The I Bond Thread

[copyright1997reloaded]

I don't know the answer to your question but your logic seems sound. The last time a fixed rate was greater than zero on I-Bonds was on November 1, 2019 when it was 0.20%. I'm not expecting a fixed component this November pretty much for the reason you stated. People don't need an incentive to buy. In 2019 they did.

some of us remember when TIPS/I-Bonds had over a 3% real (maybe even close to 4%) component. Those were the days. I still have iBonds from 2003 that are currently paying 11.3%.

I actually just sold (a couple/few days ago) a 2029 maturity TIP that I had owned since 2009 w/a 2.5% real. (It was in a IRA that I am transferring to a 457 plan).

 

[bobandsherry]

I still have iBonds from 2003 that are currently paying 11.3%.

I'm curious, what was that paying for the prior 3-4 years?

 

[copyright1997reloaded]

I'm curious, what was that paying for the prior 3-4 years?

Sorry, I have no idea. I just own it. However, your post made me look.

[To elaborate, I pretty much ignore my iBonds and only occasionally feed them to the iBond website to update their value information, and then only when I for some reason feel the need to include their updated value in my overall net worth tracking....like now! No need to know for taxes, etc. ]

The highest current rate on my inventory is 13.39% on bonds purchased in 3Q/2000. Looking at this: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#past it tells me those iBonds have a real rate of 3.4%.

Further down, it discusses the inflation components over the years. Looking at 3-4 years ago, much lower (e.g.1.16% in Nov 2018), so that would have been 3.4%+1.16% = 4.56%?

 

[beowulf]

Yep- 3Q/2020 was a good time to buy - everything I bought from March 2000 to May 2021 had a similar rate. Then it started to drop in Nov 2021 and continued until it hit 0%. Bad thing is that those 2000 I bonds mature in 8 years - and they are worth triple what I paid for them.

 

[Jerry1]

Question re: buying IBonds. I purchased some bonds this year around May. Do I have to wait until next May to purchase more, or can I purchase my next bonds after January 1st?

 

[braumeister]

January. It's on a calendar year basis.

 

[Jerry1]

January. It's on a calendar year basis.

Thanks. Starting to plan next years cash needs.

 

[beowulf]

But you can buy a $10K gift bond for your wife now and deliver it to her on Jan 1 and you will earn interest from Oct. Assuming, of course, that you’re married and that she hadn’t bought one in 2022. She will also need a Treasury Direct account.

 

[Sunset]

But you can buy a $10K gift bond for your wife now and deliver it to her on Jan 1 and you will earn interest from Oct. Assuming, of course, that you’re married and that she hadn’t bought one in 2022. She will also need a Treasury Direct account.

Or, buy the gift now, but don't deliver it, let it age and earn interest in the gift box.

Actually, I've realized it's better to buy a bunch of gifts now and snag the 9.6x% for 6 months. We can just deliver gifts to each other over the years.
We bought $30K in gifts for each other, so committed to 3 years worth.
Advantage of gifts is: high interest rate, and they age in gift box, so cashable as soon as given, which is limited to 1 gift per year of original $10K (plus int) value.

 

[Finance Dave]

So if you buy before the end of October then you'll get 9.62% (annualized rate) for the first 6 months, the rate announced in November (expected to be ~6%) for the second 6 months and then the announced rate very 6 months thereafter.

No withdrawals in first year, then 3 month early withdrawal penalty for next 4 years, then no withdrawal penalties. Max of $10k/person/year but you can buy more than $10k as a gift for future delivery and get today's juicy rates and a head start on the holding periods.

DW and I bought each other gifts for our 2023, 2024 and 2025 allowances earlier this year. You can also buy up to $5k a year with your tax refund.

I'm confused. You say you each bought "gifts" for each other? I thought that any gift bought counted towards the gifted person's annual purchase limit...so how does that help? If you bought your own $10k, how can your DW buy you a gift for $10k and not exceed the $10k/year limit? What am I missing? I see that you say the gifts are for future years, but why not just buy your own rather than gifts?

 

[target2019]

You can delay the delivery of the gift until a future year.
https://thefinancebuff.com/buy-i-bonds-as-gift.html

 

[steelyman]

I hadn’t seen anything about this here (this thread) yet but noticed it on CNBC this morning.

Hopefully it means that someone has felt our collective pain with respect to Treasury Direct?

As demand soars for Series I bonds, TreasuryDirect gets a makeover

https://www.cnbc.com/2022/10/04/as-...s-i-bonds-treasurydirect-gets-a-makeover.html

 

[Gumby]

I'm confused. You say you each bought "gifts" for each other? I thought that any gift bought counted towards the gifted person's annual purchase limit...so how does that help? If you bought your own $10k, how can your DW buy you a gift for $10k and not exceed the $10k/year limit? What am I missing? I see that you say the gifts are for future years, but why not just buy your own rather than gifts?

The $10k limit is on the recipient, not the buyer. You can buy as many gift bonds for your wife as you like. However, you can only deliver $10k of them to her in any one year, because a person can only buy for themselves or receive as a gift $10k of bonds in one year. So I bought $30k of gift bonds for my wife this year. I will deliver them to her in three equal tranches - one on 1/1/23, one on 1/1/24 and one on 1/1/25. Note that the interest accrues, but it doesn't count against the $10k amount; only the original principal counts against the limit.

The reason to buy them all this year was to capture the temporarily high rates this year on a larger principal, since even while in the gift box they accrue interest.

I hadn’t seen anything about this here (this thread) yet but noticed it on CNBC this morning.

Hopefully it means that someone has felt our collective pain with respect to Treasury Direct?
https://www.cnbc.com/2022/10/04/as-...s-i-bonds-treasurydirect-gets-a-makeover.html

Just when I've grown comfortable with navigating the old site.

 

[Jerry1]

Once again, this site (the people on it) has been so helpful. I bought $10K earlier this year (first time) and now I’m going to buy some as a gift to DW (and her to me). Thanks for the great information. Given the restriction on annual purchases, it’s not something you’re going to get rich doing, but as I think most here know, there’s a lot of basic blocking and tackling that goes into being financially well off. This is a good one.

 

[steelyman]

Just when I've grown comfortable with navigating the old site.

Well, it sounds like the emphasis is on the front end, which can definitely benefit from a redesign (if done well, not just slapped together). I rarely use a desktop and the mobile access is a hassle.

Fortunately, now that my accounts are established I don’t lower myself into that pit more than once monthly and for rare $10K purchases.

 

[jldavid47]

I hadn’t seen anything about this here (this thread) yet but noticed it on CNBC this morning.

Hopefully it means that someone has felt our collective pain with respect to Treasury Direct?

https://www.cnbc.com/2022/10/04/as-...s-i-bonds-treasurydirect-gets-a-makeover.html

Well, the front-end has been streamlined but once you log in you have exactly the same interface as before. Maybe they are still working on it. Revamping a web site that large is a big job.

 

[jollystomper]

I hadn’t seen anything about this here (this thread) yet but noticed it on CNBC this morning.

Hopefully it means that someone has felt our collective pain with respect to Treasury Direct?

https://www.cnbc.com/2022/10/04/as-...s-i-bonds-treasurydirect-gets-a-makeover.html

They mainly changed the "front end" and informational parts of the website. The account login and account sections are the same, this new front end just links to it.

 

[jollystomper]

Well, the front-end has been streamlined but once you log in you have exactly the same interface as before. Maybe they are still working on it. Revamping a web site that large is a big job.

Very true, I did a lot of this in the early years of the internet. It is one thing to change how fairly static information is presented, quite another when dealing with login security and data retrieval/update processes - even just frontending those processes from existing is a lot of work and testing.

 

[Finance Dave]

The $10k limit is on the recipient, not the buyer. You can buy as many gift bonds for your wife as you like. However, you can only deliver $10k of them to her in any one year, because a person can only buy for themselves or receive as a gift $10k of bonds in one year. So I bought $30k of gift bonds for my wife this year. I will deliver them to her in three equal tranches - one on 1/1/23, one on 1/1/24 and one on 1/1/25. Note that the interest accrues, but it doesn't count against the $10k amount; only the original principal counts against the limit.

The reason to buy them all this year was to capture the temporarily high rates this year on a larger principal, since even while in the gift box they accrue interest.

Thanks Gumby...but do you have any link that says if you buy them now but don't deliver until next year that you get today's high rates? I don't see that anywhere on the TD site.

 

[Gumby]

This is what the Treasury Direct site says "I bonds earn interest from the first day of the month you buy them." https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/ (emphasis mine, i.e. "buy" not "deliver"). I can confirm that I have done exactly what I said earlier, and every month the Treasury Direct site shows the gift bonds accruing interest while in my gift box.

 

[calmloki]

A question: if one sells an I-bond before the five year mark there is a three month interest penalty. Is it the first three months or the last three? I'll note that when I bought the bonds it was three months before any interest started showing. It would be much better of course to lose three months that was earning maybe 3% vs three months at 9.6%. Like $165 better.

 

[Sunset]

A question: if one sells an I-bond before the five year mark there is a three month interest penalty. Is it the first three months or the last three? I'll note that when I bought the bonds it was three months before any interest started showing. It would be much better of course to lose three months that was earning maybe 3% vs three months at 9.6%. Like $165 better.

I anticipate it would be the last 3 months of interest, since the accumulated interest showing is 3 months behind.

 

[Gumby]

Last three months:

31 CFR § 359.7

If I redeem a Series I savings bonds before five years after the issue date, is there an interest penalty?

If you redeem a bond less than five years after the issue date, we will reduce the overall earning period by three months. For example, if you redeem a bond issued January 1, 2002, nine months later on October 1, 2002, the redemption value will be determined by applying the value calculation procedures and composite rate for that bond as if the redemption date were three months earlier (July 1, 2002). However, we will not reduce the redemption value of a bond subject to the three-month interest penalty below the issue price (par). This penalty does not apply to bonds redeemed five years or more after the issue date.

Note: I think their example forgets the fact that there is a minimum one year holding period.

 

[Finance Dave]

The $10k limit is on the recipient, not the buyer. You can buy as many gift bonds for your wife as you like. However, you can only deliver $10k of them to her in any one year, because a person can only buy for themselves or receive as a gift $10k of bonds in one year. So I bought $30k of gift bonds for my wife this year. I will deliver them to her in three equal tranches - one on 1/1/23, one on 1/1/24 and one on 1/1/25. Note that the interest accrues, but it doesn't count against the $10k amount; only the original principal counts against the limit.

The reason to buy them all this year was to capture the temporarily high rates this year on a larger principal, since even while in the gift box they accrue interest.

Ok, so correct me if I'm wrong...

You're saying she will NOT be able to buy her own bond on 1/1/23 because the gift you bought her counts against her $10k limit for 2023? But that's ok because you got the high interest rate by purchasing now.

Can you then buy 3 for yourself but not deliver them to yourself until future years? Or is it not allowed to set up future deliveries to yourself?

Sorry for all the questions, just trying to get clarity.

 

[Gumby]

Ok, so correct me if I'm wrong...

You're saying she will NOT be able to buy her own bond on 1/1/23 because the gift you bought her counts against her $10k limit for 2023? But that's ok because you got the high interest rate by purchasing now.

Can you then buy 3 for yourself but not deliver them to yourself until future years? Or is it not allowed to set up future deliveries to yourself?

Sorry for all the questions, just trying to get clarity.

No, you can't buy gifts for yourself. The way we did it was to buy three $10k gifts for each other for the next three years, so we can get the good interest rate now. On January 1 of 2023, 2024, and 2025, we will deliver those $10k bonds to each other. In each of those years, we will be unable to buy I-bonds for our own account (but we could buy more gifts to be delivered in future years).

This may help

31 CFR § 363.52

What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.

(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.

(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.

(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.