New Savings Bonds Rates - I Bond Fixed Rate Rises to 0.30%
The Treasury released the new I Bond and EE Bond rates today. New rates are announced on every first business day of May and November. The I Bond fixed rate increased 20 bps to 0.30%. As I had calculated three weeks ago, the I Bond inflation rate is 2.22%. This results in a composite I Bond rate of 2.52%. This is the highest the fixed rate has been since 2010.
The Treasury kept the EE Bond rate the same at 0.10%. With this low rate, in my opinion, the only reason to purchase an EE Bond is if you’re planning to hold it for 20 years. In that case, the EE Bond is guaranteed to double in value. This is equivalent to an annual return of about 3.5%.
Summary:
I Bond Rates:
Composite Rate: 2.52%
Fixed Rate: 0.30%
Inflation Rate: 2.22%
EE Bond Rate: 0.10%
Rates effective May 1, 2018 through October 31, 2018
The increase in the I Bond fixed rate is small, but the new 0.30% rate is the highest it has been since 2010. In November 2009, the Treasury announced a 0.30% fixed rate, and on May 2010, that rate fell to 0.20%. From May 2010 until today, the fixed rate had never been above 0.20%. Most of that time, the fixed rate was zero. Hopefully, this is a sign that we’ll see higher I Bond fixed rates in the years ahead. Before 2008, the fixed rate had always been 1.00% or higher.
Current I Bond Holders
If you have old I Bonds, you'll have six months of rates that range from 2.22% (for I Bonds with a fixed rate of 0%) to 5.86% (for I Bonds with a 3.60% fixed rate). Back in the good old days, the I Bond fixed rates used to be above 3.00%. The highest I Bond fixed rate was 3.60% during the period from May 2000 to October 2000. If you have any of those I Bonds, you'll want to keep them as long as you can. They will mature after 30 years from the issue date. You can see the entire history of the fixed rates in this TreasuryDirect page.
Remember that the six months with the 2.22% inflation rate may not begin this month. It depends on when you purchased the I Bond. An I Bond's new inflation rate takes effect every six months after its issue date. So if you purchased an I Bond on October 2012, the 2.22% inflation rate won't take effect on that I Bond until October 2018.
Series I Savings Bond Features
Below is a summary of the I Bond features. More information is available at this Treasury Direct I Bond page:
- Can't be redeemed within 12 months of issue date
- Lose 3 months interest if redeemed within 5 years
- Interest is composed of fixed and inflation-based rate
- Fixed rate remains for life of bond
- Inflation-based rate changes every 6 months after issue date
- New rates announced every six months on November and May 1st
- Federal tax can be deferred on interest until bond is redeemed
- Interest is exempt from state and local tax
- Some or all interest is tax exempt when used for educational expenses
- Maximum purchases per year and per social security number is $10,000 in TreasuryDirect and $5,000 in paper bonds purchased with IRS tax refunds (This excludes trust/business purchases) - total was $60,000 before 2008 (Treasury's press release).
For more details about the purchase limit, please refer to the Treasury's press release on the new annual purchase limit and the Treasury Direct's purchase limit FAQs.
Collect about $1800 in interest @ 2.52% and no risk and can keep it there 22 more year's and I'll sell them today..
If your intend was to "mock", you missed the points on all guesses, better luck next time.
I'll hazard another guess, that you probably didn't accumulate the $400k in these plans all in the same plan year? If you add savings bonds into the mix, in 10 years you could have $100k in face value (per person), earning over $2k per year in tax-deferred interest.
I have not purchased any I-bonds myself in several years now, due to the low fixed rate compared to my old I-bonds with 1.6% fixed rate. But fixed rates look to be finally heading back up. Not sure if I consider the current 0.3% fixed rate a great long term investment, but we don't know yet what a "good" real interest rate will be over the coming years. My guess is that 5-year TIPS real yield will top out between 1-1.5% this interest cycle, so a good I-bond fixed rate to hope for might be around 1%. But I might be guessing wrong, of course - as you pointed out.
Here is a tip that might be helpful if you happen to export your Bond inventory from your savings bond wizard to the new online savings bond calculator and have some difficulty with your inventory transferring over:
Clear your browser history and see if that solves your problem. Also take note that you can only save your inventory using the new online savings bond calculator by using internet explorer along with some other browsers, but not google chrome.
I opened a 2 year brokered CD with Vanguard that pays 2.75%. Took me a total of 15 seconds to open!
But that aside, is Ken saying that the only way you can buy these is with a tax rebate from the IRS, or is that just the paper bonds?! So, if you owe taxes when you file, instead of overpaid and are owed a refund, you can't buy these bonds?! Why, who cares if the money came from a tax refund?! That can REALLY limit how much you buy, you might not be able to buy $10,000 worth in a year if you didn't have a tax refund that large.
Since my state now seems bound and determined to join the Californias and the New Yorks of the world in terms of tax increases, I guess I'll have to investigate these kinds of things. Thanks in advance.
https://www.irs.gov/refunds/using-your-income-tax-refund-to-save-by-buying-us-savings-bonds
If you prefer your bonds on TreasuryDirect, they have a program called SmartExchange to convert paper bonds to electronic form. But there's really not much of an advantage to that, in my opinion. Lost or stolen paper bonds can be replaced (it would be a good idea to keep a log of the serial numbers, but I think the Treasury can identify your holdings by SSN).
Treasury Direct disavows any responsibility for any fraud that is the result of using its website.
This is despite the fact that if paper iBonds are lost, destroyed or stolen you will get your money back!
Yup, the government pulled a huge fast one by forcing people to use Treasury Direct starting back in 2012.
If you notify a bank within 2 days of receiving your statement, the most you can be out is a whole $50.
Regulation E imposes that restriction even if the fraud is a result of the customer falling for a phishing website.
Treasury Direct accounts are not protected by Regulation E, if your account gets hacked, you're on your own.
Brokerage accounts are also not protected by Regulation E (you're at the mercy of their individual policies).
It can't be sent to anyone else, what is the real risk?