I Bond’s variable rate 9.62%

David Enna writes:

Based on the March inflation report, which concluded the six-month rate setting period for the U.S. Series I Savings Bond, the inflation-adjusted variable rate of the I Bond will rise from the current annualized 7.12% to 9.62% as of the May 1 reset.

https://tipswatch.com/2022/04/12/i-bonds-new-variable-rate-w…

An almost 10% rate for one of the safest investments in the world is nothing short of amazing in my book. Of course the reason is inflation so a double edged sword. Still, maybe time to max out on the I-bond purchase if you haven’t done so already.

DT
TXT, ANSS Ticker Guide
Click on my board name to see a list of my holdings

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Not to rain on your parade, but this doesn’t work well for large taxable accounts. Taxflation takes much of the inflation topper. And what does this do to the already strained Federal budget?

And what does this do to the already strained Federal budget?

That’s an important public policy question to ask. But it’s irrelevant for making individual investment decisions.

–Peter

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Might it already be too late, given the paper-driven and extremely slow process of setting up an I-bond account? 6 months from now it could reset down to 4% and then, well, the point becomes moot…

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“Might it already be too late, given the paper-driven and extremely slow process of setting up an I-bond account?”

It was really easy to set up an account at TreasuryDirect. I did it a few years ago,
it was painless. Link it to your bank or credit union account, there is 0 paperwork
changing hands. I have not had 1 single issue with using it. I have bought and sold
T-Bills/notes, and have bought I-bonds, they take the exact amount of money out of your bank account on the buy side, and they send the exact amount of money into your bank account when the product you buy redeems. And I’ve always promptly received any tax papers from them.

Their web site does feel a little clunky to me, but it is not at all hard to learn how to navigate
in it.

https://www.treasurydirect.gov/

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Might it already be too late, given the paper-driven and extremely slow process of setting up an I-bond account?

What paper-driven process are you talking about? After reading your post, I just opened an account. It took me 10 minutes on the Treasury Direct website https://www.treasurydirect.gov/global_open.htm to open a Treasury Direct account, and a lot of that was going to get my purse and getting my drivers license out of it. It then took another 5 minutes to get to the point where I could buy I-bonds.

AJ

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Begging everyone’s pardon, that note was based on bad or misunderstood information from a WSJ video.

I signed up for an account online and bought I-bonds in 15 minutes.

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but this doesn’t work well for large taxable accounts

Not sure what you’re trying to say here? I-bonds are completely tax free until redeemed unless you choose to pay tax on the interest as you go (not sure who would do this?). I series bonds are not subject to state or local taxes. You can buy them online in a Treasury Direct account that is easy to set up. What’s not to like? No rain on my parade:-)

Regards,
DT

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Might it already be too late, given the paper-driven and extremely slow process of setting up an I-bond account? 6 months from now it could reset down to 4% and then, well, the point becomes moot… - Flying Circus


Good point.

Also, with a $10K purchase limit, the effect of the higher interest rate on a tiny fraction of a large portfolio is negligible. Now if I could buy $100K, I might put up with the hassle of establishing and keeping track of another account. But generally I have been reducing the number of my investment accounts as I strive to simplify my life during retirement.

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FlyingCircus writes,

Might it already be too late, given the paper-driven and extremely slow process of setting up an I-bond account? 6 months from now it could reset down to 4% and then, well, the point becomes moot…

I seem to remember having to get a signature guarantee to open a Treasury Direct account more than 20 years ago. (The small tranche of i-bonds I bought in 1998 are by far the most poorly performing asset in my portfolio.)

But, the Treasury Dept has streamlined the process for opening a Treasury Direct account today. It’s nearly point and click and you’re done.

https://www.treasurydirect.gov/RS/UN-ACCOUNTCREATE.DO

intercst

I bought $20K of these a month ago. I wonder if my LLC should buy one too.

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Hi Stock Goddess,

I think your LLC should.

Mrs. DT and I have been buying $10K each for 9 years, $5K with our tax refund, and $10K for our trust for two years. If you’re persistent, it eventually adds up. I maintain there is no better place to park your “emergency money”. They’re not investments that one can expect to make any money on, but it is as safe as it gets, and you will never lose money to inflation. Here is link to follow-up article by David Enna:

https://tipswatch.com/2022/04/13/ready-to-invest-in-i-bonds-…

At the start of the article David states: If you have a friend or relative who needs a nudge to buy I Bonds, please send them a link to this article.

Here’s your nudge SG :slight_smile:

DT
TXT, ANSS Ticker Guide
Click on my board name to see a list of my holdings

DoubtingThom,

RE: Treasury Direct’s I-Bond Gift Box

According to the folks at

https://www.bogleheads.org/forum/viewtopic.php?p=6621545#p66…

Money deposited into an I-Bond Gift Box earns interest at a rate matching current I-Bond rates.

With our 2023’s I-Bond purchases in mind, that seems like a good incentive for me to pre-fund my wife’s I-Bond Gift Box now, and for her to return the favor :slight_smile:

Have you looked into this ?

Thanks,

NWVillager

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Hi NWVillager,

I have never looked into this, but it is interesting. Reading the link, it looks like you could do this if you wanted to get the current interest rates locked in for 2023. Essentially, you’d be buying a double allocation for 2022, but then you’ll lose the ability to buy in 2023. The problem I see is that we don’t know what will happen next year. Will the feds raise the fixed rate for I-bonds between now and then? Heck if I know, but I think there is a chance given how inflation is heating up. If you buy your “gifts” now, you are locking in at a zero fixed rate but with an attractive variable rate. The other issue I see is that those bonds will be unavailable until January 1, 2023 in an emergency since you’re already maxed out for 2022. Of course you really don’t want to redeem your bonds that soon any way since you’d pay a penalty.

Interesting idea though. If you’re convinced that next year’s variable rate will go down, you can lock in this years variable rate. And you also accumulate the interest for this year.

Thanks for the link!

Best,
DT
TXT, ANSS Ticker Guide
Click on my board name to see a list of my holdings

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Doubting Thom,

I appreciate your perspective.

RE: The Feds raising the fixed rate?

I had not considered that possibility.

What is the argument for them to do that ?

I thought the fixed rate was a just marketing gimmick to entice people to buy a new financial product :slight_smile:

Thanks,

NWVillager

TMF - Could please have an Edit Button ?

What I had intended:

I thought the i-Bond’s fixed rate feature was just an introductory marketing gimmick to entice people to buy a new financial product.

NWVillager

What is the argument for them to do that ?

https://tipswatch.com/2021/12/05/when-is-the-i-bonds-fixed-r…

DT
TXT, ANSS Ticker Guide
Click on my board name to see a list of my holdings

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RE: The Feds raising the fixed rate?

I had not considered that possibility.

What is the argument for them to do that ?

There probably isn’t one until the Fed Funds rate at least gets close to 1% But if the Fed actually hikes rates 2 or 3 more times before Nov 1, 2022, we might see a bump up to 0.1% or 0.2% for the fixed rate component on I-bonds sold starting Nov 1, 2022.

AJ

RE: The Feds raising the fixed rate?

I had not considered that possibility.

What is the argument for them to do that ?

You can see here the fixed rate fluctuations. It has bounced up from zero and back a couple of times since 2008.

https://treasurydirect.gov/indiv/research/indepth/ibonds/res…

You can see here the fixed rate fluctuations. It has bounced up from zero and back a couple of times since 2008.

If you call the slight increases all the way up to 0.3%, 0.1% and 0.5% over 12 years ‘bounces’, then I guess you could say that it has bounced up. Seems more like small bobs to me.

AJ

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