The I Bond Thread

[Phroig]

From the link, I learned that I could report the deferred I bond interest and pay taxes on it, in order to avoid the tax bomb at maturity when 30 years of interest AND inflation compensation get dumped on my lap.

Hmmm... It sounds fair, but paying taxes in advance is always hard to do.

Have you considered redeeming a few bonds early each year, and reinvesting the proceeds into new ones? At this point, there’s no penalty, and some kind of staggered redemption would allow you to spread the interest income out over several years. I know you have some bonds with a decent fixed rate, so you probably want to leave those alone.

 

[NW-Bound]

Have you considered redeeming a few bonds early each year, and reinvesting the proceeds into new ones? At this point, there’s no penalty, and some kind of staggered redemption would allow you to spread the interest income out over several years. I know you have some bonds with a decent fixed rate, so you probably want to leave those alone.

Yes, this looks like what I need to do. Still have 12 years till maturity to plan this out.

All of my bonds have 1 to 1.2% fixed rate. Not that great, but every little bit helps.

 

[JDARNELL]

Yes, this looks like what I need to do. Still have 12 years till maturity to plan this out.



All of my bonds have 1 to 1.2% fixed rate. Not that great, but every little bit helps.

I have several like this also. And looking at treasury direct you would think I am a genius. However it certainly is just a snapshot in time. I will be liquidating about 50% of what I have left in this range on 2 Dec to help pay for the second to last semester of college for son. The other half I will liquidate in 2023 so I can use them to pay for college against the 23 tax filing. I have to give up the fixed income component as compared to others I have but I can avoid a huge tax liability on all the accumulated interest using them in the college role.

 

[NW-Bound]

I currently have a 6-figure gain to pay taxes on, and no college cost anymore to claim.

And with inflation ballooning up these I bonds with a double-digit interest, in 12 years the tax bill is going to be brutal. I do not mind paying taxes on real gains, but these are mostly phony gains that just cancel out the high inflation.

And I forgot that I don't have 12 years to figure out what's best to proceed; my RMD starts a lot sooner than that.

Oh well, just throw a dart and start selling some here and there.

 

[pb4uski]

.... Personally I-bonds bother me, I understand that right now they make sense, however, the concept of taxing gains on assets that the treasury knows just kept even with inflation grates my soul as it is just another of the many hidden taxes imposed by inflation. However, that didn't stop me from buying them when they made sense started buying when they where 3.56% and we knew the follow on rate would be guaranteed to beat our emergency fund CDs.

WADR, that is silly. How are i-bonds any different from any other investment? Many investments are generating returns that don't keep pace with inflation and those returns are taxed too. The last thing in the world that we need to do is to introduce more complexity to the tax code by adjusting income for inflation. At the end of the day it will have accomplished nothing since what the government needs to collect isn't any different, so rates would have to go up. Just a plain bad idea.

 

[lawman]

I currently have a 6-figure gain to pay taxes on, and no college cost anymore to claim.

And with inflation ballooning up these I bonds with a double-digit interest, in 12 years the tax bill is going to be brutal. I do not mind paying taxes on real gains, but these are mostly phony gains that just cancel out the high inflation.

And I forgot that I don't have 12 years to figure out what's best to proceed; my RMD starts a lot sooner than that.

Oh well, just throw a dart and start selling some here and there.

I don't understand..How are I-Bonds going to affect your RMD's?

 

[NW-Bound]

I don't understand..How are I-Bonds going to affect your RMD's?

It does not. But when I have a few 100Ks of gains on top of RMD and delayed SS, I am pushed into a higher tax bracket, and it hurts.


PS. On the other hand, if the tax brackets are indexed to inflation, then it's all fair.

 

[misanman]

I foresee heavy web traffic. Don't wait for the last minute to buy the 9.62% iBonds. Good luck.

I made an iBond purchase this AM (gift for DW) without any issues.

 

[roadtripper]

Late to the party, but I was able to open accounts for DH and myself this morning and the purchase confirmations went through immediately.

 

[Sunset]

Late to the party, but I was able to open accounts for DH and myself this morning and the purchase confirmations went through immediately.

Great !
Are you thinking of doing the gift purchase to get around the $10K limit at this time ?

 

[Winemaker]

DBrother bought an I bond yesterday for himself and gifted one for 2023, 2024,and 2025 to DSister. DSister did likewise, buying one for herself, and gifting one to DBrother in 2023, 2024, and 2025. But only $10,000 left each of their accounts. What up with that? Thanks in advance.

 

[euro]

DBrother bought an I bond yesterday for himself and gifted one for 2023, 2024,and 2025 to DSister. DSister did likewise, buying one for herself, and gifting one to DBrother in 2023, 2024, and 2025. But only $10,000 left each of their accounts. What up with that? Thanks in advance.

Sorry to say that they didn’t do it right, then. What they needed to do is buy the gift bond NOW but put them into the gift box and then “deliver” them in each of the next three years. Instead, they scheduled regular purchases to be executed in each of the next three years. Different thing. Different results.
It may be possible to cancel those three (each) scheduled purchases and do it the right way, but I’m not sure. Worth a try because as it is, they did NOT LOCK IN ANY 9.62% rates at all on the three scheduled bonds.

 

[euro]

Related to the “scheduled purchase” topic above, I actually found that the scheduling part did’n work for me, for some reason. Over the weekend, I decided to buy a gift bond in DW’s name. The balance in the linked checking account was almost exactly 10k, so cutting it very close. I decided to transfer some extra cash into that account, just to be sure. Since those transfers usually take a day or two, I scheduled to bond purchase for October 27. Well, turns out that the bond purchase was executed first thing Monday anyway (I had a couple of dollars to spare in the account……)! No idea what happened. I can’t imagine that TD would just ignore the purchase date, so I assume I did something wrong with scheduling. Given how non-intuitive the TD website is, it is very easy to make mistakes…..

 

[Gumby]

I see no need to complicate things by trying to schedule future delivery, which as noted fails to accomplish what you wanted to accomplish anyway. It is the work of an instant to pencil a note in my calendar to deliver the gift bonds in January. Simplicity is my friend in life, and could be yours too.

 

[Chuckanut]

I see no need to complicate things by trying to schedule future delivery, which as noted fails to accomplish what you wanted to accomplish anyway. It is the work of an instant to pencil a note in my calendar to deliver the gift bonds in January. Simplicity is my friend in life, and could be yours too.

I still write important events on my physical calendar.

And, I have a very lovely travel calendar hanging in my kitchen that is a pleasure to look at every day. It has almost one picture per day of some interesting part of Europe. Very nice.

Back on topic... I'll soon need money to buy more I-bonds. 2023 is not that far away. Listening to several politicians pontificate on all the money they have spent on programs to lower the COL this year leaves me with a bad feeling about future inflation. Also, I like to diversify my investments.

 

[NW-Bound]

Sorry to say that they didn’t do it right, then. What they needed to do is buy the gift bond NOW but put them into the gift box and then “deliver” them in each of the next three years. Instead, they scheduled regular purchases to be executed in each of the next three years. Different thing. Different results.
It may be possible to cancel those three (each) scheduled purchases and do it the right way, but I’m not sure. Worth a try because as it is, they did NOT LOCK IN ANY 9.62% rates at all on the three scheduled bonds.

Ummm, strictly speaking, the 9.62% rate is only applicable at the present time for all existing I bonds.

Next year, if the Fed is successful in taming inflation, the rate will come down on all bonds.

Only the fixed-rate component of the I bond can be locked in for the 30-year life of the bond, and unfortunately it has been at 0 for more than a decade.

 

[Toast]

DH and I created Treasury Direct accounts today and made our I Bond purchases. It was nerve racking! The site timed out multiple times before it finally went through.

We have learned so much from this thread.

 

[jollystomper]

This past weekend, a couple who is computer shy and (due to me mentioning it a few times, me and my big mouth) see me as an "expert" wanted me to help them open an I-Bond account, to make a purchase before the end of the month. I told him better do it ASAP, the site would get bogged down much more as the week went by.

Unfortunately they did not allocate time to try until this afternoon around 4PM. You guessed it... we could not get through, completely bogged down, site outage being reported on places that track website availability, etc.

I recommended trying between 1AM and 7AM today, as that is likely when the traffic will be light. I offered to be on a Zoom session with them to walk them through it. But they did not want to stay up late. We tried again at 8pm, same result.

Just for grins, I tried getting in within the last 30 minutes - no issues. Hopefully some site maintenance was done to make the situation better, but there may be an bigger rush today and tomorrow. Hopefully they will contact me (or someone else they said might be able to help) early in the morning before the rush begins .

 

[mystang52]

I recommended trying between 1AM and 7AM today, as that is likely when the traffic will be light. I offered to be on a Zoom session with them to walk them through it. But they did not want to stay up late. We tried again at 8pm, same result.).

granted this is not a life or death matter, but I just don't understand not sraying up late, or getting up early, to do this. Would it have been so bad to get up at 6:30 AM to do this?

 

[roadtripper]

Great !
Are you thinking of doing the gift purchase to get around the $10K limit at this time ?

I am considering doing this but I need to do more research. Thanks.

 

[misanman]

Tried to login at 7:30AM EDT this morning and did not get through. Long delays at each step and finally a message that the TD site was "Not Available".

 

[copyright1997reloaded]

granted this is not a life or death matter, but I just don't understand not sraying up late, or getting up early, to do this. Would it have been so bad to get up at 6:30 AM to do this?

It's because there are tons of people not willing to do anything out of their normal routine to save or make money.

I've seen this same thing with friends and relatives - just too lazy or set in their ways, or they let some minor obstacle stop them.

 

[Winemaker]

Sorry to say that they didn’t do it right, then. What they needed to do is buy the gift bond NOW but put them into the gift box and then “deliver” them in each of the next three years. Instead, they scheduled regular purchases to be executed in each of the next three years. Different thing. Different results.
It may be possible to cancel those three (each) scheduled purchases and do it the right way, but I’m not sure. Worth a try because as it is, they did NOT LOCK IN ANY 9.62% rates at all on the three scheduled bonds.

Thanks, euro! They were able to go back and make the correction.

 

[euro]

It's because there are tons of people not willing to do anything out of their normal routine to save or make money.

I've seen this same thing with friends and relatives - just too lazy or set in their ways, or they let some minor obstacle stop them.

Well, I suppose it all depends on just how much they want to buy those bonds. They’ll decide. Personally, I do like the deal currently on offer but we are really talking about locking in probably 3% additional interest for 6 months on 10k. So, that is $150 if my math is right. If you set up a bunch of gift purchases then multiply by the number of bonds. So, maybe $600 total. Sounds good to me, but not everyone is willing to get up at 5AM for that kind of cash.

 

[joesxm3]

I am in the same boat as NW Bound. My 7/2000 bonds have $90,000 of interest so far and will bump me into the 24% bracket.

I would pay interest annually, except I think you have to do it for all your bonds and settle up accrued interest when you start. That would be an even bigger bulge.