5 ms·

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

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.

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.