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I Bond’s variable rate will rise to 9.62% with the May reset
- faangiq 5y agoThis is apocalyptic. It’s over.
- hnburnsy 5y agoBest part... >While waiting for the May 1 reset might look tempting to launch directly into the 9.62% rate, I still strongly recommend buying I Bonds before April 30, which will lock in a 7.12% rate for a full six months, followed by 9.62% for six months. That’s an annual rate of about 8.4%, and there is no other very safe investment that can match that return. >I Bonds must be held for 12 months before you can redeem them. If you redeem them before five years, you will forfeit the last three months of interest. But if you buy near the end of April 2022, you will get full credit for April and can redeem 14 months and a few days later, avoiding taking the interest penalty on the 9.62% rate. >However, I always recommend buying I Bonds every year up to the purchase cap of $10,000 per person per year and holding them until you actually need the money. People who have been buying I Bonds for years — like many of my readers — are very happy right now, collecting an annual rate of 8.4%, plus any fixed rate attached to the original purchase.
- eloff 5y agoDo you have to be a US citizen to purchase these?
- medler 5y agoNo but you need a social security number and to be a US resident
- mahesh_rm 5y agoCan a Delaware C-Corp buy them?
- vosper 5y ago[you may purchase] if you have a Social Security Number and meet any one of these three conditions: - United States citizen, whether you live in the U.S. or abroad - United States resident - Civilian employee of the United States, no matter where you live https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#who https://treasurydirect.gov/indiv/research/indepth/ibonds/res...
- netfortius 5y agoDoesn't work if you live abroad. Certification is only possible in the US.
- ValentineC 5y agoI wonder if an ITIN would suffice.
- tomatowurst 5y agothere's just no way to buy em if you are not American as i found out.
- UncleOxidant 5y agoThere's also a fixed yield part of iBond interest. Currently that's 0%, but perhaps it will be something around 0.5% due to the Fed raising rates? That could be an incentive for waiting until May to buy.
- Thrymr 5y agoThat was also addressed in the article: > Will the I Bonds’s fixed rate rise on May 1? > I still say “no,” but conditions are getting better for a fixed rate higher than the current 0.0%. The real yield of a 10-year TIPS has now “surged” to -0.12%, an impressive rise of 85 basis points since the beginning of the year. But until it gets to at least 0.25%, I think it’s unlikely the Treasury will increase the I Bond’s fixed rate. We might see the rate rise in November, which would be available to grab when the calendar resets in January. > My advice: Don’t be waiting for a higher fixed rate that might never come, and miss out on the chance to make $840 on a $10,000 investment in one year. Invest up to the cap before May 1.
- deleted 5y ago[deleted]
- netfortius 5y agoNot available for expats, apparently. Opening an account requires a form to be signed by some sort of certification officer (not a notary) only available in the US.
- mynameishere 5y agoLike war bonds, I suppose if these became popular, they could have the effect of actually reducing inflation. Very temporarily.
- ceeplusplus 5y agoThe demographics driving up inflation are probably not the same ones investing into I-Bonds. Take a look at this loan delinquency rate over the course of the pandemic [1] - it's pretty clear that the American Rescue Plan (last round of stimulus passed by reconciliation) had a marked impact on subprime auto and credit card loans. That gives you a hint for where all that stimulus money ended up going instead of being spent on useful things like food or invested. Coincidentally one of the biggest drivers of CPI was used cars. [1]: https://www.wsj.com/articles/investors-turn-cautious-on-consumer-debt-11649624240 https://www.wsj.com/articles/investors-turn-cautious-on-cons...
- readthenotes1 5y ago(a) most people in the USA live in a region without adequate mass transit and thus needs cars to do useful things like keeping a job or shopping at the grocery store. (B) did the Wall Street journal article also talk about the effects of the chip shortage and the subsequent new car shortage that hit last summer? If not, it is willfully misleading. (C) another hint on where all that money went is the increase in fuel costs, rent costs, and food costs. The increased demand is exacerbated by the supply chain troubles including the decrease in US oil wells provoked by Biden's war on American-sourced fossil fuels.
- cwmoreiras 5y ago> spent on useful things like food or invested There are a lot of people for whom a used car is much more useful than bonds, shares of a company, etc.
- mywittyname 5y agoThis is one of the reasons certain economists recommend cash payments over benefits like SNAP for poor people. People generally have a good idea of how they could invest in themselves for an immediate improvement in their situation. Be that getting the money for a down payment on a car, house, or apartment; getting tools they need to start side business; taking time off to take a class at a community college; etc.
- bombcar 5y agoI Bonds are a great way of "saving" for a large purchase, as they roughly keep pace with inflation so you are effectively saving real dollars. Fun fact - you can still get paper I Bonds if you request your tax refund be sent that way. https://www.irs.gov/refunds/using-your-income-tax-refund-to-save-by-buying-us-savings-bonds https://www.irs.gov/refunds/using-your-income-tax-refund-to-... - this is the ONLY remaining way to get paper I bonds.
- Trasmatta 5y agoOr using it as your emergency fund. Just keeping in mind that you should probably ladder your emergency fund into them, since they're locked up for 1 year.
- mywittyname 5y agoIt's not much of an emergency fund if it's locked away for a year.
- bombcar 5y agoThat's the point of the ladder - after a year or two you can access much of it at anytime. Buy 1k this year and 1k next year, and your accessible emergency fund is 1k - but from then on it grows 1k a year if you keep purchasing; only the last purchase isn't immediately available.
- mywittyname 5y agoI understand that, but think about the trade-off: I am potentially earning $40-80 on interest over a year, but I lose access to $1000 ear-marked specifically for emergencies. If it's truly an emergency, then you're better off with $1000-inflation. Maybe get a high-yield savings account and split the difference ($20/yr, but access at any time). I will concede that people have different definitions of "emergency" funds. I see it as, $500-1000 sitting in an account to deal with things that need to paid for now or else bad things will happen. So sudden car repairs and the like. Other people call six months of wages an emergency fund. For these people, yeah, a ladder makes a lot of sense, but that's mostly because they never really expect to need the entire amount immediately (thus, IMHO, not really an emergency fund).
- deleted 5y ago[deleted]
- Panther34543 5y agoThese seem like one of the best investments to make right now, considering the current inflationary environment. How does one purchase these bonds?
- gte525u 5y agoThe treasury direct website.
- lordofmoria 5y agoI was so happy to have found I bonds in the last few months. This does beg the question - is there any other “safe, relatively liquid” option that has even close to the same yield as I Bond? Seems like traditional bank savings and short term CDs are still well below 1% everywhere.
- gizmo686 5y agoNo. There is a reason you are limited to $10k a year. I bonds are not a financial product being sold for the benefit of the seller. They are a government service being provided for the benefit of the buyer.
- gotaquestion 5y agoKinda sound like a wanker here, but if I can only by $10k of bonds... that works out to about $500 after taxes in a year. Not a whole heck of a lot, or do they retain the 8% for however long you hold the bond? (e.g., 10 years?) Meaning at 7.2% in 10 years I'd have 20k? EDIT: Thanks for the replies. TIL.
- zeroonetwothree 5y agoNo they have a rate that adjusts to match inflation. So after 10 years you will have exactly the same amount as you started with in real dollars (actually less because of taxes...)
- gizmo686 5y agoThe bonds last up to 30 years, and you can buy the yearly max every year regardless of how much you own. However, they do not have a fixed interest rate. Every 6 months, the rate is set to match inflation.
- atwebb 5y agoThe second one (but in theory it is still that same purchasing power since it is keeping with inflation). There's some rules on if you cash out before 5 years (you give up the last 3 months of interest) and you MUST hold for 12 months. You can ladder them too and have different amounts / times of purchase. I like it for planned emergency funds that would otherwise be cash, ladder into it so you always have your EF available.
- enlyth 5y agoIs there a way to purchase these as a UK national?
- lesgobrandon 5y ago
- nullc 5y agoWhen i-bonds have a fixed rate of zero they are guaranteed to under-perform inflation since you still must pay federal income tax (not even LTCG) on their increase in nominal value. An i-bond needs to have a fixed rate of at least 0.27% to cover the interest on the 2% target rate of inflation, assuming a 12% income tax rate. If inflation was sustained at 9% the i-bond fixed rate would need to be 1.2% to make it not lose value. I-bond is an interestingly alternative when you'd otherwise just hold cash, but with the fixed rate of 0 it's not that exciting. Other than cash few other investments are guaranteed to lose money relative to inflation. I would avoid buying I-bonds with a fixed rate under 0.5% and certainly under 0.2%. ... and that's entirely without getting into the argument that the government systematically underestimates inflation e.g. by CPI-U having an open-loop correction for substitution.
- mint2 5y agoIts interesting when it’s the best of the bad options for a cash reserve. CDs, tbills, etc all are worse.
- tbirdz 5y agoIt's worth noting that I bonds are exempt from state income tax, and you pay federal income tax at the time you redeem the bond, not at the time you get interest, so it's federal income tax deferred. You could potentially hold onto the I bond for up to 30 years before being forced to redeem, so you could wait until you're in a lower tax bracket, which makes it better.
- nullc 5y agoIndeed. But consider: except for very high income households, the LTCG tax rate is never more than 15%-- and federal income tax brackets don't go lower than 10% and even just social security payments will move people into 12%. Many ibond alternatives yield qualified dividends (=LTCG rates). For anyone with income under 41k (81k married) long term the LTCG rate is 0. A rate of 0 is wayyy better than a rate of 12% but deferred. State taxes are a bigger difference but really just for the few states that have higher income tax rates... and even those they're only really high for high incomes.
- dgrin91 5y agoI decided to go in and buy some I-Bonds for the first time. To do this you need to make an account with https://www.treasurydirect.gov/ https://www.treasurydirect.gov/. My god this was a shockingly bad experience filled with security theater. * Passwords must be at least 8 chars, but can't be longer than 16 (they don't tell you the max length though * Passwords can't have \ * Passwords are case-insensitive * When you actually try to log in they make you use a virtual keyboard - meaning you have to use your MOUSE to click each individual character which is shown on screen in plain text. The keyboard does not work on purpose, and password manager don't work either. From their security FAQ - > Virtual Keyboard: The virtual keyboard is one of many security features introduced in TreasuryDirect as part of our on-going commitment to heightened password and account security. The advantage of using the virtual keyboard is that others are deterred from learning your password. It reminds me of that video from a while back of UX designed by the devil. I know its government, but what an awful experience.
- vorpalhex 5y agoLast time I saw virtual keyboard as a security feature, it was in an early 2000s Korean MMO filled with bots...
- Macha 5y agoDublin bike hire does it, including shuffling the numbers. I could almost understand it at the terminals at bike hire points, but they do the same on their web interface. Of course the real insecurity is they assign you a fixed numeric 6 digit PIN.
- ihattendorf 5y agoYeah it's pretty bad. To enter password via keyboard/paste: right click password element -> inspect -> remove the `readonly="readonly"` attribute.
- jghn 5y agoI was surprised today, Safari autofilled the password for me. First time I tried using it with Safari.
- HWR_14 5y agoI'm still not sure that doing so before May 1 is the way to go. Jumping straight in seems better if you assume that inflation isn't going below 7.5% by November
- pcurve 5y agoJust heads up, your money is locked in for 5 years if you want to avoid paying penalty. Before 5 years, you forfeit interest from the previous 3 months which isn't terrible, assuming the variable rates remain competitive.
- adammunich 5y ago14mo
- oceanplexian 5y agoWhile it sounds attractive, I’m doubt that real inflation is anywhere near that since the government is so obviously fudging the #’s. Look at asset prices, rent, food, home values, and basically anything that actually matters.
- paxys 5y agoI must be the only one who hasn't caught the I-bonds mania. Yes 9.5% is a crazy interest rate, but it only works if you (1) have $10K lying around in a savings account (2) don't need to touch it in the next 12 months (3) need it in the short term after the 12 months are up. And ultimately you will make a few hundred dollars worth of interest (minus a 3 month interest penalty), all of which will be taxable immediately at your regular short-term rate. Just put the $10K in VOO instead and forget about it for a few years.
- nanidin 5y agoI haven't done the research on I Bonds, but interest on T-Bills is not subject to state tax.
- paxys 5y agoI-bonds are subject to regular federal income tax.
- nanidin 5y agoYes, but I only mentioned state tax. Are I Bonds subject to state income tax? The lack of state tax on T-bills was a great loophole for emergency fund growth a few years ago until yields dropped around the start of COVID.
- paxys 5y agoNo idea, but my state doesn't have income tax regardless. And for any regular investment tax is 0 until you realize it.
- js2 5y ago> Are I Bonds subject to state income tax? No. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_itaxconsider.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
- tomatowurst 5y ago
- tomatowurst 5y agoDo you have to be American to purchase this? What about Canadians? This is absolutely bonkers that this exists, the GIC account I put in pays a measly 1.25%. Update: so according to this site looks like it is possible but we will be taxed on the interest (50% capital tax!!!) https://www.thestreet.com/investing/funds/can-canadians-have-treasury-direct-accounts-737721 https://www.thestreet.com/investing/funds/can-canadians-have... Is there a way to avoid this by putting it in TFSA or RRSP?
- akg_67 5y agoWhy not look into Real Return Bond? It is Canadian version of inflation protected bond. You need SSN to buy I-series bond.
- tomatowurst 5y agoGood point I guess 2.75 is better than 1.25. laughable that its "inflation protected" but bummer...you need a SSN
- fortran77 5y agoYou can only buy $10,000/year of these. Back in the day, a married couple could purchase up to $120,000 of them if you bought $60K in paper and $60k electronic. When they were paying around 7% in 1998 or so, we would max out every year. The lowered the limit because of "equity". (Here's something from Forbes when they lowered the limit from $30,000/person/year to $5,000: https://www.forbes.com/2010/02/25/i-bonds-purchase-limits-tips-personal-finance-bogleheads-view-lindauer.html?sh=42d1e24652b8 https://www.forbes.com/2010/02/25/i-bonds-purchase-limits-ti... )
- jdofaz 5y agoI've been locked out of my treasury direct account for years now. The website directs me to call, I waited on hold for 4 hours before the call was disconnected
- elil17 5y agoI had everyone in my household start shoving savings into i bonds a year ago. Now that money can be withdrawn (albeit with a small penalty). Those are now our emergency funds and will continue to keep up with costs!
- pciexpgpu 5y agoI am always wary when there is a guaranteed return even if it’s a very safe investment. But given the stability of the US Govt, could someone explain who is on the “other side” that provides these returns and why? Possibly ELI5 sorry!
- simulate-me 5y agoThe government is the "other side," and they do it as a service to consumers. Each individual can only purchase $10K per year, so it's not meant as a general purpose investment vehicle.
- xhkkffbf 5y agoAny suggestions on whether to choose 5 year or 9 year + 8 months? Those are apparently the two options.