The I Bond Thread

[pb4uski]

^^^ That is where the eyebonds chart is useful to me because it shows the values at the end of each month by month of issue (and denomination).

 

[Phroig]

I bonds ($10 K each purchase) were purchased on 10/25/2021 and 1/10/2022. What month this year would be the best me to get out of them and take advantage of higher rates elsewhere?

I thought you get the May 2021 rate for your first six months of ownership on the first bond. If that’s the case, you should get the 6.48% rate through September 2023. Then you need to own the bond for three more months at the current rate.

Edit: I didn’t read to the end of the thread; I see others have pointed this out.

 

[BlueberryPie]

You will get the same price is you sell at any time in July, conversely you will get the full month interest even if you buy at the end of the month.
Only the month of the date you buy/sell matters, not the actual date during the month.

Since for banks it matters, usually compounded daily, you can get essentially an extra month (like 29 days) I retest by selling I bonds on the 1st and putting it immediately in a HYSA.

 

[Vincenzo Corleone]

7/1/23 for the first and 10/1/23 for the second. That way, you'll capture the 6.48% rate for the full period.

I take it the recommended sale date of 7/1/23 goes for an issuance date of 12/1/2021 and now yielding 3.38%. Correct?

 

[BlueberryPie]

You can't just look at the current interest rate, you want to have been earning that rate for 3 months since you lose 3 months of interest rate if you sell before 5 years.

Your Jan 1 2021 purchase changes rate every 6 months from your month of purchase, so it changes in Jan and July. This means you just started earling last May's rate of 3.48, up until June you were earning the earlier November rate.

So if you want to forfeit 3 months at the lower rate, you need to wait till September.

 

[Vincenzo Corleone]

You can't just look at the current interest rate, you want to have been earning that rate for 3 months since you lose 3 months of interest rate if you sell before 5 years.

Your Jan 1 2021 purchase changes rate every 6 months from your month of purchase, so it changes in Jan and July. This means you just started earling last May's rate of 3.48, up until June you were earning the earlier November rate.

So if you want to forfeit 3 months at the lower rate, you need to wait till September.

Thank you.

 

[pb4uski]

You can't just look at the current interest rate, you want to have been earning that rate for 3 months since you lose 3 months of interest rate if you sell before 5 years.

Your Jan 1 2021 purchase changes rate every 6 months from your month of purchase, so it changes in Jan and July. This means you just started earling last May's rate of 3.48, up until June you were earning the earlier November rate.

So if you want to forfeit 3 months at the lower rate, you need to wait till September.

Actually, I think you need to wait until October 1. You would forfeit interest for July, August and September at the 3.38% rate that is effective July 1, 2023 for an I bond issued in Jan 2021.

$25 I Bond January 2021

 

[calmloki]

And just to keep in mind the kind of numbers we're talking about:
$10,000 Ibond @ 3.38% vs. 6 month treasury @ 5.4% is about a 2% difference, so $16.67/month?

 

[pb4uski]

True, but with the I bond if you don't hold for 5 years then you have to concede to 3 months at 0% at some point... so IMO better to forfeit 3 months at 3.38% than forfeit 3 months at 6.48%.

 

[calmloki]

I agree, but was actually trying to keep my stewing over this in check by realizing the amount lost by missing the optimal cash-in date by a month or so.

 

[SloHan]

^^^^

True. You are not facing a huge loss if you redeem a bond a month too early.

 

[audreyh1]

You will get the same price is you sell at any time in July, conversely you will get the full month interest even if you buy at the end of the month.
Only the month of the date you buy/sell matters, not the actual date during the month.

Since for banks it matters, usually compounded daily, you can get essentially an extra month (like 29 days) I retest by selling I bonds on the 1st and putting it immediately in a HYSA.

This is true for buying, not for selling. You have to wait until the following month to get the interest. You don’t get any interest for the month during which you sell.

Actually, I think you need to wait until October 1. You would forfeit interest for July, August and September at the 3.38% rate that is effective July 1, 2023 for an I bond issued in Jan 2021.

$25 I Bond January 2021

Yes.

 

[BlueberryPie]

You can sell in September and forfeit July, August and Sept intérêt because Sept is accrued on the first of the month.

 

[imbatman]

Interesting, so selling on the 2nd of the month will still have accrued for the whole month on the 1st (and in this case, could count as 1 of 3 the months forfeited). I realize the money isn't huge but still nice to know for sure how it works.

 

[Gumby]

You can sell in September and forfeit July, August and Sept intérêt because Sept is accrued on the first of the month.

Interest is paid for the month only if you hold on the last day of the month. Interest is paid for the full amount of the first month regardless of the day during the month on which you buy the I-bond.

 

[Gumby]

Interesting, so selling on the 2nd of the month will still have accrued for the whole month on the 1st (and in this case, could count as 1 of 3 the months forfeited). I realize the money isn't huge but still nice to know for sure how it works.

No. See my earlier post.

 

[Gumby]

Actually, I think you need to wait until October 1. You would forfeit interest for July, August and September at the 3.38% rate that is effective July 1, 2023 for an I bond issued in Jan 2021.



$25 I Bond January 2021

Exactly correct.

 

[imbatman]

Got it, thanks @Gumby. Giving up 28-30 days free interest on both the buy month AND sell month was going to be particularly generous. So ONLY a free ride on the buy month if you time it correctly.

 

[audreyh1]

Interest is paid for the month only if you hold on the last day of the month. Interest is paid for the full amount of the first month regardless of the day during the month on which you buy the I-bond.

Yes.

 

[Accidental Retiree]

+1 I'm suprised that the fixed rate is so high. I think I'll probably swap out some 0% fixed rate I-bonds for some 0.9% fixed rate I-bonds in October... I don't mind paying the three-month penalty and locking up the money for a year to get that nice 0.9% fixed rate forever.

Is the penalty deductible on our taxes, as CD interest penalties are?

 

[audreyh1]

Is the penalty deductible on our taxes, as CD interest penalties are?

No. You simply don’t get the last 3 months interest, so no income to tax. You still get all your principal back plus the rest of your interest. So no loss involved.

 

[RunningBum]

One reason you might continue to hold longer is to not have to recognize interest on the bond yet. Someone might want to wait until 1/1/2024 to sell if they were concerned that the I-Bond interest paid from a sale in 2023 ($1500 on a $10K I Bond purchased 1/1/2021) would put them into a higher IRMAA tier, for example. Holding for 3 months at a lower rate might be worth it. I might do this just to avoid going over the LTCG/QDiv 0% barrier.

 

[sengsational]

Interest is paid for the month only if you hold on the last day of the month. Interest is paid for the full amount of the first month regardless of the day during the month on which you buy the I-bond.

So if one wants to put the finest point on their early I-bond sale, they could put their issue into eyebonds.info and wait until the value reflected on the Treasury Direct site was beyond the latest blue rate change?


Right now, this bond is reading "$10,764" on Treasury Direct, indicating that not all the juice is out of the 6.48% yet. Once it reads "$10,852", you can sell and not leave any 6.48% on the table.

 

[RunningBum]

So if one wants to put the finest point on their early I-bond sale, they could put their issue into eyebonds.info and wait until the value reflected on the Treasury Direct site was beyond the latest blue rate change?


Right now, this bond is reading "$10,764" on Treasury Direct, indicating that not all the juice is out of the 6.48% yet. Once it reads "$10,852", you can sell and not leave any 6.48% on the table.

If you sell before 5 years you lose the last 3 months of interest, so you have to go 3 months beyond where it reads "$10,852" in your example.

 

[Born2Fish]

So if one wants to put the finest point on their early I-bond sale, they could put their issue into eyebonds.info and wait until the value reflected on the Treasury Direct site was beyond the latest blue rate change?


Right now, this bond is reading "$10,764" on Treasury Direct, indicating that not all the juice is out of the 6.48% yet. Once it reads "$10,852", you can sell and not leave any 6.48% on the table.

If you sell before 5 years you lose the last 3 months of interest, so you have to go 3 months beyond where it reads "$10,852" in your example.

So, would I need to redeem on Sep 1, or Oct 1 to ensure I get the full 6.48% interest?