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I Bonds Interest Component Now Known For May 1st Reset.

Friday, April 15, 2011 - 10:40 AM
CPI information was released today for March, 2011.

We now know the six month interest component of the I Bond.

It is 2.302%. Thus the new CPI portion of the I bond should be an eye-popping 4.604%.

The fixed component will be (I suspect) 0.00% again.

 



 
10
BobBob3 posts since
Sep 17, 2010
Rep Points: 21
1. Friday, April 15, 2011 - 3:45 PM
With a 1 year minimum holding period and a 3 month penalty for redeeming ibonds within 5 years, the worst case would be buy last week in May, hold 1 year, and lose the last 3 months of interest. Even if the rate during second 6-month period were 0, you'd come out with slightly above 2.3% for the year. If the second 6-month rate is higher, even better! Since that beats 1 year CD's, this should probably become a front-page article.

The stated "annual purchase limit" is 5k paper & 5k electronic purchases per SSN, per year. But for you resourceful folks, you can always buy them as gifts to get around this limit. Buy lots of ibonds in late May, and next calendar year, give everyone in your family another one! (yes, minors can own savings bonds). http://www.treasurydirect.gov/indiv/research/articles/res_invest_articles_purchaselimits_0406.htm

If you "gift" them to your children, you pay tax at their rate, or use it for qualified educational expenses and pay no tax at all! (subject to income limitations, etc) http://www.treasurydirect.gov/indiv/planning/plan_education.htm

Regardless, you don't pay ANY tax until you redeem them. http://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_itaxconsider.htm

There was a previous well-written article on this site in April 2008 when ibonds were also paying better than similar CD's, even without the tax advantages.
5
AtlantaWolfAtlantaWolf40 posts since
Jan 16, 2010
Rep Points: 187
2. Friday, April 15, 2011 - 6:02 PM
Just published the blog post on this deal.

It took me a while since there are two cases to consider: buying in April or buying in May.
2
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
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