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Last post 23 months ago by rfenst. 26 replies replies.
TreasuryDirect.gov- inflation indexed bonds!
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rfenst Offline
#1 Posted: Mon, May 16 2022, 10:23 AM EST
Joined: 06-23-2007
Posts: 39,255
Check it out!!!

Inflation indexed rate of return on Series I bonds from the U.S. government.

Currently indexed at 9.62% rate of return/interest!!!




"Series I Savings Bonds

NEWS: The initial interest rate on new Series I savings bonds is 9.62 percent. You can buy I bonds at that rate through October 2022. Learn more.

KEY FACTS: I Bonds can be purchased through October 2022 at the current rate. That rate is applied to the 6 months after the purchase is made. For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through January 1, 2023. Interest is compounded semi-annually.

REMEMBER! You can only purchase up to $10,000 in I bonds each calendar year. If you buy I Bonds exceeding that limit, we will process a refund, which may take up to 16 weeks.

Use I bonds to:

save in a low-risk product that helps protect your savings from inflation
supplement your retirement income
give as a gift
pay for education

..."

Buy one for yourself, your spouse and one in each of your kids names if they aren't going to do it.

YMMV.
HockeyDad Offline
#2 Posted: Mon, May 16 2022, 10:54 AM EST
Joined: 09-20-2000
Posts: 46,120
I heard the current inflation is transitory.
rfenst Offline
#3 Posted: Mon, May 16 2022, 11:06 AM EST
Joined: 06-23-2007
Posts: 39,255
HockeyDad wrote:
I heard the current inflation is transitory.

Let's hope that is all it is. (Fingers crossed while praying.)

I haven't looked into this fully, but on its face it could be a real good thing for those who an afford it.

I wonder if you can use IRA or 401k or the like funds to buy-in and then keep the bonds as part of your retirement portfolio without taxation, until you sell or cash out?

Time to call my people...
BuckyB93 Offline
#4 Posted: Mon, May 16 2022, 11:13 AM EST
Joined: 07-16-2004
Posts: 14,165
Series I bonds is the best place to park any extra cash right now thanks to rising inflation. Right now (and pretty much anytime) a risk free 9.62% annual return is almost unheard of for any investment.

Some things that one should be aware of...
- Your money in I bonds is locked up for a minimum of one year.
- If you sell before then, you'll receive no interest. If you sell before 5 yrs, you'll forfeit the prior 3 months interest. If you sell after 5 yrs there is no penalty.
- The interest rate is adjusted twice a year (May 1st and November 1st).
- How to buy them: Electronically from https://www.treasurydirect.gov in amounts of $25 or more to the penny. There is no secondary place to buy them so you must go through Treasury Direct. You can get paper versions by using your tax refunds in $50, $100, $200, $500, $1,000, $5,000 increments.
- Limit of $10k per calendar year per Social Security number.

The current interest rate of 9.62% is locked in on bonds purchased from May-October 2022. On Nov 1st, a new I bond interest rate will be set depending on inflation. Bonds purchased on and after Nov 1 will be locked in at that new rate. The following May, a new rate will be determined for those bonds and so on and so forth.

As I understand it, you can buy anytime between now and the last business day before Nov 1 to lock into the 9.62% rate.

If, on Oct 31 of 2022 (a Monday) it looks like inflation is going down, you can still lock in the current 9.62% bond interest rate if you buy on Oct 31st. If i looks like the rate is going up, wait a day (Tues Nov, 1st) and lock in on the new increased bond interest rate.

So you can buy some now and until Oct 31st to lock in the 9.62%. If you want to buy more maybe wait until Oct 31 and see where the interest rate will be going. If i looks like it will be down, buy more on Oct 31 to still get the 9.62%. If it looks like it will be going up, buy the next day or beyond and lock in on the new higher interest rate.
BuckyB93 Offline
#5 Posted: Mon, May 16 2022, 11:19 AM EST
Joined: 07-16-2004
Posts: 14,165
rfenst wrote:
Let's hope that is all it is. (Fingers crossed while praying.)

I haven't looked into this fully, but on its face it could be a real good thing for those who an afford it.

I wonder if you can use IRA or 401k or the like funds to buy-in and then keep the bonds as part of your retirement portfolio without taxation, until you sell or cash out?

Time to call my people...


You can't buy them using IRA or 401(k) money. There is no secondary market. Can only buy them from TreasuryDirect.gov

The bond interest earnings are exempt from state tax but are subject to Fed taxes when you cash out unless the money is used for education. Interest-earning period: 30 years or until you cash them, whichever comes first.

At a glance:
https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm
Dg west deptford Offline
#6 Posted: Mon, May 16 2022, 3:44 PM EST
Joined: 05-25-2019
Posts: 2,836
Bucky be the man!
Thanks for posting this rfenst!
rfenst Offline
#7 Posted: Mon, May 16 2022, 5:04 PM EST
Joined: 06-23-2007
Posts: 39,255
Good work Bucky!
BuckyB93 Offline
#8 Posted: Mon, May 16 2022, 5:04 PM EST
Joined: 07-16-2004
Posts: 14,165
I'll likely buy some as a a safe place to park some cash. It's hard to pass up a 9+% risk free return on investment especially the way the market has been going lately. I'll sock some money away in them try to forget I have them.

I'll buy some in my kids' names too. Since both the stock market and the overall bond market have been taking a $hit lately... it's hard to argue against investing with something with a risk free 9+% return. (Unless the US government takes a complete $hit and is dissolved but in that case we'll have way more issues to worry about than our investments).
BuckyB93 Offline
#9 Posted: Mon, May 16 2022, 5:04 PM EST
Joined: 07-16-2004
Posts: 14,165
NINE!
deadeyedick Offline
#10 Posted: Mon, May 16 2022, 6:03 PM EST
Joined: 03-13-2003
Posts: 17,075
Wow! That almost keeps up with inflation.
MACS Offline
#11 Posted: Mon, May 16 2022, 6:15 PM EST
Joined: 02-26-2004
Posts: 79,747
deadeyedick wrote:
Wow! That almost keeps up with inflation.


LOL
Mr. Jones Offline
#12 Posted: Mon, May 16 2022, 6:56 PM EST
Joined: 06-12-2005
Posts: 19,419
Someone? Somebody? Or something is HIGH ON C.R.A.C.K.
AND L.S.D. AND METHAMPHETAMINE CONCURRENTLY AT THE U.S. TREASURY???

WHAT THE **** IS THIS BULL****???

SOMEBODY HAS GONE CRAZY???
Mr. Jones Offline
#13 Posted: Mon, May 16 2022, 6:57 PM EST
Joined: 06-12-2005
Posts: 19,419
This can't be true???

It's a mirage and a fantasy and a Ponzi scheme all wrapped up in a burrito...
BuckyB93 Offline
#14 Posted: Mon, May 16 2022, 8:59 PM EST
Joined: 07-16-2004
Posts: 14,165
deadeyedick wrote:
Wow! That almost keeps up with inflation.


The current state of inflation is *{cough, cough}* transitional.

If you believe the market will bounce back (it always does eventually) I'd DCA into broad market funds while they are "on sale". Nobody knows when the bottom will happen and when it will turn to corner. I personally believe that we have some more rocky roads ahead before things settle down (just my opinion).

Cash is king so it's a good idea to have a cushion sitting around for mid and near term use. An emergency cushion in case you need tap into it right away. You never know when some hospital bills might come into play, your car needs to be fixed, or if you want to buy golden toilets, a kitchen upgrade, your furnace/AC $hits bed, need to buy stone dust and patio pavers...

In my opinion, Series I bonds is a good place to stash some extra cash that you don't plan on using for awhile. With a minimum buy in of $25 and a guaranteed return of 9.6% right now (inflation adjusted every 6 months), it's better than a savings account. Again, one should have a cushion and liquid assets that can be tapped into for any immediate or unplanned things (a short term safety net).

Another option is buying TIPS (Treasury Inflation-Protected Securities). These can be bought on the open market within your IRA or 401(k) (however it's rare that an employer sponsored 401 will have a TIPS option in their investment choices). I don't use TIPS, I think they kinda suck and would rather use the money in other equities. That's just me.

https://www.treasurydirect.gov/indiv/products/prod_tipsvsibonds.htm

Also, never take financial advice from some blockhead on a discount internet cigar forum.
HockeyDad Offline
#15 Posted: Tue, May 17 2022, 10:42 AM EST
Joined: 09-20-2000
Posts: 46,120
Put $10K in Tesla and $10K in an I-bond and walk away. Check back in 30 years.
deadeyedick Offline
#16 Posted: Tue, May 17 2022, 11:10 AM EST
Joined: 03-13-2003
Posts: 17,075
HockeyDad wrote:
Put $10K in Tesla and $10K in an I-bond and walk away. Check back in 30 years.


They'll both be in bankruptcy before then.d'oh!

And Musk will be living on Mars.
BuckyB93 Offline
#17 Posted: Tue, May 17 2022, 11:13 AM EST
Joined: 07-16-2004
Posts: 14,165
In 30 years I might not even be alive. If so, I'd be in my early 80's and not likely able to remember any passwords or account numbers for which to check them with. I'll leave it up to my kids to try to find that $hit.

Maybe I'll have the information stitched into the waistband of my diapers... code name "Rosebud"
rfenst Offline
#18 Posted: Sun, May 22 2022, 3:02 PM EST
Joined: 06-23-2007
Posts: 39,255
BuckyB93 wrote:
In 30 years I might not even be alive. If so, I'd be in my early 80's and not likely able to remember any passwords or account numbers for which to check them with. I'll leave it up to my kids to try to find that $hit.

Maybe I'll have the information stitched into the waistband of my diapers... code name "Rosebud"

Got to get moving. I haven't bought yet. Has anyone else?
BuckyB93 Offline
#19 Posted: Sun, May 22 2022, 4:58 PM EST
Joined: 07-16-2004
Posts: 14,165
We have until Oct 31 to lock into the current rate. On Nov 1, a new rate will be set. I'll probably buy some before Oct 31 and sit and wait to see where the interest rates are going for the next set rate.

NINE! teen.
deadeyedick Offline
#20 Posted: Mon, May 23 2022, 7:50 AM EST
Joined: 03-13-2003
Posts: 17,075
Gots a little cash rattling around. Will prolly buy the limit for wife and I soon. Still need to read all the rules on the site first.
BuckyB93 Offline
#21 Posted: Mon, May 23 2022, 1:53 PM EST
Joined: 07-16-2004
Posts: 14,165
The web site is rather awkward and not the easiest one to navigate. It's a typical government website that looks like it was created 20 yrs ago and hasn't been updated since then.

I'd give them a grade of a D for ease of use, user interface, and user experience.
HockeyDad Offline
#22 Posted: Mon, May 23 2022, 1:56 PM EST
Joined: 09-20-2000
Posts: 46,120
It’s prolly written in Cobal.net.
BuckyB93 Offline
#23 Posted: Mon, May 23 2022, 2:04 PM EST
Joined: 07-16-2004
Posts: 14,165
Wowzers... I took COBOL, Pascal and BASIC classes back in Jr High. Working on Texas Instruments TRS-80, also known as Trash 80... printers were dot matrix.

The 8" floppy disks were the standard storage media. These things: https://en.wikipedia.org/wiki/History_of_the_floppy_disk

And I walked to school... up hill... both ways in knee deep snow.

If you got lost.. you knocked on a tree, or clapped, or did flashlight signals in Morse Code. If you were lucky enough to build a fire, you could do smoke signals too.
rfenst Offline
#24 Posted: Mon, May 23 2022, 2:16 PM EST
Joined: 06-23-2007
Posts: 39,255
BuckyB93 wrote:
We have until Oct 31 to lock into the current rate. On Nov 1, a new rate will be set. I'll probably buy some before Oct 31 and sit and wait to see where the interest rates are going for the next set rate.

NINE! teen.

Aren't you loosing interest by waiting?
BuckyB93 Offline
#25 Posted: Mon, May 23 2022, 3:03 PM EST
Joined: 07-16-2004
Posts: 14,165
rfenst wrote:
Aren't you loosing interest by waiting?


The interest rate is locked in and reset every 6 months (first business day in May, first business day in November)

So yes, you do lose on gains the longer you wait (time in market > than timing the market). If you get in early, you have a head start and a couple months of interest adding up. It accrues on a monthly basis.

As an example if you buy on, say, June 1st vs June 30th, there is no difference. A bond bought on June 1st still gets the same accrual for that month as a bond bought on June 30th. If you buy in on May 30th, you get one month of interest gains over someone who bought on June 1st.

This is my understanding and I might be not explaining it well.

"What interest will I get if I buy an I bond now?
The composite rate for I bonds issued from May 2022 through October 2022 is 9.62 percent. This rate applies for the first six months you own the bond.

How do I bonds earn interest?
An I bond earns interest monthly from the first day of the month in the issue date. The interest accrues (is added to the bond) until the bond reaches 30 years or you cash the bond, whichever comes first.

The interest is compounded semiannually. Every six months from the bond's issue date, interest the bond earned in the six previous months is added to the bond's principal value, creating a new principal value. Interest is then earned on the new principal.

You can cash the bond after 12 months. However, if you cash the bond before it is five years old, you lose the last three months of interest. Note: If you use TreasuryDirect or the Savings Bond Calculator to find the value of a bond less than five years old, the value displayed reflects the three-month penalty; that is, the amount of the penalty has been subtracted already."

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
rfenst Offline
#26 Posted: Tue, Jul 12 2022, 9:36 PM EST
Joined: 06-23-2007
Posts: 39,255
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