Is anyone else buying 2023 ibonds? I did and am wondering if anyone else is buying now.
Thanks
Answers
In fact, we have no idea what the Treasury’s longer term thinking is about I-Bonds. They were originally promoted to encourage long term savings, but within a very short time have now become immensely popular for short term savings, making it very difficult for the Treasury to effectively budget and plan for interest accruals and principal redemptions in such a volatile environment. For all we know, the Treasury may eventually decide to discontinue issuing them altogether and leave us with only TIPs for longer term inflation protected savings.
https://www.marketwatch.com/story/its-time-to-buy-i-bonds-again-here-are-3-ways-to-maximize-your-10-000-inflation-fighting-investment-11672824207
PS I’ll defer to others as to (which administration) is responsible for this turn around in CPI
As for "30 years of interest on a 30 year bond" and IRMAA, that's going to be an issue to plan around with any deferred tax investment (not just ibonds). With ibonds, you at least have the option of paying the tax as you go along instead of taking the tax hit at the end.
I did not realize you can take just a portion out of an I bond. I left my interest in so it would compound. I have always done that with CD's also. So if my beneficiaries take just $1,000 out of the original $10,000 bonds, they would pay the income tax on that $1,000 on the tax return? What would they report on their tax return or can they take money out only if I have paid the income tax on the bonds yearly? Would the gov send them the amount owed? I didn't think the gov sent you any information on the bonds or bond interest.
I keep my income low so I can convert a portion of my traditional IRA's to a Roth for the last 10-12 years so the kids can inherit them tax free. They are near retirement and don't want them to have a problem with IRMAA. They already pay income tax on my husband's IRA's that I disclaimed so they could inherit it. Glad I did. It can last their lifetime instead of spending it in 10 years that is the law now.
I will tell my children and I won't worry about paying the taxes on them if I don't get all the traditional IRA's converted.
I will put a note by the copy of them where they each have their lists of bonds with the account number and my password in their notebooks.
I have recently signed a paper to transfer all my traditional IRA to a Roth so they will be able to mail it in the year of my death if I don't get it all done. I will pay the tax on it that way.
That is something I certainly will do as soon as my Traditional IRA's are all converted. Am hoping I can get them all converted within the next 5-6 years. I am waiting for the papers to sign and am filling them all out to convert all that is left in case I go into hospice or something before then. I can mail the papers or have the kids mail them and pay the taxes and won't have to worry about my Medicare premium going up 2 years later cuz I won't be around. Maybe I can pay the taxes on the bonds at that time also. But if they are allowed to take just $1,000 or so out of the Ibonds every so often the taxes on them won't be very much and not enough to put them over the IRMAA.
I noted this week in doing my annual financial summary I now have I Bonds paying OVER 13% APR! (All tax deferred too, which in the early 2000s was important as my personal tax bracket often exceeded the 33% marginal rate). These I Bonds start maturing in just a few years.
The UST used to allow one to "roll over" (so to speak) into Series HH Bonds but alas that stopped in 2004. Since I'll be age 71 at the start of the maturing I bonds (30 years held) that will continue each year through my age 78 birthday and my dilemma is/will be "what next"? Series E Bonds would guarantee a small but reasonable tax deferred return but, need 20 years to mature. Too long when in my 70s.
I have already 4 Jumbo CDs ($1.1+M) at any one time spread out at banks already and low 6 digits of ready cash. Another $800K~in various managed equity accounts of 65% to 98% stocks (about $250K~ is IRA money) and a nice $800K~ variable annuity IRA (I sold myself with this valuable 7% "High point" Income for life Rider annuity) invested aggressively that annuity guarantees me a 7% "high point" lockup/payout and thus $72K+ income annually (even after the annuity goes to ZERO $!). I Rollover that annuity annual payout to another mostly equity IRA listed above and again defer taxes. I don't plan on social security until age 70. I have a military pension (taxable) and am a 100% Disabled Vet (not taxable), so those 2 government incomes are near $100K~ a year with COLAs. No property tax bill in Florida being a Disabled Vet either. No needs.
So, my taxable income is only very modest now ($10K~ a year in Federal Income tax) and will be only a bit higher now through age 71 but, will then increase dramatically as I bond interest and Social Security get paid to me. At age 75 even more taxable income occurs with RMDs occurs.
Deferring a lot of income now and in future means more compounding of growth AND allow my future Medicare premiums to remain low though about age 77 when 2 the back years of RMD's, I bond, Interest income, Military Pension, Social Security., etc, yada will force me once again into a higher tax bracket and much higher Medicare Premium for the rest of my life. The VA backs me up with Free health care as well and future assisted living at a modest level should I need it and I also have as a retired Military Officer Tricare for Life healthcare as well. So, I'm double health inured with no or very low annual deductibles.
I live in a nice country club, new home paid for, etc., I never have had a mortgage or any debts to speak of in my life paying cash along the way and now my worth is about $4M~ "liquid". (I don't count stuff, cars, yada as anything of any value), and all the income I need, and I'm not wanting much more "risk" via equity exposure than I have now (about 1/3 of my worth that gets $72K+ added to that "pool" via that 7% annuity payout Rollover annually). I will leave much to various charitable causes when I pass.
I'm starting to wonder, where do I invest/save these "I bond" monies "next"?
Keeping it simple for my heirs is important. A POD or beneficiary required. A Lady Bird document for the house. Not a lot of accounts spread far and wide. CD's, more CD's? Treasuries via Treasury Direct sounds easy and reasonable alternative. Modest growth, Protection of Principal and ease of portfolio management for myself and heirs is paramount. I'll be in my early 70's at the time of the I bond pile starting maturity.
A good problem to have but, this has me wondering about next decades planning...
Thoughts? TY in advance
Jeff in Eastern FL
Roth conversions mean paying taxes NOW vice there will be no income tax once I die (and no compounding on the dollars used to pay conversion taxes) so I've ruled that out.
Being raised form post-depression parents who avoided debt and "saved for a rainy day" regardless of weather (and never earned more than $40K~ in a year), I guess it's in my blood.
I lived on $15K-$25K a year in the 80's, (worked begged, stole, did what I had to for $$ through college at State University in late 70's/early 80's - so I never took any loans for school. The USAF paid for my MBA sans just $1800 that I paid for fees and books via GI Bills/Tuition Assistance on active duty with night/weekend classes) and I completed a double major Cum Laude in 4 years to boot as an undergrad. Then I lived on $25-$45K in the 90s and never more than $55K after 2003 ish, even though in some years I paid $150K~ in Federal Income tax while working my typical 60~ hour weeks - until I retired at age 47, 15 years ago. I just invested/saved the rest along the way while living a nice upper middle-class life, paid cash to build two modest homes in nice places so never a mortgage either.
I took one car loan at age 23 but, paid it off in 19 months vice the 48 months note for $6K~ and borrowed $5K~ for my first business computer lease in 1993 and paid that off in a year. While in the USAF I had a "trailer loan" for $8K but, I sold the trailer for a lot more than the loan balance when I went overseas making that short loan moot. And I got a .50 cent interest charge when a check mailed to USAA Bank in 1991 during Desert Storm as postal mail took a month to get back to the states too late for a credit card bill. (I charge everything possible, and my bank automatically pays 'em in full every month that's the only debts I ever had in 62 years of life).
My net worth has increased by over $1.2M since I retired without adding much to the principal!
Maybe then I learn how over 20 years to turn about $80K gain from $30K of Principal Invested.
Once I figure the way to generate 13% Annual Return on non-risk bearing Investment, the Equity Market ceases to exist!
For the consumption of such unlicensed armatures like myself, Treasury publishes the data that claims highest historical return of 7.74% for Series EE and 6.68% for Series I Bonds.
Perhaps Treasury tries to discourage Bonds Purchasing by US Retail Taxpayers when it includes "Yield from Issue" values and make the data public as "Accrual Savings Bonds Redemption Tables"???
Annualized?? return of the investments held for 20 something Annual periods?! Seriously, no distinction between the Rates Annual, Annualized, Compounded and the Yield?
Fixed rate Interest of 3-3.5% definitely helps achieving respectable return over extended period of time.
The age and marital status is only helpful if the proposal is about to be made.
Making the case out of best performing holdings, definitely doesn't!!!
What about the performance at the bottom of the list? what about averaged, weighted performance of the entire ibonds portfolio?
Is tax deferral good policy universally, or some may want to report the interest? How long would it take to unwind ibonds holding before inheritance tax kicks in or MAGI adjustment negates an entire purpose of the deferral?
What have we learned here? should ibonds be purchased yada-yada? now while inflation rate is high or wait for inflation to subside and elevated fixed rate?
Any yada-yada Investment makes virtually curtain that over 20+ year period there will be some outlier position returning low double-digit annual yield.
And yes, there will be investments of $30K that 20+ years later would be valued about $120K due to Compounding effect.
That is how Rate of about 6% gets to be the Yield of "around 13%+ currently!".
Overall it is one yada-yada strategy... to sit on ibonds until 80 years old just to be tempted to purchase again for next 20 years of holding.
It takes a swag to predict CPI in afterlife!!! my bet is that with such strategy nobody would lose money and nobody could use or carry them over, as inspirational or spiritual the whole story is.