The I Bond Thread

[Dash man]

I have two iBonds that are now over 11%.

11-02-2002 11.3%
05-01-2006 11.09%

 

[misanman]

I tried earlier today to log into TD but it was "down for maintenance". I just successfully logged in and I'm seeing something strange. I have bonds issued in Nov, 2021, Dec, 2021, Jan, 2022, and Feb, 2022. The interest rate listed for the November bonds is 9.62%. The interest rate listed for the Dec, Jan, and Feb bonds is listed as 7.12%

Has anyone else seen this? I don't have an explanation. Maybe they let a junior programmer update the site.

 

[jldavid47]

I tried earlier today to log into TD but it was "down for maintenance". I just successfully logged in and I'm seeing something strange. I have bonds issued in Nov, 2021, Dec, 2021, Jan, 2022, and Feb, 2022. The interest rate listed for the November bonds is 9.62%. The interest rate listed for the Dec, Jan, and Feb bonds is listed as 7.12%

Has anyone else seen this? I don't have an explanation. Maybe they let a junior programmer update the site.

You earn the original interest rate for 6 months, then the next interest rate for 6 months, and so on. The bonds issued in Nov 2021 finished their first 6 months in April, so for May it will show the 9.62% rate. The others are not yet 6 months old so will show the original 7.12% rate. Next month the bonds issued Dec 2021 should show a 9.62% rate. The others should show it in July and August, respectively.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#change

 

[pb4uski]

I did a couple calculations for a relative of the minimum IRR if you buy an ibond on 5/1/2022, get the 9.62% for 6 months and nothing thereafter and redeem on 5/1/23 or 1/1/24 and the yields were 4.70% and 2.79%, respectively.

4.70% for 12 months is great, and 2.79% for 20 months is not too shabby.

Now realistically, I think the yields for a 12 month and 20 month hold will be better than those numbers, but those are the minimum yields.

2023 Delivery			2024 Delivery
XIRR	4.70%		XIRR	2.79%
05/01/22	-10,000		05/01/22	-10,000
05/01/23	10,470		01/01/24	10,470
12	months		20	months

 

[Dash man]

I tried earlier today to log into TD but it was "down for maintenance". I just successfully logged in and I'm seeing something strange. I have bonds issued in Nov, 2021, Dec, 2021, Jan, 2022, and Feb, 2022. The interest rate listed for the November bonds is 9.62%. The interest rate listed for the Dec, Jan, and Feb bonds is listed as 7.12%

Has anyone else seen this? I don't have an explanation. Maybe they let a junior programmer update the site.

They update on every six month anniversary of your purchase month, always on the first of the month.

 

[Gumby]

Let me try to restate things to be more understandable. Every May 1 and November 1, the Treasury sets the interest rate at which I-Bonds will be sold for the next 6 months. If you buy an I-Bond during that period, you get that rate for six full months. This applies whether you buy the I-Bond in the first month of the rate period or the sixth month. So if you buy an I-bond in May 2022, you get an APR of 9.62% until November 1, 2022. If you buy an I-Bond in June 2022, you get an APR of 9.62% until December 1, 2022. If you buy an I-Bond in July 2022, you get an APR of 9.62% until January 1, 2023. And so on and so forth.

 

[Katoslake]

Can these be purchased in an IRA ?

 

[Gumby]

Can these be purchased in an IRA ?

My understanding is that they cannot be purchased in an IRA.

 

[jollystomper]

I get a pleasant feeling seeing the $10K in I-Bonds I bought a year ago has earned (even after deducting the 3 month penalty) $356. Whereas had I left that money in my savings or money market accounts, it would have earned about $40.

 

[homestead]

So does the 3 month penalty get added back in after 5 years?

 

[jollystomper]

So does the 3 month penalty get added back in after 5 years?

Yes, that is how I understand it. The Treasury Direct display amount will show the full interest earned.

 

[pb4uski]

Let me try to restate things to be more understandable. Every May 1 and November 1, the Treasury sets the interest rate at which I-Bonds will be sold for the next 6 months. If you buy an I-Bond during that period, you get that rate for six full months. This applies whether you buy the I-Bond in the first month of the rate period or the sixth month. So if you buy an I-bond in May 2022, you get an APR of 9.62% until November 1, 2022. If you buy an I-Bond in June 2022, you get an APR of 9.62% until December 1, 2022. If you buy an I-Bond in July 2022, you get an APR of 9.62% until January 1, 2023. And so on and so forth.

Yes, you get the current rate for the first 6 months of ownership, then next declared rate for the second 6 months of ownership, etc.

 

[Sunset]

I got our tiny IRS refund deposited to the bank account yesterday, so now I wonder if the $5K in I-bonds will be dated this month

I made our tax return refund $5,009.00 , so that $5,000 would be in I-bonds and $9.00 would go to the bank account, thereby letting me know when the return had processed.

Now we have something to look forward to in the mailbox over the next week or two

We got our paper I-bond, it's a single $5,000 bond which is nice. Best of all it's Bond Date (top date) is for April. Means we get the 7.12% and then the 9.62% during the next 12 months !!

 

[Another Reader]

Is there a detailed set of instructions for buying in a revocable living trust? Do I open a new account in the name of the trust? Do I send in copies of the trust documents?

 

[Austin704]

Trying to decipher the I bond math... I understand interest is paid semiannually but is it also compounded semiannually or monthly?

In any case, perhaps someone could help me with the calculation. I bought a $10k I-Bond in November 2021. Six months of interest through April 2022 should be:

P*[1+(.0712/2)]=$10,356 or with monthly compounding
P*[1+(.0712/12)]^6=$10,361

However, what Treasury Direct shows is $10,236. I've read elsewhere that TD withholds 3 months' interest for the withdrawal penalty for holding less than 5 years but that would result in a value of $10,178 or something close depending on compounding.

What am I missing?

 

[pb4uski]

Is there a detailed set of instructions for buying in a revocable living trust? Do I open a new account in the name of the trust? Do I send in copies of the trust documents?

https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html

No need to send in the trust documents.

 

[Gumby]

Trying to decipher the I bond math... I understand interest is paid semiannually but is it also compounded semiannually or monthly?

In any case, perhaps someone could help me with the calculation. I bought a $10k I-Bond in November 2021. Six months of interest through April 2022 should be:

P*[1+(.0712/2)]=$10,356 or with monthly compounding
P*[1+(.0712/12)]^6=$10,361

However, what Treasury Direct shows is $10,236. I've read elsewhere that TD withholds 3 months' interest for the withdrawal penalty for holding less than 5 years but that would result in a value of $10,178 or something close depending on compounding.

What am I missing?

Compounding is definitely every six months. I have concluded that the monthly "value" shown by Treasury Direct is best viewed as an approximation. So $356/6 ~ $60 per month. I have yet to figure out whether they say +$56 the first month and +$60 for the next five months or something else. But it is such a small amount that I do not worry about it.

 

[Chuckanut]

Is there a detailed set of instructions for buying in a revocable living trust? Do I open a new account in the name of the trust? Do I send in copies of the trust documents?

I had the same issues. Surely, somewhere I would have to register this trust with a bank, government bureau or whatever. No. Not true. Get the paperwork made up (I used the NOLO Willmaker and Trust software) get your signature notarized and just make sure you have copies for yourself and your heirs. At some point when you pass they will have to deal with it, but that's their issue. I imagine a family law attorney could help them if needed.

Oh, make sure you know the correct notary language to use when you get the paperwork notarized. The notary would not give advice since she was not a lawyer. I believe you can look it up on the Internet.

 

[Austin704]

Compounding is definitely every six months. I have concluded that the monthly "value" shown by Treasury Direct is best viewed as an approximation. So $356/6 ~ $60 per month. I have yet to figure out whether they say +$56 the first month and +$60 for the next five months or something else. But it is such a small amount that I do not worry about it.

Thanks Gumby. That's helpful.

 

[misanman]

How iBond Interest is Calculated

Here is an explanation of how iBond interest is calculated. Not exactly intuitive. Hope this helps.

http://https://www.reddit.com/r/personalfinance/comments/ug2deh/exact_ibond_interest_calculation_explanation/

 

[pb4uski]

^^^ Broken link

 

[pb4uski]

Compounding is definitely every six months. I have concluded that the monthly "value" shown by Treasury Direct is best viewed as an approximation. So $356/6 ~ $60 per month. I have yet to figure out whether they say +$56 the first month and +$60 for the next five months or something else. But it is such a small amount that I do not worry about it.

Yes, mine make no sense at all. I have one $10,000 ibond that I bought in January 2022 that shows a value of $10,060 and that is ~ $10,000+$10,000*7.12%/12*(4-3)... within 67c.. so that one makes sense.

But you would think that the $10,000 ibond that I bought exactly 3 month earlier in October 2021 would be worth $10,237 using that same formula... $10,000+$10,000*7.12%/12*(7-3)... but TD only shows a value of $10,116 which seems to exclude 2 months of interest.

I don't get it.

 

[Gumby]

Yes, mine make no sense at all. I have one $10,000 ibond that I bought in January 2022 that shows a value of $10,060 and that is ~ $10,000+$10,000*7.12%/12*(4-3)... within 67c.. so that one makes sense.

But you would think that the $10,000 ibond that I bought exactly 3 month earlier in October 2021 would be worth $10,237 using that same formula... $10,000+$10,000*7.12%/12*(7-3)... but TD only shows a value of $10,116 which seems to exclude 2 months of interest.

I don't get it.

Are you sure you bought in October? If you did, you would have been earning 3.54% interest, not 7.12% because the rate changes in November. If you actually bought in November, that bond has now earned 6 months of interest (Nov through Apr, inclusive), but if you cashed it in (which you can't do for the first year anyway), you would lose the last three months. So you should get 3 months worth right now = $178 (at 7.12%). I don't know why it shows only $116, but I do note that it is $60 + $56. If you added $60/month for four more months, it would equal the $356 that you were promised when the interest is compounded at the six month point. It looks like the value is a month behind and calculated in a strange fashion.


Which convinces me that I should keep my own spreadsheet and not rely on TD for that information.

 

[Dabbler]

Complete Link

Here is an explanation of how iBond interest is calculated. Not exactly intuitive. Hope this helps.

http://https://www.reddit.com/r/per...exact_ibond_interest_calculation_explanation/

https://www.reddit.com/r/personalfi...exact_ibond_interest_calculation_explanation/

 

[pb4uski]

Are you sure you bought in October? If you did, you would have been earning 3.54% interest, not 7.12% because the rate changes in November. If you actually bought in November, that bond has now earned 5 months of interest (Nov through Apr, inclusive), but if you cashed it in (which you can't do for the first year anyway), you would lose the last three months. So you should get 2 months worth right now = $118.67 (at 7.12%). I don't know why it shows only $116, but I do note that it is $60 + $56. If you added $60/month for four more months, it would equal the $356 that you were promised when the interest is compounded at the six month point.

Ah, yes... that is it. I did buy in October (see screenshot above) but forgot that the rate was 3.54% for the first 6 months and then 7.12% for the second six months. If I substitute 3.54% for the 7.12% in the formula above... $10,000+$10,000*3.54%/12*(7-3)... then I get $10,118... within $2.

Thanks for the assist.

The screenshot above says 7.12% next to both the 10-1-2021 and 1-1-2022 purchases because now that the 10-1-2021 purchase is more than 6 months old the 7.12% is the current creditign rate.

Looks like it is spreadsheet time to keep track of all these.