Anybody Buying Ibonds In January 2024?

Ltssharon | Dec 30, 2023 | 471 posts since 2020

Well, I thought I would venture into the 2024 ibond purchase topic:

Mr. Google and I says this is what you would get for the first 6 months.

"The 5.27% composite rate for I bonds issued from November 2023 through April 2024 applies for the first six months after the issue date. The composite rate combines a 1.30% fixed rate of return with the 3.94% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U)." My thought is that the 1.30 fixed is good, and buy and hold these.

What are your opinions?

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Answers

Spotter | Dec 30, 2023 | 4 posts since 2023

I’ll probably wait until April and make my decision. Will find out the variable rate for the following six month in April. Plus, liquid savings accounts are currently the 5% range. I feel no urgency to buy in January.

CuriousDave | Dec 31, 2023 | 233 posts since 2018

It depends party on how long you are planning to go, and on how important inflation protection is to you. These bonds mature in 30 years’ time but you can cash out all or part of your savings after 5 years without penalty. A purchase now will give you a “real” yield (a yield on top of inflation) of 1.30%, which is, historically speaking, nothing special. If during your planned investment term inflation continues to decline, your 1.30% will not be on top of much, so if you are looking for a 5 year term, you may be better off purchasing a 5 year CD yielding around 5.0%. The current 5 year breakeven inflation rate is around 2.14% (the difference between the latest rate quotes for the 5 year Treasury Note of 3.85% and the 5 year TIPS of 1.71%). If the market has accurately forecast the 5 year breakeven inflation rate, you can expect to earn around 3.44% per year (1.30% + 2..14%). The latest DA issue is showing current rates of around 5.0 - 5.25% on a 5 year CD, which are superior to the 3.85% on the I Bond for the same 5 year term, but it’s not a straight comparison because of the tax differences (interest on I Bonds and U.S treasurys is free of state income taxes and, on I Bonds only, is tax-deferred until redemption unless you elect to report the income annually). You could also consider 5 year TIPS, on which last Friday’s real yield was quoted as 1.71%, forty points higher than for I Bonds, but they have several disadvantages such as annual taxability, including “phantom” tax on the inflation portions which you will receive only on maturity, and the extra cost of the bid/ask spread if you purchase through a broker rather than through Treasury Direct. TIPS are best purchased in an IRA account.

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w00d00w | Dec 31, 2023 | 360 posts since 2012

i agree that the I Bond would now be of most interest to those who intend a long-term holding period. getting a guaranteed pre-tax 1.3% return above inflation while also getting deflation protection over a prolonged stretch of time is useful.

Overall, I prefer to hold TIPS in a non-Roth IRA, but the state/local tax benefit is lost by keeping them there as opposed to a taxable account. I Bond investors get that tax benefit whenever they decide to cash out. Potentially significant for some, but meaningless for other investors depending on their geography.

As a side note, CPI-U has been negative the last two reports. So the next variable component of the I Bond rate sits currently at 0% with 4 readings yet to go.

JeffinEasternFL | Dec 30, 2023 | 744 posts since 2020

I've holding all my 2001-07 I Bonds. I love the tax deferral (meaning those dollars that otherwise woulda paid taxes are ALSO compounding for 30 years!) 1.3% FIXED plus the inflation IS a decent payback. If ya don't/won't need the cash for 5+years, I'd consider it. Wish the 'ol $30K/$60K per person limit was still in effect. I LOADED up on them at that amount for 6 of the 7 years!

MoneyMoves | Dec 30, 2023 | 149 posts since 2019

Jeff, you can purchase more than one $10K I-Bond. Buy one in your name, using your SSN on TreasuryDirect -- called an INDIVIDUAL ACCOUNT.

Buy one in the name of your trust, using your SSN on TreasuryDirect.-- called an ENTITY ACCOUNT.

Need more? You can have unlimited number of trusts; unlimited number of ENTITY ACCOUNTS on TreasuryDirect. All using your SSN. (Common with real estate -- a Trust for each property -- owned by an individual using their SSN)

Each I-BOND will have unique account number for signon. But can use the same password for every account. When you sell, each account will have a 1099-INT for tax for the one SSN.

Ltssharon | Dec 30, 2023 | 471 posts since 2020

Personally, though, it cost me 3k just to set up a trust, and that was in 2008. I used a lawyer

MoneyMoves | Dec 31, 2023 | 149 posts since 2019

Now you own the blueprint; the master. Copy & Rename to new Trust name. Delete the accounts it held. Add new I-BOND account. Delete the lawyer's name. Sign w/Notary. Done.

Use new Trust name for the ENTITY ACCOUNT on TreasuryDirect with SSN.

Ltssharon | Dec 31, 2023 | 471 posts since 2020

I definitely never thought of that. Because I have many many cds and brokerages all in the name of the original trust, I would leave all those cds and brokerages in the original trust.

But, thinking about it, I could make a new trust with a new name, copy all the provisions from the original trust, notarize, and buy some new ibonds under the new trust name. (if I wanted to, that is: my trust is about 125 pages long.) Thanks for the inspiration. Truly, I never thought of it at all , ever.

MoneyMoves | Dec 31, 2023 | 149 posts since 2019

Seriously, 125 page trust?? That lawyer must be charging by the page LOL Maybe you meant the trust + advance healthcare directive + durable power of attorney + pour over will, etc ?? (You only need the trust for this)

Here's a thought ... for that amount $3K ... perhaps it was that high because it included all future changes / updates needed? If so, perhaps the lawyer can provide a "shell" "boilerplate" of it for this purpose; online; that you can RENAME for the IBOND only purpose. Print; sign at lawyer's notary. Again; just a thought. Was back in 2008 -- maybe there were additional benefits included that were not fully explained.

JeffinEasternFL | Jan 1, 2024 | 744 posts since 2020

No trust so same problem, and ain't gonna go into the complications and costs, paperwork of a trust when it simply isn't needed. Life needs to be simple not complicated when it comes to money!

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