8 ms·

I 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 clo

I 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 ago
No. 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 ago
  Kinda 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 ago
    No 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 ago
    The 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 ago
    The 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.
  - pedrosorio 5y ago
    > that works out to about $500 after taxes in a year. https://www.thebalance.com/tax-advantages-of-series-i-savings-bonds-357552 https://www.thebalance.com/tax-advantages-of-series-i-saving... 1) No state tax on I-bonds 2) You can defer and pay tax on the interest only when you sell the bonds (which means you can time the sale to when you have lower income) > or do they retain the 8% for however long you hold the bond? No, the interest rate is updated every 6 months, see the sibling comment.
  - armchair_ 5y ago
    The interest rate gets changed every 6 months depending on the CPI. The $10k limit is per year - so if you hold on to those bonds you can potentially have $300k invested in total. As the parent comment stated - this isn't meant to get anyone rich. This is the government providing a service that allows (working-class) individuals to keep a rainy-day fund relatively insulated from risk. If you're able to save more than 10k per year, you're not the primary target for this service.
  - cplex 5y ago
    “Not a whole heck of a lot” but at virtually zero risk. This is for the portion of your portfolio that you don’t risk at all.
- oversocialized 5y ago
gte525u 5y ago
Closed end bond funds - but their price hasn't been stable lately due to pricing in expected rate increases.
Trasmatta 5y ago
One thing to keep in mind is that the I Bond rates will go way back down once inflation does. So it's great as an inflation hedge, but other assets will almost certainly out perform them in the long run. Still worth getting the yearly $10k though.
- lotsofpulp 5y ago
  Assuming VOO will get bailed out by US government in the event of a decline/stagnation within the timeframe of a few years, then I would go with $10k in VOO over $10k in I bonds every year due to the lower long term capital gains tax rate for VOO as opposed to paying regular income tax rates on interest income with I bonds.
  - orev 5y ago
    Market funds are a very bad place to keep money that might be needed soon. Ibonds provide a safer place to keep funds you might need in an emergency. You should never have emergency funds in the market. Also, assuming a government bailout will come to the rescue is a pretty risky strategy.
    - lotsofpulp 5y ago
      I bonds are also not for funds needed soon. I see some utility for them for funds that might be needed after 12 months, but before whenever one feels comfortable that public equity markets will be bailed out. They do sound like a good option for those that want to be prepared for emergencies 12 months into the future. >Also, assuming a government bailout will come to the rescue is a pretty risky strategy. Of course, this is just my opinion, but I feel like it is risky to not assume a government bailout. As far as I can see, the options are bailout of public markets, or revolution.
      - mint2 5y ago
        I’d really hope people are planning in advance for emergencies. It’s not an emergency if one knows it’s coming next month. Everyone should have some emergency plan or fund if at all feasible.
UncleOxidant 5y ago
Not currently. Maybe if we see interest rates rise significantly we'll see some attractive rates on 10 year treasuries? I think if the 10 year goes over 6% I'm going to start buying them.
arcbyte 5y ago
Anchor protocol is paying 19.5%.
- arcticbull 5y ago
  Yeah that has a somewhat different risk profile. A series I bond risk profile is basically 0 risk. Anchors risk profile is roughly “oh my good sweet buttered Christ what are you thinking?!”
buzzy_hacker 5y ago
Short-term TIPS. The shorter duration means more responsive to inflation and less sensitive to interest rate risk. https://institutional.vanguard.com/iam/pdf/ISGCTIPS.pdf?cbdForceDomain=true https://institutional.vanguard.com/iam/pdf/ISGCTIPS.pdf?cbdF...
- Apes 5y ago
  In theory, but not in practice. Inflation is up over 8% YoY, but short term TIPS are down over 2% - for a realized loss against inflation of over 10% on what should be a "safe" asset class: https://www.google.com/finance/quote/VTAPX:MUTF?sa=X&ved=2ahUKEwiE_oWKwo_3AhXYD0QIHeOMCdAQ3ecFegQIBRAf&window=1Y https://www.google.com/finance/quote/VTAPX:MUTF?sa=X&ved=2ah... The longer they exist, the more it feels TIPS are a sucker's bet.
  - Spellman 5y ago
    It's a very different thing to compare a fund vs holding the actual certificate. Same with the Bond Mutual Funds vs holding a Bond. The Funds will decline because you have to sell old Bonds at a discount to buy up the new higher interest payout bonds. But if you held on to the original bond, then you'd still get the fixed payout. You'd just miss out on the opportunity of the new higher payout bonds on the market.
  - redisman 5y ago
    You’re forgetting the dividend. But yes it’s not as good as an I bond https://ycharts.com/mutual_funds/M:VTAPX/dividend_yield https://ycharts.com/mutual_funds/M:VTAPX/dividend_yield https://ycharts.com/mutual_funds/M:VIPSX/dividend_yield https://ycharts.com/mutual_funds/M:VIPSX/dividend_yield
christophilus 5y ago
I think TIPs are in the 4% range. Not close, but still pretty high based on recent ranges.
oceanplexian 5y ago
I would just buy stocks and keep rolling LEAPs (long dated options) to cover the downside risk of different scenarios. Then you can fine tune exactly the risk you want to take and the premium you want to pay. I-Bonds are not that attractive and the rates are not great when you take into account inflation. Plus there are a million ways to get a better tax outcome with stocks, tax privileged accounts, loans, tax loss harvesting, etc.

gizmo686 5y ago

No. 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 ago
Kinda 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 ago
  No 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 ago
  The 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 ago
  The 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.
- pedrosorio 5y ago
  > that works out to about $500 after taxes in a year. https://www.thebalance.com/tax-advantages-of-series-i-savings-bonds-357552 https://www.thebalance.com/tax-advantages-of-series-i-saving... 1) No state tax on I-bonds 2) You can defer and pay tax on the interest only when you sell the bonds (which means you can time the sale to when you have lower income) > or do they retain the 8% for however long you hold the bond? No, the interest rate is updated every 6 months, see the sibling comment.
- armchair_ 5y ago
  The interest rate gets changed every 6 months depending on the CPI. The $10k limit is per year - so if you hold on to those bonds you can potentially have $300k invested in total. As the parent comment stated - this isn't meant to get anyone rich. This is the government providing a service that allows (working-class) individuals to keep a rainy-day fund relatively insulated from risk. If you're able to save more than 10k per year, you're not the primary target for this service.
- cplex 5y ago
  “Not a whole heck of a lot” but at virtually zero risk. This is for the portion of your portfolio that you don’t risk at all.
oversocialized 5y ago

gte525u 5y ago

Closed end bond funds - but their price hasn't been stable lately due to pricing in expected rate increases.

Trasmatta 5y ago

One thing to keep in mind is that the I Bond rates will go way back down once inflation does. So it's great as an inflation hedge, but other assets will almost certainly out perform them in the long run. Still worth getting the yearly $10k though.

lotsofpulp 5y ago
Assuming VOO will get bailed out by US government in the event of a decline/stagnation within the timeframe of a few years, then I would go with $10k in VOO over $10k in I bonds every year due to the lower long term capital gains tax rate for VOO as opposed to paying regular income tax rates on interest income with I bonds.
- orev 5y ago
  Market funds are a very bad place to keep money that might be needed soon. Ibonds provide a safer place to keep funds you might need in an emergency. You should never have emergency funds in the market. Also, assuming a government bailout will come to the rescue is a pretty risky strategy.
  - lotsofpulp 5y ago
    I bonds are also not for funds needed soon. I see some utility for them for funds that might be needed after 12 months, but before whenever one feels comfortable that public equity markets will be bailed out. They do sound like a good option for those that want to be prepared for emergencies 12 months into the future. >Also, assuming a government bailout will come to the rescue is a pretty risky strategy. Of course, this is just my opinion, but I feel like it is risky to not assume a government bailout. As far as I can see, the options are bailout of public markets, or revolution.
    - mint2 5y ago
      I’d really hope people are planning in advance for emergencies. It’s not an emergency if one knows it’s coming next month. Everyone should have some emergency plan or fund if at all feasible.

UncleOxidant 5y ago

Not currently. Maybe if we see interest rates rise significantly we'll see some attractive rates on 10 year treasuries? I think if the 10 year goes over 6% I'm going to start buying them.

arcbyte 5y ago

Anchor protocol is paying 19.5%.

arcticbull 5y ago
Yeah that has a somewhat different risk profile. A series I bond risk profile is basically 0 risk. Anchors risk profile is roughly “oh my good sweet buttered Christ what are you thinking?!”

buzzy_hacker 5y ago

Short-term TIPS. The shorter duration means more responsive to inflation and less sensitive to interest rate risk. https://institutional.vanguard.com/iam/pdf/ISGCTIPS.pdf?cbdForceDomain=true https://institutional.vanguard.com/iam/pdf/ISGCTIPS.pdf?cbdF...

Apes 5y ago
In theory, but not in practice. Inflation is up over 8% YoY, but short term TIPS are down over 2% - for a realized loss against inflation of over 10% on what should be a "safe" asset class: https://www.google.com/finance/quote/VTAPX:MUTF?sa=X&ved=2ahUKEwiE_oWKwo_3AhXYD0QIHeOMCdAQ3ecFegQIBRAf&window=1Y https://www.google.com/finance/quote/VTAPX:MUTF?sa=X&ved=2ah... The longer they exist, the more it feels TIPS are a sucker's bet.
- Spellman 5y ago
  It's a very different thing to compare a fund vs holding the actual certificate. Same with the Bond Mutual Funds vs holding a Bond. The Funds will decline because you have to sell old Bonds at a discount to buy up the new higher interest payout bonds. But if you held on to the original bond, then you'd still get the fixed payout. You'd just miss out on the opportunity of the new higher payout bonds on the market.
- redisman 5y ago
  You’re forgetting the dividend. But yes it’s not as good as an I bond https://ycharts.com/mutual_funds/M:VTAPX/dividend_yield https://ycharts.com/mutual_funds/M:VTAPX/dividend_yield https://ycharts.com/mutual_funds/M:VIPSX/dividend_yield https://ycharts.com/mutual_funds/M:VIPSX/dividend_yield

christophilus 5y ago

I think TIPs are in the 4% range. Not close, but still pretty high based on recent ranges.

oceanplexian 5y ago

I would just buy stocks and keep rolling LEAPs (long dated options) to cover the downside risk of different scenarios. Then you can fine tune exactly the risk you want to take and the premium you want to pay. I-Bonds are not that attractive and the rates are not great when you take into account inflation. Plus there are a million ways to get a better tax outcome with stocks, tax privileged accounts, loans, tax loss harvesting, etc.