Advertising Disclosure
  1. Home
  2. Community
  3. Ask
  4. To Be Or Not To Be, I-Bonds Retention Strategy.

To Be Or Not To Be, I-Bonds Retention Strategy.

IGR
  |     |   580 posts since 2020

Anybody figured I-Bonds retention/redemption strategy?

Everyway I spin it it comes out empty, nothing but beginning August 2023 the redemption of 2021 issued Bonds, before Yield drops dramatically. Fortunately October 2022 Bonds would have to wait until February 2024.

Any contrarian ideas of how turn 0% fixed rate Bonds into acceptable return? otherwise it is monumental waste of the effort.

  Post an answer
3


Answers
Steve58
  |     |   459 posts since 2018
First of all your question is lacking detail and clarity. But I understand the gist of your question.  For overall optimum return on your investment...

If you bought IBONDS when the first interest rate was 7.12%, you should sell your ibond 21 months and 1 business day after the ISSUE date for that IBOND. This will give you interest rate for 6 months at 7.12%, 6 months at 9.62%, and 6 months at 6.48%, The next 3 months of interest at 3.38% will be forfeited as early withdrawal penalty. Sell sooner than that and you will be paying a higher penalty and making less money overall.

If you bought IBONDS when the first interest rate was 9.62%, you should sell your ibond 15 months and 1 business day after the ISSUE date for that IBOND. This will give you interest rate for 6 months at 9.62%, and 6 months at 6.48%, The next 3 months of interest at 3.38% will be forfeited as early withdrawal penalty. Sell sooner than that and you will be paying a higher penalty and making less money overall.

Steve
Reply
4
IGR
  |     |   580 posts since 2020
taking care of semantics
"21 months and 1 business day" makes it 22nd month since "the ISSUE (date) MONTH for that IBOND"!
Days make not much of the difference for the return on $10K, but in instances mean different tax year
Reply
1
Rickny
  |     |   1,296 posts since 2017
I had a fee EE bonds that hit the 30 year mark and were converted to C of I bonds paying no intrest. Cashed them out. Nice that I got an email the maturities of the bonds.
Reply
2
IGR
  |     |   580 posts since 2020
@Ltssharon is Wrong!
@w00d00w is Wrong!
The dude who makes a living as tipswatch.com is Fundamentally WRONG!!!
@Steve58 is Wrong on Presentation, but Correct on Substance.
The Redemption must occur on every 4th or 10th Month from the Month of the Bonds Issue, Roman Calendar in mind.
The highest Return achieved is when the Redemption occurs starting Month 16 and going 22, 28 and so on in 6 months increments until month 52-58 - which exactly - I am not investing myself into hypotheticals.
Reply
2
w00d00w
  |     |   360 posts since 2012
not sure that I understand the question. if it's about optimizing I Bond redemption, blogpost below might be helpful. for those interested in cashing out, he recommends Jan 2024 redemption of I Bonds purchased in October 2022.
https://tipswatch.com/2023/03/29/want-to-exit-your-i-bond-investment-youd-better-have-a-plan/
Reply
1
IGR
  |     |   580 posts since 2020
the article is outdated, inaccurate and at times incorrect!
the question had two parts;
A. sound redemption strategy, before Bonds start accumulating 3.38% - seems that I would have to wait for Treasury to publish for the Last Time the Redemption Tables.
"The Redemption Tables dataset will be updated at the beginning of June 2023 with 6 months of data (Jun 2023 - Nov 2023). This will be the last update for this dataset."
B. Sensible Retention Strategy, based on data available currently and forward looking assumptions .
Reply
1
Ltssharon
  |     |   471 posts since 2020
I agree with your conclusion. For myself, I would have to wait until Sept. 2023 for ibonds issued Dec. 2021.
Reply
1
IGR
  |     |   580 posts since 2020
Who's conclusion is that?
I have December 2021 and Treasury says to wait till October.
If September it is, please explain, as the answer to my original question.
Reply
1
Ltssharon
  |     |   471 posts since 2020
The ibonds I bought in December, 2021 are still earning over 6 and will until june. then I think they will go to 3.xx. so wait for june, july, and august for 3 months penalty at 3ish percent. Take out in September. I am aware some say take it out in August. Maybe they are more accurate than I am. Did you call the treasurydirect and they said October? Please s'plain back.
Reply
1
w00d00w
  |     |   360 posts since 2012
i think you have it right Ltssharon. it's my understanding that interest is credited on the 1st of the month. September would be the 3rd month of interest at 3.38% for that Dec '21 bond. so should be able to cash out anytime after Sept 1 and absorb the 3 month penalty at the lower 3.38% annualized rate.
Reply
2
IGR
  |     |   580 posts since 2020
it is correct... in theory, one of the reasons why I am frustrated with this needlessly complicated gimmick.
Now lets think and tackle Treasury Data; Redeemed Values of $100.00 I-Bonds issued December 2021-
Redemption;
05/2023- $109.72
06/2023 - $110.32
07/2023 - $110.88
08/2023 - $111.48
09/2023 - $112.08
10/2023 - $112.40

Please, doublecheck me, but I don't see any performance degradation occurring in September, it is mostly flat with slight uptick.
October, though, indicates clear decline.

Al-in-All; Way too much computing for such a little gain!
Reply
3
NYCDoug
  |     |   334 posts since 2011
If a $10,000 iBond, then multiply by two orders of magnitude, and you may note a more significant cash value difference . . .

And also remember to take into account the tax advantages of the iBond vis a vis a regular CD
Reply
1
IGR
  |     |   580 posts since 2020
AND? How the relative performance is affected by multiplication or the constant of tax?
Reply
1
CuriousDave
  |     |   233 posts since 2018
The tax issue would make a small difference if the optimal redemption date for your I Bonds is in early 2024. You may then be able to stretch out your tax deferral period to as late as April 2025, if you can plan to either have a federal tax balance due for 2024 not greater than $1,000 by that date, or, if greater, can plan to use the prior year (2024) “safe harbor” estimated tax rule to owe the tax due by April 2025.
Reply
2


The financial institution, product, and APY (Annual Percentage Yield) data displayed on this website is gathered from various sources and may not reflect all of the offers available in your region. Although we strive to provide the most accurate data possible, we cannot guarantee its accuracy. The content displayed is for general information purposes only; always verify account details and availability with the financial institution before opening an account. Contact [email protected] to report inaccurate info or to request offers be included in this website. We are not affiliated with the financial institutions included in this website.