5 ms·

Just go for I-Bonds instead.

ra7 4y ago
The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.
- imtringued 4y ago
  It sounds like I-Bonds are not meant to subsidize the poor instead of the rich which is a nice change for once.
- JumpCrisscross 4y ago
  > If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
  - ra7 4y ago
    Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)
    - JumpCrisscross 4y ago
      Thanks!
    - aklein 4y ago
      You can buy CDs from a Vanguard brokerage account that are yielding about 50% more than the equivalent durations offered at gsbank/Marcus: https://personal.vanguard.com/us/FixedIncomeHome https://personal.vanguard.com/us/FixedIncomeHome
      - doktorhladnjak 4y ago
        Brokerage CDs are a pain if you need your money back early. Unlike a normal CD, which you can redeem early for a penalty, you can only sell brokerage CDs on a secondary market. They trade at huge discounts, and you have to pay fees to involve a broker because they are not liquid enough to trade yourself. At least this is how it was when I tried to do this a few years back.
PopAlongKid 4y ago
Yes, these are becoming more popular. Unfortunately, there is an annual purchase limit that is pretty low ($10K per person plus maybe an extra $5K if you can use a large income tax refund). There was a time not that many years ago (15?) where I was actually earning higher interest in a bank CD than I was paying on my mortgage. I was also able to get short term cash advance at low introductory rate on a credit card, like $20K, and invest it short term at a higher rate. Good times.
- votepaunchy 4y ago
  Interest is taxed as income. Debt does not cancel out income unless paid on a mortgage when itemizing deductions.
  - deleted 4y ago
    [deleted]
  - PopAlongKid 4y ago
    Yes, there is before-tax yield and after-tax yield. Tax rates are at historic lows right now and unlikely to stay that way long term (current rate cuts expire after 2025). Since tax applies to all kinds of income, I'm not sure why it should be a big factor in this discussion any more than it is in discussions of crypto, tech salaries, etc.
JumpCrisscross 4y ago
> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibonds.htm https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul...
- redisman 4y ago
  Savings accounts are effectively giving you -8% right now
  - JumpCrisscross 4y ago
    > Savings accounts are effectively giving you -8% right now Savings accounts have always been of dubious value for preserving or accruing value.
    - ghaff 4y ago
      I don't know the last time I had money in a savings account. Probably decades. Even when interest rates were higher I remember savings account interest was pretty paltry.
  - mupuff1234 4y ago
    In US purchase power. USD has been increasing against major foreign currencies in the last few months so there is some upside if you're planning on spending outside the US. (For example, USD is 12% up against the euro in the last year and 20% vs the yen)
- CameronNemo 4y ago
  Actually Series I bonds are negative real yield because the interest is taxed federally.
  - kube-system 4y ago
driverdan 4y ago
I Bonds might be a good alternative to CDs but are not comparable to a savings account. Your money is essentially locked in.

ra7 4y ago

The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.

imtringued 4y ago
It sounds like I-Bonds are not meant to subsidize the poor instead of the rich which is a nice change for once.
JumpCrisscross 4y ago
> If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
- ra7 4y ago
  Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)
  - JumpCrisscross 4y ago
    Thanks!
  - aklein 4y ago
    You can buy CDs from a Vanguard brokerage account that are yielding about 50% more than the equivalent durations offered at gsbank/Marcus: https://personal.vanguard.com/us/FixedIncomeHome https://personal.vanguard.com/us/FixedIncomeHome
    - doktorhladnjak 4y ago
      Brokerage CDs are a pain if you need your money back early. Unlike a normal CD, which you can redeem early for a penalty, you can only sell brokerage CDs on a secondary market. They trade at huge discounts, and you have to pay fees to involve a broker because they are not liquid enough to trade yourself. At least this is how it was when I tried to do this a few years back.

PopAlongKid 4y ago

Yes, these are becoming more popular. Unfortunately, there is an annual purchase limit that is pretty low ($10K per person plus maybe an extra $5K if you can use a large income tax refund). There was a time not that many years ago (15?) where I was actually earning higher interest in a bank CD than I was paying on my mortgage. I was also able to get short term cash advance at low introductory rate on a credit card, like $20K, and invest it short term at a higher rate. Good times.

votepaunchy 4y ago
Interest is taxed as income. Debt does not cancel out income unless paid on a mortgage when itemizing deductions.
- deleted 4y ago
  [deleted]
- PopAlongKid 4y ago
  Yes, there is before-tax yield and after-tax yield. Tax rates are at historic lows right now and unlikely to stay that way long term (current rate cuts expire after 2025). Since tax applies to all kinds of income, I'm not sure why it should be a big factor in this discussion any more than it is in discussions of crypto, tech salaries, etc.

JumpCrisscross 4y ago

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibonds.htm https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul...

redisman 4y ago
Savings accounts are effectively giving you -8% right now
- JumpCrisscross 4y ago
  > Savings accounts are effectively giving you -8% right now Savings accounts have always been of dubious value for preserving or accruing value.
  - ghaff 4y ago
    I don't know the last time I had money in a savings account. Probably decades. Even when interest rates were higher I remember savings account interest was pretty paltry.
- mupuff1234 4y ago
  In US purchase power. USD has been increasing against major foreign currencies in the last few months so there is some upside if you're planning on spending outside the US. (For example, USD is 12% up against the euro in the last year and 20% vs the yen)
CameronNemo 4y ago
Actually Series I bonds are negative real yield because the interest is taxed federally.
- kube-system 4y ago

driverdan 4y ago

I Bonds might be a good alternative to CDs but are not comparable to a savings account. Your money is essentially locked in.