cash equivalents in a couple of years let alone for the life of the bond. So you can’t assume you are going to get $X more each year.

 

[LarryMelman]

i've given some thought to this I Bond issue and the $10,000 limit on yearly purchases.

Here's what I think for my situation. YMMV.

I spend about 30 minutes a month making sure I use the correct credit card for my cash back purchases. I figure that this 6 hours a year earns me many hundreds of dollars, and can hit $1000 extra if I do a lot of high cash-back spending. That's over and above using my 2% card for everything buy.

Purchasing $10,000 of I bonds using money currently sitting in an online bank earning 0.55% will earn me about $200 extra each year. All for maybe another 30 minutes of effort. And that assume I have to cash in the bond and give up 90 days of interest.

So, why wouldn't I do that? If nothing else, I can give the $200 to my kids, or my grandkids, or some charity. I think all would appreciate my giving the money to them and not letting some bank keep it.

Yes, that's exactly my thinking. I chase credit-card bonuses and bank account bonuses that add up to a few hundred dollars every year using cash that would otherwise be buried in the yard earning nothing. This is just another opportunity.

 

[BergLust]

Thanks everyone for the feedback. I see it similarly. Very little effort for a good opportunity.

Does anyone have experience with the $10k purchase as an individual AND $10k purchase by Trust?

 

[kevink]

This post on the TIPSWatch site is an excellent primer on all of the ins and outs of using Treasury Direct. Especially noteworthy are the discussions of the potentially confusing account registration options (particularly important for married couples) and a head's-up about account security at Treasury Direct vs. brokerages, etc. that will take you down a Bogleheads forum rabbit hole if you so choose. Some might conclude iBonds aren't worth owning after reading it.

Whether i (or for that matter EE) bonds make sense depends a lot on age, objectives and the amount of assets. If I were younger (20's-40's) I'd be maxing out my purchases of both types of bonds without a doubt.

At 64 though I was late to the iBond party and DW and I have only been buying our 10K per person max for a couple of years. We'll probably keep doing so up to 100K total or so as long as iBonds remain the only Treasury security that provides a real return (inflation-adjusted, Federal tax deferred and State tax exempt).

https://tipswatch.com/2021/05/09/ready-to-open-a-treasurydirect-account-here-are-some-tips/

 

[BergLust]

Thanks for the article and comments. Insightful. What I take away is to assess security risk and be vigilant. Also, I’m not surprised a government website is clunky!

 

[wanaberetiree]

Hi All,
...
I would appreciate any feedback. Thanks!

I was lucky to listen to Bob Brinker years ago and started buying i-bonds in early 2000 on his advise.

My average interest now is ~4.5%

So buy it for several years and it will help your portfolio.

I also consider i-bonds as emergency cash position.

Good luck !

 

[BergLust]

I was lucky to listen to Bob Brinker years ago and started buying i-bonds in early 2000 on his advise.



My average interest now is ~4.5%



So buy it for several years and it will help your portfolio.



I also consider i-bonds as emergency cash position.



Good luck !

Thanks for the data point. I also am viewing it as a good emergency cash position (and perhaps more liquid or less penalty than many than CDs).