The I Bond Thread

[pb4uski]

I'm getting out... monthly between Oct 1 and Jan 1, 2024, and Jan 1, 2025. Then I'll be rid of Treasury Direct and will buy TIPS in either tax-deferred or tax-free accounts.

 

[Mulligan]

TIPSWatch guy predicts that the fixed rate on IBonds has to increase significantly in November as the spread is too wide compared to TIPS. https://tipswatch.com/2023/10/08/the-i-bonds-fixed-rate-will-rise-but-by-how-much/

If that’s true I’m recycling some of my older ones.

I have culled a lot of my herd and only have 20k left. But if its near a 2 handle it would really cause me to gift some bucks. I wouldnt care to string out gifting 5 years or so to unwind. I wish the Boys at the Treasury would throw a 5 handle bone out to the lowly Series EE bonds too….Wishful thinking I know….

 

[steelyman]

All I’m looking for is a non-zero fixed rate to replace one or two existing ones. No “new money” into I Bonds but I’ll pay the tax on interest and reset.

 

[BlueberryPie]

Even though we tend to think of them as "one bond" you can redeem them in smaller sums. So if you have $20k 2 years ago for a couple, now worth $23k (making it up), you can still have $20K at new fixed rate and $3K at the old 0% fixed rate. You do pay taxes on the $20K, either redeem more to cover taxes or pay with current cash.
Not sure that it's that advantageous,.but it's a good reminder they are not monolithic $10K bonds per purchase

 

[audreyh1]

Right, partial redemption is quite straightforward.

 

[Chuckanut]

From the latest Tips Watch newsletter

September inflation sets I Bond’s new variable rate at 3.94%; Social Security COLA will be 3.2%

Posted on October 12, 2023 by Tipswatch

I Bond’s new composite rate could exceed 5% at the November reset.
By David Enna, Tipswatch.com
Investors in U.S. Series I Savings Bonds will see the investment’s annualized inflation-adjusted variable rate rise to 3.94% at the November 1 reset, up from the current rate of 3.38%, based on September inflation data released Thursday by the Bureau of Labor Statistics.
At the November reset, the I Bond’s fixed rate should rise above the current 0.9%, if market conditions stay stable through the end of this month. That means the new composite rate — for I Bonds purchased from November 2023 to April 2024 — should be higher than 5%, maybe as high as 5.4%.

We'll see what happens.
The rest of the article is also worth a few minutes of reading time, IMO.

 

[Sunset]

All makes sense. My wife and I have met our max for 2023, so we will have to wait until Jan 24. Not sure exactly which tax bracket we will be in next year, so I’ll stand pat for now.

You can buy gifts for each other without limits (except that limited to actual delivery of the gift is ($10K+interest)/yr/person.

 

[Sunset]

The now is like a step up in basis. Pay it now or pay later. Depending on your current bracket vs future, it could matter.
I happen to need extra cash early in the year to make deferred contributions to my Roth IRA, so the tradeoff on taxes should be a wash, so I will "upcycle" $20K worth.

We cashed in $40K worth of the 0% bonds.

Will cash in another $20K in January, possibly to upcycle these ones via gifting.

 

[imbatman]

great article, if the fixed rate really does hit the 1.4-1.7% that he is hoping, I might be buying my 2023 allocation after all

 

[Gumby]

Because we are maxed through 1/1/25, whatever I buy must be via the gift box strategy and must be held until 1/1/26 before it can be delivered and sold. So, if the fixed rate is 1.7% and the variable rate is 3.94% after November 1st, I will wait until late this coming April (2024) to buy and will hold a short term regular treasury bill until then. That way, if the yield plunges after the first 6 months, I am only stuck with the I-Bond for slightly over 20 months instead of 25 months.

 

[steelyman]

CNBC published another (speculative) article about I Bonds. There’s really not any new information beyond what the experienced members here at e-r.org have posted but might be of interest anyway.

The annual rate for Series I bonds could rise above 5% in November based on inflation and other factors, financial experts say.

That would be an increase from the current 4.3% interest through Oct. 31, but less than the 6.89% rate offered from November 2022 through April 2023.

However, the U.S. Department of the Treasury doesn’t disclose exactly how it decides the fixed rate for I bonds, which can be difficult to predict.

Series I bond rates could rise above 5% in November, experts say https://www.cnbc.com/2023/10/13/ser...e-above-5percent-in-november-experts-say.html

 

[Chuckanut]

With the 5 year TIPS yielding 2.44%+inflation, I am hoping that the Ibond rate will be raised to at least 1.5%. We'll see what happens.

 

[Mulligan]

With the 5 year TIPS yielding 2.44%+inflation, I am hoping that the Ibond rate will be raised to at least 1.5%. We'll see what happens.

Unfortunately it didnt. They just announced at 1.3% for a 5.27% total next cycle. Very disappointing with where the fixed is for TIPS. They announced the Series EE bonds at 2.7%. Criminals…They need to be thrown in jail for offering that pittance.

 

[mrfeh]

Unfortunately it didnt. They just announced at 1.3% for a 5.27% total next cycle. Very disappointing with where the fixed is for TIPS.

Relative to what the fixed rate has been the last 10 years, 1.3% is fantastic.

 

[steelyman]

Relative to what the fixed rate has been the last 10 years, 1.3% is fantastic.

It’s enough to make me swap an older 0.0% issue in January ‘24.

 

[Mulligan]

Relative to what the fixed rate has been the last 10 years, 1.3% is fantastic.

Yes, but it really was a given it would meet that level. The hope was more considering TIPS is a 100 bps higher.

 

[imbatman]

yeah mixed bag....on the plus side the highest it has been since October 2007 (and 5.27% total rate isn't too shabby).....but far from 1998-2002 when it ranged from 1.6-3.6%

https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

 

[Accidental Retiree]

I’ve got space to buy one this year for our trust account so will be purchasing a new one. We haven’t yet cashed out or “upgraded” our 0% ones; we’ll look at that next year.

 

[Chuckanut]

2.7% for Series EE bonds?!?!? The doubling time remains at 20 years, so if you want a better long term yield, just get a 20 year Treasury which currently is yielding above 5%. Yes, it's almost criminal to offer such a low interest rate.

The 1.3% rate is disappointing. But, one must consider that it is an inflation+ protected bond, non callable, that has a variable term from 1 to 30 years depending on the whims of the investor, and has a guaranteed return of principal and interest. That is a plus, IMO. I’ll probably sell my 0% bonds and use the money to buy the current 1.3% bonds.

 

[JDARNELL]

So I have some I-Bonds that were issued 10/1/21 with the 0.00% fixed rate and currently earning 3.38%. To pay the 3 month penalty breaking them should I sell them 12/2/23 or 1/2/24 or is it another date? My math is bad on this one.

Also 9/1/22. I think this one is 11/2/23 or 12/2/23

JDARNELL

 

[Exit 2024]

I was considering to sell all my old I-bonds and reinvest but now not that sure.
Majority are with fixed 0%, some have 0.2%, but our federal marginal tax rate will be 24%. Assuming that we have 0% fixed for all and that we will pay taxes using other funds (reinvest the same amount as we currently have before taxes) We will need to make up extra tax by having extra 1.3% on the same base amount. Back of the envelope calculation gives about 5 years to break even. And that does not include lost gain on the tax amount that could be sitting for example in saving account for all that time. Did I miss anything?

 

[Sunset]

So I have some I-Bonds that were issued 10/1/21 with the 0.00% fixed rate and currently earning 3.38%. To pay the 3 month penalty breaking them should I sell them 12/2/23 or 1/2/24 or is it another date? My math is bad on this one.

Also 9/1/22. I think this one is 11/2/23 or 12/2/23

JDARNELL

This site for the 10/1/21 says to me it should be cashed Jan 2 2024
https://eyebonds.info/ibonds/10000/ib_2021_10.html

BUT.... I'd like someone else to confirm I'm reading this correctly (its the 3rd month of lower interest rates)..

The generalized site location to pick any I bond is: https://eyebonds.info/ibonds/home10000.html

 

[SloHan]

Selling the last of fixed 0% I bonds tomorrow and will deposit funds in VMFXX. I might buy the 1.3% fixed bond in Jan 24.

 

[jldavid47]

This site for the 10/1/21 says to me it should be cashed Jan 2 2024
https://eyebonds.info/ibonds/10000/ib_2021_10.html

BUT.... I'd like someone else to confirm I'm reading this correctly (its the 3rd month of lower interest rates)..

The generalized site location to pick any I bond is: https://eyebonds.info/ibonds/home10000.html

That's correct if you want to get full advantage of the previous 6.48% rate.

 

[jollystomper]

Relative to what the fixed rate has been the last 10 years, 1.3% is fantastic.

+1


In January I will deliver our existing I Bonds gifts that are 3+ months into the 3.38 rate, and purchase gifts for 2025 at this new rate.