Ken Tumin
  |     |   6,113 posts since 2009
Thanks cumulus! Also, Harry described how a couple can buy up to $65k in I Bonds in one year:

"A married couple each with a revocable living trust and a self-employment business can buy up to $65,000 each calendar year"
Choice
  |     |   428 posts since 2020
The Buff has some great info.  As we posted in another DA thread, some associates just completed the account registration process for several title/accounts for Treasury ibonds and, there, a focus on how to redeem upon death. Bottomline…The US Treasury has several unpublished principles or gotchas/frustrations that clearly are not “advertised” nor properly promulgated regulations! For example Treasury seems to think that an individual sole proprietorship must have a dba while the website does not mandate it. And your account could be frozen w/o any prior notice or rationale. On and on with no explanations being provided. Be careful and conduct sufficient due diligence especially when a debt limitation is on the horizon
Choice
  |     |   428 posts since 2020
With only one month left until the new November 1st ibonds rate, the CPI posted today for August portends a rate in the upper 6% range!
CDmanFL
  |     |   41 posts since 2019
Thank you, Choice. I was about to buy I Bonds this week, but your comment made me ponder the following questions: If I buy I Bonds this week, am I locked into the 3.54% interest rate for the next 6 months even if the rate increases on November 1? Or do I automatically get the new rate on November 1? If the former, I think it makes sense to wait until November 1 before I buy them. If the latter, there is no reason to wait. Would love to get clarity on this from one of our DA experts! Thanks!
alan1
  |     |   597 posts since 2015
CDmanFL -- If you buy Series I savings bonds in September, you will be locked in to a rate of 3.54% for the first six months you own the bond.

From Treasury Direct:
"What's the interest rate on an I bond you sell today?

"For the first six months you own it, the Series I bond we sell from May 2021 through October 2021 earns interest at an annual rate of 3.54 percent. A new rate will be set every six months based on this bond's fixed rate (0.00 percent) and on inflation."
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm

You wrote that you were "about to buy I Bonds this week". There's no reason to buy the bonds _this_ week. The bonds would have an issue date of September 2021 and would earn interest as if they were purchased at the beginning of September. If you bought the bonds _next_ week, they would have an issue date of September 2021 and would earn interest as if they were purchased at the beginning of September. So, whenever one purchases Series I bonds, it's worth waiting till close to the last business day of the month to make your purchase. (I wouldn't do it on the last few business days of the month; the purchase might be pushed over into the following month. I don't know the precise number of business days before the end of a month that will guarantee you'll get that month's issue date.)
CuriousDave
  |     |   59 posts since 2018
Yes, you are indeed locked into the 3.54% rate for the first 6 months, regardless of the change in rate that is likely on November 1. If you invest today, you will earn 3.54% through March 2022, when you will earn the "November 1" rate for 6 months thru September 2022, and so on. Bear in mind also that throughout the life of your I-Bond you will to all intents and purposes be earning only the inflation element of the composite rate, because the fixed element on current purchases is a measly 0.10% that does not change for the life of the bond. Because of that, if and when the interest rate environment changes, at some point you may find yourself earning a rate inferior to what you can earn on, say, CDs. Then you will want to consider cashing out and investing elsewhere, though you will owe federal income tax on all the interest you will have accumulated up to that time, and, if you will have held for less than 5 years, you will also forfeit interest earned for the last 3 months.
CDmanFL
  |     |   41 posts since 2019
Thanks Alan and Dave! Very helpful information!
alan1
  |     |   597 posts since 2015
CuriousDave writes: "the fixed element on current purchases is a measly 0.10% that does not change for the life of the bond."

However, according to Treasury Direct:

The composite rate for I bonds issued from May 2021 through October 2021, is 3.54%
Here's how we set that composite rate:
Fixed rate 0.00%
Semiannual inflation rate 1.77%"
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
CDmanFL
  |     |   41 posts since 2019
In today's interest rate environment, is there anything better than I Bonds for up to $10,000? I can't imagine a better option that guarantees principal, but would love your guys' opinions. I've already marked my calendar for November to buy them, but I can be talked out of it if I'm missing something.
Choice
  |     |   428 posts since 2020
Only one account? Go long!
CuriousDave
  |     |   59 posts since 2018
The 3.54% rate is of course the annualized rate, though clearly it will be earned for only 6 months unless the composite rate for the next 6 months happens to be unchanged. I used the 3.54% rate to directly compare with other products - like CDs - that conventionally quote the annualized rate regardless of the term of the investment.
GreenDream
  |     |   128 posts since 2019
Sorry Dave, but I have to agree with alan1 for once. The fixed element on I-Bonds is current 0% and has been since May 2020. (you can follow the link from Alan's post for more details). Perhaps you were confusing the I-bond fixed rate with the EE bond's rate?
CuriousDave
  |     |   59 posts since 2018
Yes, I was mixing apples with grapes.
Of course, the current rate for EEs is not the whole story for those who will hold them for 20 years or longer, as these bonds are guaranteed to reach their face value (meaning they will double in value) if held for 20 years.
cdqueen
  |     |   70 posts since 2016
3.54% interest accrual sounds great compared with other fluctuant products as of today. I have two questions to pose I hope DA readers with I-bond experience can help clarify. Given a purchase limit of $10,000.00 per annum, and given the imminent rate change pending Nov. 1st, can one 10K sum be purchased prior to 11/1/21 to be counted for 2021 issuance at 3.54%, and then another 10K sum be purchased in early January 2022 to be counted for 2022 at the new rate established Nov. 1st, 2021? Is it reasonable to assume the rate change occurring 11/1/21 will result in a higher composite number than 3.54%? Or is that unknowable currently? Thank you for any/all help.
CDmanFL
  |     |   41 posts since 2019
I think the answers are yes and yes. However, I will wait until November 1 to purchase my first $10K because the interest rate could be notably higher. Then I’ll purchase my second $10K in January 2022. I don’t think it makes sense to purchase my first $10K before November 1 since we’re quickly approaching that date, but if anyone has a different thought I’d love to hear it.
Choice
  |     |   428 posts since 2020
I suggest one read many of the various posts on DA on ibonds. And, not buy ibonds until one knows why and when, if ever, to do it. And. most importantly the rationale for (in)action, not conclusion statements.  Good Luck
w00d00w
  |     |   9 posts since 2012
the rate for November 1 is currently 6.56% annualized plus whatever adjustment in CPI-U occurs next month. this calculation is based on the CPI-U change from 264.877 in March '21 to 273.849 in Sept '21.

for further information, i'd suggest tipswatch.com which offers some quality articles about I Bonds and TIPS
cdqueen
  |     |   70 posts since 2016
Thank you all posters for your valuable contributions to this discussion. Very important question as yet unasked unanswered: is there a limiting condition of once per calendar year versus once per fiscal year for 10K single account acquistion? Given that 3.54% and 6.56% are both very attractive rates, who wouldn't wish to avail of both with 2021 and 2022 investments? Thank you in advance for any/all help.
alan1
  |     |   597 posts since 2015
cdqueen -- From Treasury Direct:

How much in I bonds can I buy for myself?

In a calendar year, you can acquire:
up to $10,000 in electronic I bonds in TreasuryDirect
up to $5,000 in paper I bonds using your federal income tax refund

https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#myself
ORInvestor
  |     |   33 posts since 2014
If you get a paper I bond, how do you cash it in?
alan1
  |     |   597 posts since 2015
ORInvestor -- Please read "Cashing Paper Savings Bonds" at Treasury Direct
https://www.treasurydirect.gov/indiv/research/indepth/bond-redeem.htm
CuriousDave
  |     |   59 posts since 2018
Assuming the bonds are titled in your name, if you purchased your paper bonds at a bank and that bank still processes redemptions (you will need to ask), you can take the bonds to the bank and cash them out on the spot after you provide satisfactory ID. If you have a savings or bank account there they can deposit the proceeds directly into your account.
If you did not purchase the bonds at a bank that still processes redemptions, you will need to mail them to Treasury Direct after following the instructions on the site provided above by alan1. Go to Item # 4 headed" What if the Bank Can't Cash My Bond"?
Very few banks still process redemptions of paper bonds and if you do not have an account with that bank they will probably decline to help you. Bear in mind, the banks do not earn a dime of commission on processing U.S. savings bonds and are understandably reluctant to devote their human resources to bondholders who are not existing clients and to products that are not theirs and generate no income for them.
jamesstewart
  |     |   40 posts since 2011
Ibonds have to be held for a year before redeeming (minus the buying timing trick late in the month). From my perspective, for a 1 year period a sure thing of getting 3.54% for the first 6 months, then a probable 6%+ for the second six months is better than 6%+ for the first six months and an unknown for the second 6 months. If inflation tanks, that second six months could be near zero. If inflation keeps going, you will still most likely have a better than cd market ride for 18 (or possibly more) months if you invest before Nov 1. Also, it would be helpful to have an idea of what conditions you would redeem the ibonds since the penalty of losing the last 3 months of interest is a factor as well as taxes on the accumulated interest when redeemed.
CDmanFL
  |     |   41 posts since 2019
James,
You’ve crystallized what I’ve been debating. Instead of waiting until November 1, I’m going to buy $10K now and $10K on 1/1/22. I like your analysis. Thanks!
NYCDoug
  |     |   187 posts since 2011
@ CDmanFL For next year's $10k, better you purchase in late January (26th ~ 28th)
CDmanFL
  |     |   41 posts since 2019
Thanks NYCDoug!
CuriousDave
  |     |   59 posts since 2018
jamesstewart --as alan1 pointed out above, bear in mind that the rates you are talking about are annualized rates. The 3.54% means 3.54% PER YEAR for 6 months, so, on $10,000 your earnings for the first 6 months will be $177, and for the next 6 months, assuming that 6% will be the annualized rate, you will earn $305 ( = 10,177 x 6% x 6/12), So, your interest earned for the first 12 months will be $482 (= 177 + 305), which is an effective rate of 4.82% for the 12 months.
CuriousDave
  |     |   59 posts since 2018
jamesstewart -- Regarding the early withdrawal penalty of interest for the last 3 months, the Treasury has a very investor-friendly policy of crediting interest for the full month in which you purchase your savings bonds, regardless of the actual date you invest, and also crediting interest for a full month for the month you redeem. That means that with careful timing you can reduce your penalty period to as little as a month plus, say, ten days.
jamesstewart
  |     |   40 posts since 2011
Thanks for your clarifications, Dave. I understand the 6 months run at the APR (Annual Percentage Rate). APR makes a good comparison tool of earning power of multiple term investments at a point in time. With the Ibonds, it's like buying two successive 6 month CD's and averaging their APR's to get actual yield after one year. You clarified the investment "timing trick" which I mentioned above which cuts down on the penalty time.
NYCDoug
  |     |   187 posts since 2011
A point to keep in mind is that, on the Treasury Direct website, until five years have passed, you'll not see your full interest; it will always lag four months behind, since the Treasury accounts for the fact that you would be hit with a three-month interest penalty were you to withdraw your funds prior to your five year anniversary..

Example: I purchased my $10k iBond at the end of last month (September). Today, October 1st, I have already -- in theory -- received my first month's interest. But the Treasury website shows no increase in balance. I'll need to wait until January to see how much I earned in September. Why? Come January, I will have received interest for Sep, Oct, Nov, Dec [four months] . . . and the preceding three months will be held in escrow, as it were, and not display. But my September interest will finally show!

A rather bizarre way of doing things, until you get used to it. If ever :-)
Choice
  |     |   428 posts since 2020
With the September CPI being released today, I calculate 7.2% ibond rate on November 1st for 6 months


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