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Federal Reserve, the Economy and CD Rate Forecast - Sep 13, 2022This Year’s Savings Deals We Can Be Thankful For
I want to wish everyone a happy and healthy Thanksgiving. Thanks for all of your support this year.
It’s sort of my blog tradition for Thanksgiving to look back at some of the bank deals this year that we can be thankful for. As you might expect, I’m going to have to keep this post short.
Deposit rates are starting to rise, but unfortunately, inflation is rising faster. One savings product that’s tied to inflation is the Series I Savings Bond (I Bond), and that is the one good deal I want to remind everyone of today. The I Bond fixed rate is zero, so an I Bond purchased today won’t put you ahead of inflation, but at least you’ll keep up with inflation. For a savings product with no principal risk, that is very nice.
As I reported on November 1st, new I Bond purchases made through April 2022 will have six months with a 7.12% interest rate. The interest rate for the next six months (that will be announced on May 2, 2022) will depend on CPI numbers from October 2021 through March 2022.
Those who still have I Bonds that were purchased in the past will get six months of this new inflation rate. The start of this six-month period depends on when you purchased the I Bond. An I Bond's new inflation rate takes effect every six months after its issue month. If your old I Bond has a high fixed rate, you should be thankful. Those who purchased I Bonds from September 1998 through October 2001 have a fixed rate that ranges from 3.00% to 3.60%. Those I Bonds will have a composite rate for six months that ranges from 10.23% to 10.85%.
The primary downside of I Bonds is the purchase limit. The maximum that an individual can purchase per year is $10,000 at TreasuryDirect and $5,000 in paper bonds purchased with an IRS tax refund (There are ways to buy more I Bonds. Harry Sit of The Finance Buff has a useful review of how a married couple could buy up to $65,000 in I Bonds in one calendar year by using business accounts and trust accounts.)
Don’t forget that the I Bond purchase limit is per calendar year. So if you haven’t maxed out on I Bonds for 2021, it makes sense to max out before December ends. You can then buy more in January.
Thankful and Hopeful
Inflation may be high and deposit rates low, but these conditions won’t last forever. Let’s hope for better days for the economy and for savers in the future. May you and your family have a safe, healthy and joyous holiday season.
Thank you for all you do for all of us for so many years. You have taught us a lot of things about our money and how to make it work for us.
Have a wonderful joyful day with your family and friends. We all have a lot to be thankful for.
HAPPY THANKSGIVING ALL!
You may very well wear a tinfoil hat "in person" like you do on the blog here, but I always make the assumption posters MAY be merely role playing in some respects for theatrical effect, which allows the unknown to mitigate my real inner reactions.
Whenever I learn of bank bonus deals elsewhere, I would come to DA to review your intelligence on the FI before proceeding. You have helped immensely so thank you and your staff for that.
Take good care and count your blessings, fellow readers. The simple fact that I am able to read and post here is one of the things I’m thankful for.
Note that you receive full interest for the entire month of November, as your first month, even though your purchase was made toward the end of the month.
After six months your iBond will compound to a higher principal (approximately $10,356) on which, for the following six months, will receive the new rate that is announced for May.
Another $10k purchase made at the end of January will similarly receive six months of 7.12% APY interest for Jan-Feb-Mar-Apr-May-Jun, and then, beginning in July, receive the next interest rate announced and established in May, for its own next six months (Jul-Aug-Sep-Oct-Nov-Dec). So it will in effect be two months behind your Nov iBond, but it will be receiving the same equivalent yield for its own six-month periods. Just offset by two months.
I assume the day I initiate a purchase from my TreasuryDirect account (which will be tomorrow) becomes the day of record (that is, the bonds will be considered purchased on that day) rather than when the ACH payment is actually received, correct (if you know)?
So thanks again for this great website.