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Ask HN: Have you bought I bonds yet? Why not?

68 points by brntsllvn 4y ago

The U.S. Treasury sells I bonds (inflation-linked bonds different from TIPS) which currently yield 9.62% and reset semi-annually with little (but not zero) cost of early sale. You can learn more about them here: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm If you have not bought I bonds yet, why not?

icapybara 4y ago
Their website is awful and I’m afraid my money will be locked away with no recourse due to a technical error.
- ralusek 4y ago
  I bought them, and everyone I know bought them. So for what it's worth, you'll at least be in good company. It won't be some forgotten bin of a handful of people with no recourse. It also maxes at $10k a year, so you're not likely to be bankrupting yourself.
- ElevenLathe 4y ago
  Same. For the potential upsides ($10,000 x 9% is $900, and that assumes I will keep it in cash otherwise), the downside risk is too great. If I could just click a button in my brokerage account and buy them, I would.
  - treis 4y ago
    I smell a business opportunity
    - ElevenLathe 4y ago
      As in taking my 10k and buying the bond in my name and returning my money at maturity? If it's legal, this is exactly the business brokers are already in. Presumably it's illegal (there are lots of restrictions on I Bond purchases) or it's not worth their time since rarely is there retail interest in these bonds.
  - fred_is_fred 4y ago
    What is the downside risk of a US Bond? The website is bad?
    - ElevenLathe 4y ago
      Yes, you the order form can hiccup and you will be out the 10k (for a matter of months until Treasury sorts it out) but still have no bond. There have been several instances of people reporting this, and presumably many more privately. My free time is worth too much use it picking up pennies in front of a steamroller.
- bombcar 4y ago
  Historically US bonds have been one of the hardest things to actually lose; as they will go through painful amounts of attempts to salvage them (via purchase history, reconstructing burnt physical bonds, reissuing, etc).
komadori 4y ago
Only US citizens, residents, and government employees can buy them.
agentofoblivion 4y ago
Yes, I have. Just learned about these recently. Pretty sweet!
codegeek 4y ago
Yes. The limit is 10k per calendar year though in case anyone is wondering. Their website looks like it was built in 1995 and they make you type (edit: actual click on virtual buttons) the password (cannot copy/paste from password managers) because they have that "virtual keyboard" BS. But it did work ultimately.
- darkstar999 4y ago
  > they make you type the password I guess this is obscure security for avoiding keyloggers? You can use your browser's developer tools to inspect the element and fill in the input value.
freediver 4y ago
The cap of $10,000 makes it not very interesting from an investment standpoint. And while the yield is great on paper, it merely lets you keep up with inflation in practice. There are probably better ways to use $10,000 if that is all you have and you are interested in growing money - online courses come to mind.
- bombcar 4y ago
  You can double that and more if you're married, and use the tax refund trick. But the reality is that 10% on 10k isn't a terribly large amount of money at the end of the day.
  - toomuchtodo 4y ago
    This. Depending on your portfolio, time value, and investment objectives, there isn’t any point in jumping through hoops for a few hundred bucks and having the funds illiquid versus something you can liquidate in a few clicks (or margin for immediate access for another opportunity).
    - giantg2 4y ago
      Please, show me where I can make a few hundred dollar with less time investment on my part. I bet it goes negative.
  - benmanns 4y ago
    Additionally, the 10% will probably only last for a year or two, at which point it'll be earning 1-3% and we'll have all jumped through these hoops for $100-300/year.
    - adabyron 4y ago
      At this point you're pretty much guaranteed a risk free 8% for 12 months. That's roughly what Buffet would say you should average in the stock market. It's a great place to park cash right now. Maybe the stock market makes a huge come back but a lot of things are pointing against that happening in the next year. The Fed & inflation, baby boomer retirements causing stocks to get sold & less risk assets bought, that whole Europe thing going on.
ed25519FUUU 4y ago
Probably one of the most user-hostile websites I’ve ever used. They actually expect you to “click” a virtual keyboard to input your password! Truly astounding.
- bombcar 4y ago
  I can estimate exactly when that was done; it was all the rage around the time of the "IGN Orange savings account" or whatever it was in the early 2000s.
- jaywalk 4y ago
  You can pop open Dev Tools and remove the "readonly" attribute on the field. Ridiculous that it has to be done in the first place, but a lot easier than clicking out a complex password on a virtual keyboard.
amilios 4y ago
Because I am not a US citizen :)
avemg 4y ago
I tried but my account got flagged for extra validation. This requires me to take a form to a bank or brokerage so that someone there can verify my identity and then stamp the form with some special stamp. Well I do my banking with online banks so I have no access to a brick and mortar branch nor do I really have the time or inclination to try to talk to somewhere there and get what they're asking for.
- ghaff 4y ago
  It's almost certainly a Medallion Signature which is somehow a Notary with superpowers. I actually needed one earlier this year. My bank no longer had a special signature person at the branch so they sent it to special signature central--which somehow didn't have the info they needed even though the bank branch sent it to them. Ended up just doing the longer drive to my broker and handling the transaction there.
- rickyc091 4y ago
  I'm going to post this here for those that couldn't get a seal. > The Account Authorization (FS Form 5444) submitted is unacceptable as the form was not properly certified. Therefore, we must ask that you submit a new form with your signature properly certified. > Please note that the form's instructions to the certifying officer state, "Acceptable certifications include the financial institution's official seal or stamp (such as corporate seal, signature guarantee stamp, or medallion stamp)." Notary public stamps are acceptable. Please have the bank place their official seal on the form to certify your signature. If the financial institution does not have an official seal or stamp to use when they certify a signature, they may use the savings bond paid stamp that they normally use when cashing savings bonds for a bond owner. We may accept: > Signature/Endorsement Guarantee Stamp > Medallion Stamp > Official Bank Seal/Stamp > Corporate Seal > Consular Seal > A commissioned or warrant officer of the United States Armed Forces may certify the signature. > Any stamp or seal must be visible. > The bank certifying officer should include his/her phone number by the certification. > If none of the options listed above are available, we may give consideration when a bank officer uses notary certification when it is accompanied by the signature of the employee and the name/address of the bank is provided. The certification must clearly shows the certifying officer is a bank employee.
orsenthil 4y ago
The paper work led to delay for me. Online purchase wasn't possible and I got asked to apply things via postal.
zjmil 4y ago
No because when I went to register, my account couldn’t be automatically authorized (probably because I had just moved). Instead for authorization they require that I fill out a form, have a certifying officer at a financial institution sign it, and mail it in. I couldn’t be bothered for only 10k. Form: https://www.treasurydirect.gov/pdf/rs/acctauth.pdf https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
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dragontamer 4y ago
> If you have not bought I bonds yet, why not? With interest rates climbing, I do believe there's a chance of deflation risk, which would set the I-bonds to 0% in the next interest rate. That is to say, I-bonds are variable rate against inflation. US Treasury bonds are fixed rate. You get exactly the rate that's on the tin. I think that I-bonds are more difficult to understand and calculate in light of this. Its easier and simpler in my opinion, to simply invest into 1M or 3M treasuries while waiting for the interest rates to climb up. -------- Its a hard balancing act for sure. I-Bonds (and their closely related TIPS brothers) are a play on inflation. Which means you need to understand one more thing in the market. At least I-bonds are capped at 0% losses. TIPS may lose value in deflation
knorker 4y ago
$900 (10k at 9%) is less than one day's work going by my day job totalcomp. The extra cognitive load of another investment platform is better spent on my day job. And as others have said, this is comparing to 0%. If you look around you can find everyday banks giving "whole digits" on savings account for at least these small amounts, so it's more like $700 compared to baseline cash. I'd maybe be interested if it 10x'd the limit.
NotYourLawyer 4y ago
I’ve been buying the maximum for years. They’re uninteresting as an investment since all they do is keep up with inflation, so I certainly wouldn’t want to put much money into them even if I could. But it’s only $10k per year, and it seems fine as a small hedge position.
adabyron 4y ago
Things I wish I knew earlier. When you buy them, you lock in the current rate for 6 months from the date you purchase & then you get the next rate for 6 months after that. So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. You'll then get the next rate which is most likely 3% for 6 months (often quoted as 6% annually). This site does an amazing job tracking what the future rate will be - https://tipswatch.com/tracking-inflation-and-i-bonds/ https://tipswatch.com/tracking-inflation-and-i-bonds/ They will announce the final next 6 months rate in October. You can buy then (around the 15th) if you want. If you buy after November 1, you won't get the current 4.81% (aka 9.62%). But as stated, the October rate is pretty well calculated. Only 1 more inflation report will adjust it slightly. See the Tipswatch site I linked to for info on how & when it's calculated. Each person can buy $10,000. If you got a tax rebate you can buy up to $5,000 with that. If you have a company, the company can buy $10,000. Must be a US Citizen. Someone who works at the US Treasury thought it was a good idea to make you type a password with a "virtual keyboard" using your mouse. So you might want to create a script in your password manager to enter in the console like this: var x = PASSWORD_AS_STRING; for(var i = 0; i < x.length; i++){ PasswordVK(x[i]) } Side note, my 70yr old Mom thought this was an easy process. I felt like an idiot.
- dragontamer 4y ago
  > You'll then get the next rate which is most likely 3% for 6 months Which is less than the 3.9% you get from a 6M treasury right now. If i-bonds really only get 6% in the next rate, you've lost money compared to 6M or 1Y treasury bonds.
  - adabyron 4y ago
    Good point. Though right now you also get the current 9.62% for 6 months so you come out ahead still with most likely an 8% return over 1 year. After November, it'll be interesting to see if I Bonds are worth buying anymore or if treasury bonds go down. It's also possible that in November they add something more than 0 to the fixed rate of the I Bond. Buying now though you unfortunately would not get that.
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__s 4y ago
No, I'm Canadian
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Invictus0 4y ago
You can get a free grand by applying to certain credit cards, or better yet, buying Twitter stock
denimnerd42 4y ago
not enough money to be interesting
Lonestar1440 4y ago
It just doesn't seem worth the hassle given the unique account with weird sign-up process, low maximum investment, and lock up period. Like it's a theoretically optimal way to invest $10k that won't be needed in the short term, but it's also just a few hundred dollars more than I get from a money market account which has far fewer restrictions. Plus another account to deal with. If I could add it to a portfolio in an existing investment account, I'd do it.
m4jor 4y ago
Because 10% is boring and your limited to 10k/yr. wow 1k Zzzzzzzzzz
asdojasdosadsa 4y ago
Is there something similar for EU citizens?
MisterSandman 4y ago
If you're going to ask questions specific to a cou try, please specify which country in the title.
jmpman 4y ago
I bought the max for everyone in my household. Should be a good savings vehicle for the kids college.
koliber 4y ago
I am a US citizen living abroad. It's close-to-impossible to create the account to buy them.
GloriousKoji 4y ago
Yes, it's great. I've been buying maximum amount for a few years. It's basically my emergency cash fund. Sure it's locked away for a year but once you get it started it's liquid enough and it gets better rates than any savings accounts, CDs, etc.
gilch 4y ago
[Not investment advice.] I'm maxed out, and maxed out last year too. If ones investments are in leveraged instruments like calls and futures, then after levering up to sensible levels of volatility (the Kelly Criterion implies there is a maximum level for ones bankroll and investments, no matter how high ones risk tolerance), one will still have a lot of cash left over that needs to be parked somewhere that at least keeps up with inflation. I-bonds are attractive for this role because of the retroactive effects of recent inflation. But the cap means it's not enough for all of my excess cash. One who is below that cap might still want to keep a portion in something more liquid. In my case, it's a small enough fraction (because programmers are paid well in America) that I'm not too concerned about the lack of liquidity in the first year.
- kccqzy 4y ago
  I too have sizable positions in ES futures but I'm worried enough that I put all the left over cash as just cash. In the event of a Black Monday event in 1987, one would want immediate access to cash to replenish the futures account, don't you agree.
  - gilch 4y ago
    That's really only a concern for the first $10k in the first year. After that, everything (but your most recent year) is at least a year old and you can exit early if you have to.
PopAlongKid 4y ago
No one has yet mentioned the tax-advantaged aspect. Interest income from I-bonds is exempt from state income tax, and federal tax can be deferred until you cash them in or 30 years, whichever comes first. Paying tax on the interest when you are in a lower tax bracket later in life makes a lot of sense. The income can also be tax-free if used for qualified educational expenses for you or some family members (not going into the details here). It seems to me the only competition here is bank CD (certificate of deposit) for 1 to 5 year term, which also has an early withdrawal penalty but is not tax advantaged in any way, and even now, you'd be hard pressed to get more than 2-3% interest on CDs from most banks, and that rate usually does not adjust at all during the life of the CD. As some have mentioned, this is also a pretty good place to keep emergency funds, once you get past the one year lockup.
- brntsllvn 4y ago
  Great point on tax deferral and state income tax exempt.
akg_67 4y ago
We have been buying I-series bonds for now 15 years. We haven't yet bought this year, will buy after November reset, just to make sure next reset doesn't increase fixed rate portion. In the long term, fixed rate portion makes a big difference. Variable rate portion changed every 6 months. I-series Bond Mega Thread on Bogleheads forum https://www.bogleheads.org/forum/viewtopic.php?f=10&t=346091&newpost=6882379 https://www.bogleheads.org/forum/viewtopic.php?f=10&t=346091...
deanmoriarty 4y ago
I think folks mentioning that it’s not worth due to the yearly limit might not be thinking in the long term. If every year you invest $10k, in 20 years you will have $200k that will have grown tax deferred to likely $400k, which should be a really nice sum equivalent to perhaps 5-10 years of living expenses, which pairs well with the equity side of the portfolio. I’ve been building my ibonds position for 8 years now, and to me they are an excellent long term holding to BND that will help me in retirement to dampen the volatility of my equities in my 80/20 allocation.
SamReidHughes 4y ago
It's better than cash, but there are better investments.
marssaxman 4y ago
Never heard of 'em before. I think I'd rather just put money into an index fund.

qqqwerty 4y ago

Well, if you and your spouse had put in 10k at the end of 2021, and again in 2022, and then put another 10k at the start of 2023 you will have built up your I-Bond allocation to $60k in about a 13-14 month timeframe. What is nice about a position of that size is that that amount is in the ballpark of a typical families expenditures in a year (ignoring the occasional big ticket items like a car), which means you have essentially hedged away your exposure to inflation. So yeah, $10k is not a lot, but that is an annual limit, not a lifetime limit. And a good way to hedge inflation is to build an I-Bond allocation that is equivalent to your annual expenses which for most households should only take a few years to get to. And an added bonus is that selling your I-Bonds early has fairly minimal penalties and can be sold at face value (i.e. not subject to market swings) so your I-Bond allocation can double as an emergency fund.

bombcar 4y ago
Yeah, they can be wonderful; but not everyone will want to bother with them (I find one of the easiest is to just get your tax return in physical bonds if you want to dabble).
- giantg2 4y ago
  How do you get a physical bond? I thought they went all virtual these days.
  - bombcar 4y ago
    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-... You can still get them if you get them as part of your tax return. Overpay estimated tax or increase your withholding. 10. Will I get actual paper bond certificates? Yes. Savings bonds purchased with a tax refund will be issued as paper bond certificates in your name. If you are married and filed a joint return, the savings bonds will be issued in your name and your spouse's name. If you purchase savings bonds for someone else, the bonds will be issued in the name(s) that you listed on Form 8888.
    - giantg2 4y ago
      Looks like you have to paper file to get them, right?
      - bombcar 4y ago
        I think it works with e-file, at least TurboTax has asked about it (I’ve never actually done it).
    - hnkiran 4y ago
      Would we be able to request after the refund has processed and deposited into bank account?

timr 4y ago

Yes, I-bonds are a bit of a meme right now, and IMO, overhyped. The other important things to note are that your money is locked for a year from purchase, you incur a penalty (3 months of interest) if you sell before 5 years, and the APY values being quoted are not indexed to inflation. I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them. Do not buy an I-bond if you need the cash or anticipate needing the cash in the near future. Also, do not treat I-bonds like investments. If you have a long time horizon and you want an investment return, you should just invest the money. If your goal is to time the market and wait for a buying opportunity (why?) then you'd be better off just keeping your cash in a regular treasury. Even parking your money in a 1 year treasury will yield you close to 5% right now (again, not inflation-indexed), but you'll still be liquid: https://www.cnbc.com/quotes/US1Y https://www.cnbc.com/quotes/US1Y If that is still too high a market risk for you, even a 3-month bill is yielding over 3%: https://www.cnbc.com/quotes/US3M https://www.cnbc.com/quotes/US3M I-bonds are a great place to put cash for things like emergency funds, assuming you keep the 1-year lockup in mind. Beyond that, they have fairly limited utility.

thrtythreeforty 4y ago
I-bonds are also a great option if your alternative is holding nothing but cash. This isn't really advisable, but I know people that do, largely due to fear of a decline in value. A guaranteed number-go-up product, even if all it does is tread water in real dollars, is a lot better than a product (bank account) that loses real value every year. For those people, I heartily recommend I-bonds.
- timr 4y ago
  I'd argue if you want the equivalent optionality of "cash" and you're buying today, you'd do better to just ladder into short-duration treasuries, or keep it in a high-yield savings account. I-bonds are really only optimal if you plan on keeping medium-sized chunks of cash around in cold storage for time periods of longer than a year.
sf_rob 4y ago
The penalty point is an important one for the above. If you only plan on holding them for the minimum of 12 months and the second half interest rate is 3% then your effective annualized return is 5.48% (1.0962^.5*1.03^.25). >I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them. Yes and no, I-bonds use a trailing inflation definition so you receive a real advantaged proportionally to the difference in current and past inflation rates; this is of course speculative.
- adabyron 4y ago
  Just a reminder, it's most likely 6% annualized return for the second 6 months.
- evanelias 4y ago
  One minor I-bond hack: It's generally better to only buy them a few days before the end of the month, since it counts the same as if you bought them at the beginning of the month. For all timing purposes (interest, 12-month lock-up, and 5-year penalty), only the purchase year and month matter. The day is irrelevant. In other words, time it correctly and your money is only locked up for 11 months + a few days. And since interest accrues on the 1st of the month, this also helps the interest rate math slightly. Just don't go too close to end-of-month, since (iirc) it takes a few days for the transfer/purchase to go through online, and you don't want to get bumped to the next month.
kevinventullo 4y ago
4.081% is close to 5%?
- timr 4y ago
  No, I should have said "approaching 5%".
Spooky23 4y ago
They were great when they had a fixed rate component. They are also nice in that tax liability is deferred until you redeem them.
sys_64738 4y ago
A CD that returns almost 10%. You'd be crazy to pass that up.

mNovak 4y ago

I find it easiest right-click>inspect the password field in chrome, and paste my password directly into the html value field. Another thing to note, if you're particularly trying to load up, is you can buy I-bonds as a 'gift', separate of your individual limit. Specifically you and your spouse can buy $10k each directly, plus each buy $10k as a gift to the other (thus $40k total). You can actually buy >$10k as a gift for someone, but you can't transfer beyond $10k a year to that person, effectively increasing the minimum hold period. Also a general note - you can enter your payment account electronically, but ever changing it requires mailing a form! So choose wisely.

mister_tee 4y ago
I might be wrong but don't gifts count against the recipient's annual $10k limit? That is, you could only give $2k to someone who has purchased $8k for themselves, all within the same year? Though, here is a Bogleheads thread where people suggest buying gift bonds even beyond 10k as you mention, to get higher interest rates now, storing them in the TreasuryDirect "gift box" until a year where the recipient comes in under the limit and they can be transferred. https://www.bogleheads.org/forum/viewtopic.php?t=306297 https://www.bogleheads.org/forum/viewtopic.php?t=306297 edit, adding: https://thefinancebuff.com/buy-i-bonds-as-gift.html#htoc-purchase-limit https://thefinancebuff.com/buy-i-bonds-as-gift.html#htoc-pur...
- mNovak 4y ago
  Yes, but buying and 'delivering' the gift are two separate actions. So I can buy $30k in bonds for you today (which benefit from the current rates), held in the gift box until I transfer them to you. But as you said, I can only transfer $10k/year less any purchases you make that same year. In the 1 year hold case (buying direct + gifts for 1 year only) you can transfer and immediately sell the gifts alongside the original bonds, in the new year.
adabyron 4y ago
If I recall the right click & enter password as HTML didn't work. Neither did selecting the input element & modifying the value. Those are my first 2 I usually try. I'm assuming they're doing some crazy silly state/event tracking with their virtual keyboard elsewhere. I didn't dig into it that close. I just grumbled & shook my head.
- mNovak 4y ago
  It works for me in any case, I've done it several times. Not sure what's different