The I Bond Thread

[cyber888]

That's what the young wife and I are doing. We will hold on to our I-bonds until: A) we need the cash or B) we find a better deal on cash (i.e. - CD rates increase and I-bond rates decrease sufficiently)

Right, I think it will still beat the 5 Year CDs currently at around 3.25%

 

[pb4uski]

Once you hit 12 months, you can withdraw your Ibonds.
Who will keep most of their emergency cash in i-Bonds and just withdraw when they need the cash, once you hit 1 year of your initial purchase ? I was thinking about this, considering it may take another 2-3 years before inflation goes back to 4%.

My plan is to stick with I Bonds as long as the I Bond yields are competitive with 3-5 year CDs.

 

[Montecfo]

My plan is to stick with I Bonds as long as the I Bond yields are competitive with 3-5 year CDs.

I will perhaps keep them longer as a hedge, given the hoops to build a balance.

 

[cb2008]

Gifting IBonds

You can buy unlimited IBond gifts for your spouse each year, you just can’t deliver the gift to them in the year they also purchased their $10000 individual I Bond limit. . You can name yourself as the beneficiary on your spouse gift bond

 

[Sunset]

You can buy unlimited IBond gifts for your spouse each year, you just can’t deliver the gift to them in the year they also purchased their $10000 individual I Bond limit. . You can name yourself as the beneficiary on your spouse gift bond

Interesting thought.
So basically my spouse and I could buy each other $300K worth. To protect the $600k total from inflation.

Downside is it would only be available as $20k (plus interest) in total gifts each year.

I wonder what happens to undelivered gifts is the spouse dies?

 

[braumeister]

Interesting thought.
So basically my spouse and I could buy each other $300K worth. To protect the $600k total from inflation.

Downside is it would only be available as $20k (plus interest) in total gifts each year.

I wonder what happens to undelivered gifts is the spouse dies?

According to The Finance Buff:

Unexpected Death
You can include a second owner or a beneficiary for the I Bonds you buy as a gift. If the gift recipient dies before you deliver the gift, the designated second owner or beneficiary will inherit your gift. You can’t name yourself as the second owner of the gift but you can name yourself as the beneficiary of the gift. The recipient can change the second owner or the beneficiary after you deliver the gift.

If you die before you deliver the gift, the gift still belongs to the recipient. Whoever handles your affairs after your death should notify the recipient that you had an undelivered gift for them. Then the recipient can claim it through TreasuryDirect. Again, it’s important that you tell someone about the gift if you’re going to hold it undelivered. If no one knows you bought a gift, the gift will be in limbo.

 

[euro]

Well, I spoke too soon. Just when we thought we might actually have gotten away with something...
Two weeks later, the Treasury figured it out, the bond was cancelled, and we received the cash back (including interest). Oh well, easy come, easy go.

Too bad! That said, I think you are correct in that sometimes, they let it slide. I did essentially the same thing (on 1/1/2022), and they did send an e-mail saying I exceeded the allotment. I then actually called TD and managed to get a real person to answer. I explained what I was trying to do and asked for assistance with doing things the correct way next time. She explained everything and told me that the extra 10K would be accepted as a one-time exception. Indeed, so far (knock on wood....) I have not received any returns. It's now well past the 12-16 weeks they say it can take for the refund, so I think in my case, it actually stuck! I have no idea how they decide what is and what isn't "legit" or at whose discretion they decide. Seems a bit odd as the government usually has an ironclad rule for everything. Well, whatever, I actually figured they would NOT pay interest for oversubscriptions. If they do, then I don;t lose anything either way. Pretty good rate

 

[EA-Sports]

You can buy unlimited IBond gifts for your spouse each year, you just can’t deliver the gift to them in the year they also purchased their $10000 individual I Bond limit. . You can name yourself as the beneficiary on your spouse gift bond

I think that’s what we’ll do. My wife and I already bought the $20k for 2022 so, assuming the next reset looks enticing, we can buy each other $10k gifts (for a total of $20k) in October, lock in the current rate and the next reset and deliver it in early 2023. Am I thinking about this correctly?

 

[Wupot2020]

When does 12 month end?

Minor question….Everyone needs to hold ibonds for at least 12 months. is the 12 month calculated based on the purchase date or when interest started accruing? For example, I bought Ibonds on 12/15/2021. Will I be able to cash out the ibonds on 12/15/22 or is the date actually 12/1/22 since that’s when interest started accruing?

 

[Gumby]

I would think the latter, since the "issue date" is the first day of the month.


This is what 10 CFR § 360.35 says

Payment (redemption).
(a) General. Payment of a Series I savings bond will be made to the person or persons entitled under the provisions of the regulations in this part, except that the redemption payment will not be delivered to addresses in areas with respect to which the Department of the Treasury restricts or regulates the delivery of remittances, including checks and electronic payments, drawn against funds of the United States. See Department of the Treasury Circular No. 655, current revision (31 CFR part 211). Payment will be made without regard to any notice of adverse claims to a bond and no stoppage or caveat against payment of a bond will be entered.

(b) Mandatory initial holding period. A Series I bond issued on January 1, 2003, or earlier, will be paid at any time after six months from issue date. A Series I bond issued on February 1, 2003, or thereafter, will be paid at any time after 12 months from issue date. Bonds will be paid at the current redemption value determined in the manner described in Department of the Treasury Circular, Fiscal Service Series No. 1-98 (31 CFR part 359).

 

[Momcpa]

Clarification on I-bond interest rate: It doesn't matter when (what year even) I bought an I-bond..........when the rates change every 6 months, the rate on MY bonds change to that new rate So the rate posted when I bought them doesn't continue as MY rate (like a CD rate continues) ?? Thanks.

 

[Gumby]

Clarification on I-bond interest rate: It doesn't matter when (what year even) I bought an I-bond..........when the rates change every 6 months, the rate on MY bonds change to that new rate So the rate posted when I bought them doesn't continue as MY rate (like a CD rate continues) ?? Thanks.

That's not quite the case. When the Treasury Department sets a rate on May 1 and November 1, that is the new rate that will apply to bonds that are bought or reach a six month anniversary during the next six month period. But once the rate changes, it applies to your particular bonds for a full six months. So, for example, if I buy an I-Bond today (August 2022), it will earn interest at an APR of 9.62% from August 1, 2022 until January 31, 2023. Starting on February 1, 2023, it will start earning the rate that will be set on November 1, 2022. And it will earn that rate until July 31, 2023, when it will change to the rate set on May 1, 2023.

Your rate only changes on May 1 or November 1 if you bought the bonds in May or November. Otherwise, it changes on every six month anniversary of your purchase.

 

[jblack]

Hi all - wow, this thread is BIG. Perhaps a TLDR question as I've only read the past 3-4 pages but is there a broad consensus on the use of I Bonds in a broader portfolio asset allocation?

Yesterday I moved our small $20k emergency fund over into 2 * $10k purchases for DW and I as a no-brainer move, but now I'm wondering if it makes sense to prioritize future retirement savings slowly over time versus other bond investments. Any conventional wisdom already covered in the first 45p?

We are mid-40s FI but not yet RE so this approach would be a small % of our overall 80/20 index portfolio. But we could execute it over several years ($20k/yr) if worth building up to a larger position vs other bonds/TIPS. Thanks!

 

[Kork13]

Hi all - wow, this thread is BIG. Perhaps a TLDR question as I've only read the past 3-4 pages but is there a broad consensus on the use of I Bonds in a broader portfolio asset allocation?

Yesterday I moved our small $20k emergency fund over into 2 * $10k purchases for DW and I as a no-brainer move, but now I'm wondering if it makes sense to prioritize future retirement savings slowly over time versus other bond investments. Any conventional wisdom already covered in the first 45p?

We are mid-40s FI but not yet RE so this approach would be a small % of our overall 80/20 index portfolio. But we could execute it over several years ($20k/yr) if worth building up to a larger position vs other bonds/TIPS. Thanks!

As a portion of your bond allocation, I-Bonds absolutely make sense. However, unless you buy them while they're paying a significant fixed-rate component (hasn't been above 1% since 2007), they're only going to stay with inflation -- they won't gain ground on it. So I-Bonds are great to preserve buying power (perfect for an EF or a component of your bond portfolio), but not for the entirety of your bonds. Personally, I'd restrict I-Bonds to no more than 10-20% of your overall bond allocation.

 

[beowulf]

I agree completely. I was an early I bond fan - buying some when the fixed part was over 3%. After holding some for 22 or so years, they are about 4X my original cash investment. When the fixed rate went to 0, I stopped buying them. I did my $20K this year and it remains to be seen what happens next. Some of my oldest I bonds are now paying over 13%. But we can’t go back in time and a year or 2 from now that rate may drop precipitously.

 

[Gumby]

I don't treat I-Bonds as bonds in my asset allocation, I treat them as cash.

 

[daylatedollarshort]

I agree completely. I was an early I bond fan - buying some when the fixed part was over 3%. After holding some for 22 or so years, they are about 4X my original cash investment. When the fixed rate went to 0, I stopped buying them. I did my $20K this year and it remains to be seen what happens next. Some of my oldest I bonds are now paying over 13%. But we can’t go back in time and a year or 2 from now that rate may drop precipitously.

I have older TIPS at 2% or more. The yields really went up after 2008 when people were worried about deflation. I'm hoping that happens again this economic cycle. Secondary market rates have the twenty year TIPS at over 1% today. I put in an order at last week's TIPS auction, but will probably start buying more on the secondary market at those yields.

 

[beowulf]

I don't treat I-Bonds as bonds in my asset allocation, I treat them as cash.

Only after they are eligible to be cashed in. You’re screwed for the first year.

 

[Gumby]

Only after they are eligible to be cashed in. You’re screwed for the first year.

That's one of the reasons I laddered my purchases and didn't commit all my cash to them. But it definitely is a consideration.

 

[pb4uski]

Only after they are eligible to be cashed in. You’re screwed for the first year.

I'm more than willing to lock up money for 9.62%

 

[jblack]

Great quick answers & insights to my allocation question. Thanks!

 

[DaveLeeNC]

This is probably addressed somewhere in this thread and I guess I could find it here about as fast as calling TDirect ("your wait time is at least 2 hours") .

My wife/I have a revocable living trust that holds most of our taxable/investible assets (for the convenience of our heirs, primarily). This is where our I-Bonds live (a TD account in the name of the trust).

I can buy $10K per year into this account. I could also set up accounts in the name of wife/me and buy $10k each into those (plus do the gifting trick if I choose). If I buy $10K into each of those accounts, when can I move them to our account held by the Trust?

Thanks. And basically I would view TD as a unsupported service right now. They no longer answer emails (directing you to the phone or website) and the phone (even at around 8:00 a.m.) is a wait of "2 hours OR MORE". Gives me second thoughts about more I-Bonds.

dave

 

[sengsational]

I'm not sure the concept of moving from one account to another really applies. You'd be better off with a lawyer, but I thought a trust was kinda like a person. So your "move" would be like a gift? Interesting question, but I doubt even if you got the best Treasury Direct representative on the planet (after waiting 2 hours), you'd be satisfied.

 

[braumeister]

sengsational is right. You can transfer a bond from a personal account to a trust account (or vice versa) but only if the receiving account has not already bought its $10K for that year.

 

[lawman]

Can I change an I-Bond from POD to my daughter to joint owner ship with my wife? IF so, can someone tell me how using Treasury Direct?
Also, how does POD work? Can I bonds be transferred to the recipient after death or do they have to be redeemed? What would that procedure look like?