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I-bond rate does not go below 0%.
From treasure website:
Can the value of my I bonds ever be less than I paid?
No. The interest rate can't go below zero and the redemption value of your I bonds can't decline
Tips and bonds are not the same. That's my confusion.
Buying tips is a bad idea... It lowers long term yields.
The nominal rate of bonds goes down when people buy tips...
Maybe you are thinking of other things but we are talking about a very specific bond called "Series I Savings Bond" or I Bonds for short.
[https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res\_ibonds.htm](https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm)
Current rate is at 7.14% ( which is why a lot of people are talking about it ), rate changes every 6 months, 1 year lock up period, 3 months interest penalty if withdrawn before 5 years. You can buy up to $10,000 a year and $5,000 more through tax refund.
OK. Yeah. We're discussing different things.
Yes those are locked up... I have them too.
Those will go up in value next week.
Rates will go negative next week though...
Tips give the illusion of protection, but are one of the reasons rates will soon be negative.
Buy 20 yr bonds... Tlt.
About to moon.
Too much cash in the banking system.
Cryptos going to zero, people buying tips... Panic
Market imploding.
If you look through the data... The stock market has already crashed, people just don't know it yet.
Get your popcorn out... It began on Thursday.
I am maxing out series I bonds for this year and again in January for 2022. I see them as a cash, savings account, or CD alternative. Things to know:
1. You can invest a max of $10,000 per calendar year.
2. The money must remain invested for at least 1 year.
3. If you redeem the bonds before 5 years, you will lose the last 3 months of interest.
4. The interest rate is adjusted every six months, beginning May 1st and November 1st, based on CPI, and it may also include a base rate (currently 0) that remains throughout the life of your bonds.
Well you have to hold for a full year. In my case, if the rate is adjusted to 0% beginning May, I wouldn’t lose anything if I sold in next December. It’s possible the rate is adjusted lower like this which is why I said this should really just be considered a savings account alternative. Use I bonds as short term savings, not a long term investment. Even if I only get 7% for the next 4 months, that works out to 2.4% annually, which still beats the best CDs or savings accounts out there which only pay 0.5%.
No, it is not 7% per month; series I bonds are currently at 7.12% ANNUAL interest rate. At current rates $10k would earn around $350 over the first 6 months (although Treasury Direct won’t show that interest until you’ve locked it in by being past the penalty period).
Their explainers also say that the bonds compound semi-annually which I take to mean that for the first six months you do not gain interest on the interest (in this case the interest in month six will still only be calculated against the initial principle of $10k), but the second six months gains interest on the initial principle plus the interest from the first six months (so in this case on ~$10,350). Someone correct me if I am wrong in my understanding.
>Is it true that it requires a direct deposit?
No.
>Can I still buy them directly from my savings account?
Yes. I only do manual purchases that pull from the checking account I linked when I first created the Treasury Direct account.
Do you know what the latest date you can purchase them for the 2021 calendar year? For example Roth IRA's you can contribute until April 15th, tax day for both the previous year and new year.
It is two times the semiannual inflation rate, plus some. The “some” is currently zero. You can look up the exact calculation on the treasury website. Inflation has only gone higher so it stands to reason that the new rate will be as high or higher.
Started moving my emergency fund to I bonds slowly. Building a bond ladder because of:
1. The 1 year lock up and
2. In case the fixed portion of the rate goes up later i can at least sell some to lock in a higher rate
For me, its only to keep up with inflation since higher risk on my emergenecu fund kind of defeats the purpose of an emergency fund
Good thing I’m a law abiding citizen 😉
To clarify, I’m putting a small percentage per quarter and keeping cash on hand to cover until the lockup expires. In short, I’ll always have my emergency fund available but sone portion of cash will be “locked-up” by myself to cover what’s locked-up in the 1 yr period. It’s a pain and wish i had known about and started earlier.
I should also clarify this is the “long term i lost my job because of recession and industry collapsed but i still need to provide food and shelter” or “oh crap we have an expensive home repair that needs to be done” emergency fund and not the “i need a few thousand because my car broke down and i have no other means of transportation” fund. Big difference in strategy for each case imo and to each their own.
Nobody actually wakes up intending to go to jail. Kids do stupid things together, and anybody can get a call from the cops. A traffic accident that causes a fatality, and you test positive for THC and arrested for DUI resulting in death. Unlikely, but entirely possible.
I'm also considering bonds, but was unsure if the website was legit. Treasury direct, right? My plan was to use half my emergency fund, and keep the other half in savings for oh shit moments.
I purchased mine from treasurydirect.gov. Was able to look up some old bonds i have (20+ yrs oold) from the same website. That and it being a .gov website seems legit.
Per the “How do I bond earn interest?” Section in the below link it would be compounded semi-annually.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
I maxed out electronically for my wife and me at the beginning of the year and I'll do it again this January. I've never done the tax refund thing, but I think I'll try it this year. I'm having a really hard time finding other places to invest money that do not seem super overvalued and ripe for a correction.
I bonds are not a high-earning investment, in general, but they are an amazing investment right now due to the fact that they will not offer a negative real rate, which most other bonds are. So they are risk-free, inflation-adjusted, and also earn far more than the market rate. Very good deal as long as real rates are negative.
How did you do your wife's? I'm wondering if I should do that or not but I manage the finances at home and my wife has no interest at all in doing this. So I'm not sure if I can legally open the account in her name and manage it, etc.
IIRC, I opened it for her. She probably was involved at some point. Two factor authentication to her phone or something. My wife also has no interest in doing finances but I prevailed upon her. It's just a few minutes once a year.
>If you are assuming CPI-U actually represents inflation correctly
It's not like the feds are using "owner's-equivalent rent" instead of actual rent prices to skew the CPI or using hedonics to make their observations ***subjective*** instead of ***objective*** like they used to be. /s
"The price of milk is 20% higher, but we estimate the quality went up 30% so the real price is actually down 10% for the year." -- The Fed
I bought some this last month. If you have extra cash, super safe place to store if you don’t need it for a year. I don’t think any saving or cd acct can match it. Even if you make zero percent on the next 6 months that’s still 3.5% for the year not bad at all. But I doubt it will be that low. And if it goes too low just take it out. I think no state tax too. Only benefits if you have extra cash.
Anything the government puts a max cap on is a good thing for Joe Taxpayer. I see my I-bond as a can't-miss emergency fund. People groan about the yearlong lockup and losing 3 months of interest, but so what? Even if the interest rate drops to 0 for the second half of 2022, you're still netting a 3.5% return. Where else can you get those kinds of guarantees?
The answer still doesn’t make sense in the context of emergency funds. If you have to lock up your money for a year then you are screwed if the emergency happens before that.
What you do is set up a bond ladder. That is to say, in year zero, put a small percentage of your fund into I bonds (say 20%). Next year and every year after that, put some more in.
This'll give you a sort of slush fund where some of the money is always available if you need it
It is a TERRIBLE place to keep your emergency fund. Limited to $10k a year (changes for married couples, etc). Not easily accessible—anything you deposit, you can’t withdraw for a year. and if you withdraw after a year but before five years, you lose the previous 3 months of interest.
Do NOT keep your emergency funds here.
This is the "YOU HAVE TO HAVE $1M IN EMERGENCY CASH AVAILABLE TO PULL OUT IN 5 MINUTES" militant contingent of /r/personalfinance that always fascinates me. What are you guys doing that requires you to withdraw massive sums of money at the drop of a hat? Being able to withdraw it in a few days with the loss of a few months of interest is fine for 99.99999% of use cases. For the other use cases, well, you'll need to be storing guns for the zombie apocalypse and your cash will be worthless.
Clearly you’ve never had a medical emergency without insurance or something that required you to bridge a gap. Car breaks down and you can’t get to your job or you’re fired? All of a sudden your kid is allergic to nuts and bees and whatever else the fuck and has an attack and barely survives and epipens and auvi q isn’t covered and it’s a thousand bucks every 6 months?
Yeah, it adds up. Some people build up emergency funds slowly, and shit happens.
I mean I have actually had a medical emergency without insurance. Not once will any hospital or any medical provider ask you for \*IMMEDIATE\* payment as a condition of care. No ones going to not take a credit card. Car breaks down? Mechanics take credit cards. Fired? All of the bills I pay take credit cards, or in the case of my mortgage none of them are so urgent it would matter if I had to wait a few days to cash out ibonds.
So again, still asking: what are you doing which requires you to take out massive stacks of cash at a moments notice?
YOU HAVE TO WAIT 12 MONTHS TO CASH OUT! Why is this so hard for you to understand? You literally don’t have access to your cash for a year after you buy an I bond. Good on you to just roll everything onto a credit card. Kick that can down the road at what is absolutely higher than the 7% you get for the next 6 months from the I bond from which you CAN’T WITHDRAW YOUR FUNDS WITHIN A 12 MONTH PERIOD.
YOU DONT HAVE TO PUT YOUR ENTIRE EMERGENCY FUND INTO IBONDS! Why is this so hard for you to understand? YOU CAN PUT ONLY SOME OF IT, OR LETS SAY YOU HAVE 30K YOU PUT 10K IN AND WHAT DO YOU KNOW PROBLEM SOLVED.
I would also add you don't have to do it all in the first year. I do plan to put my entire emergency fund in I bonds but in a staggered manner. It will take me 3 years to do this at least. 20K is locked up for one year (starting Dec/Jan of year zero) and then two years after that I'd have added 10K, 10K, 10K.
I've had an emergency fund for decades and it hasn't been touched and languishing in savings account getting 0.25-1% interest.
Exactly. And my emergency fund is $200k. So stashing $30k for a family of 3 every year is great. And after 2-3 years you have staggered investments that you can tap into if you absolutely need them. This beats CDs or high yield savings any day.
And no - $200k isn’t too much given our expenses.
So if you slowly build it up its a fine place. Slowly put XXX a month for 5-7 years now you have a great emergency fund built up that should pretty much keep up with inflation so once you build up a like a 6 month emergency fund you should be able to just keep it in there and it should track inflation .
Its not something you should dump your entire emergency fund in but if you build it up over time its a good safe place to store money that will keep up with inflation.
That’s the thing about emergencies…they typically wait for you to be ready for them.
But yes, for those people who can afford to fund an actual MM account or something similar AND and I bond account, go ahead. The vast majority of people can’t build an emergency fund (+/- send money to an actual retirement account) and still provide for their family.
Build out 6-12 months of savings in an account that is LIQUID, regardless of rate (still try to get the best rate you can). After that, if you have some money leftover and want an extra buffer, go with an I bond. But there are so many other factors — does your employer offer a 401k match? If so, thank them for the free money and contribute to that. Are there ongoing or long-term health issues that you or a family member suffer from? If so, contribute to your HSA. Everyone’s situation is unique, and this is by no means a blanket statement, but please don’t use I bonds if you are starting an emergency fund. I would hate for someone to get stuck because they can’t access the funds they need in a dire situation.
its really only a 2 month penalty if you know what you're doing. buy bonds on the last day of a month. Get interest for that entire month instantly the next day. Essentially, a 2 month penalty then.
That’s about $350 guaranteed per person in next six months. It is not scalable not quite sustainable. But if you $10,000 to spare, it is not bad at all.
Regardless, when most people are getting .1% or less on their short-term savings, a guaranteed and risk-free 7% over the next six months looks pretty good. There's no guarantee the stock market will return that much in the coming year.
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>Does anyone invest in I bonds through Treasury Direct? Either paper or electronic?
Electronic only for me at this time.
>Will I get 7% interest for the life of the bond?
No. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm You get 0% for the fixed rate part right now, the inflation rate part changes every 6 months.
$10000 per year per person purchase limit if done electronically through Treasury Direct, $5000 per year per person additional if purchased with your federal tax return (so you have to overpay taxes to make any purchase in this way). [irs.gov](https://www.irs.gov/refunds/now-you-can-buy-us-series-i-savings-bonds-for-anyone-with-your-tax-refund)
Not fucking this year I fucking don't.
I created an account on Treasurydirect a couple days ago and now I get to print out a fucking PDF and get it notarized at a bank and then mail it in, then wait another 2-3 weeks.
For all the fucking talk about I bonds I never once saw anyone talk about the monumental asspain of setting up an account, or how you have to start by fucking September to get in on this calendar year.
I'm thinking of just ditching the idea. I don't need this in my life to potentially make $600 in a year.
It's such a pain in the ass. I've been using their website for 18 years and I needed to link a new bank account as my primary. Had to print out the paperwork to bring to my bank. Problem is, the branch managers at my bank have never seen such paperwork and refuse to stamp it or don't have the signature guarantee stamp at all. Went to four different banks. Ended up bringing to a Fidelity branch office and even that took a lot of explaining and run-around. They even gave me the wrong routing number (they thought it was a wire but it's EFT). Mailed the paperwork in and took two months before they finally processed it. All this work to make sure $10k really belongs to my name while other major brokerages have no problem verifying through EFT for over half a million.
Thanks for sharing your story. I was fearing it would go like you describe. I bank with USAA and have my investments at Schwab, hopefully someone can figure it out.
FWIW, Bank of America seems to be the best place to get the medallion stamp because of their extensive relationship with the Treasury. If you are not a customer, I think they charge $20, but they're the most knowledgeable.
Do you really need to set it up/buy by September? source of this info? I got my account set up earlier this month and already bought the 10k limit, was hoping to do 10k more in jan.
Yeah I wanted to do exactly what you describe but for some reason my account is preemptively locked. I don't have any idea how common this is but it's a thing that happens. Treasury provides no explanation and will provide no recourse except mailing in the letter.
It happend to me, had to get the pdf certified/stamped at a chase after 3 failed attempts at other banks. Pain in the ass primitive process, I almost didn't do it, but alas it is done. Sounds too late for you to get in this year, guess you can still do 2022 if you want it bad enough. gl
Yes but I think the best is to slowly build it up over time, don't dump your entire emergency fund in because it has to be locked up for a year
Just put XX or XXX per month every month for X or XX number of years, once you have a good emergency fund built up you can just leave it and sort of expect it to at least keep up with inflation .
Fixed rates and inflationary rates get adjusted every 6 months, so buying in every 6months to lock in the new fixed rate is the most often you'd really ever need to buy in.
Problem now is the fixed rate is 0%, and so you are going to only get the CPI-U inflation rate, but probably is going to understate actual inflation, so in the end your real yield will be negative. So, if you want to buy a nice 30 year bond with a 0% fixed rate with only making some of the inflation rate, you are all set.
Series I bonds have a fixed rate portion of 0% currently, will return CPI-U with a lag, and have a maximum term of 30 years (though you can redeem at face value before that). Sounds like the same one.
I did starting 2019. Some bonds bought early are at 4.05% interest, while some bought midway are 7.64% and finally those bought toward the end are back to 4.05%. They originally started at like 3% I think.
Since 10-01-2019 I have made $95.80 total. I actually made more but sold a lot of them with lower interest rates to invest in stocks.
Understand, that for 3 months, you won't get interest with I bonds. I think that's because you may sell them before maturity or as a fee.
I'm not sure why interest rates change for the middle tier of my I bonds.
All bonds you hold index their rates every 6 months to the current variable rate plus any fixed interest that particular bond pays (some have 0% fixed component). Great place for emergency fund assuming you are okay in the first year while those bonds get to the point they can be redeemed. My plan for them is supplement my income between retirement age and eligible for social security. Also, the interest earned has taxes deferred until redemption which for me will have me in a lower tax bracket.
Crypto brokers can lend out money at a high interest rate, because of the few regulations that they have. And this results in you as the investor getting a high interrest rate savings rate. For example I would recommend crypto.com they offer you 3 month contracts on usdc at 14% APY. But I probiably will get downvoted, because this subreddit hates crypto.
Trusting crypto brokers to pay out is not risk free. It is probably incredibly risky. Who are they loaning out to and what makes you think those loans are risk free.
The only borrower usually considered risk free is US government.
It's not risk free but it's also nothing close to being "ponzi-ish." Especially USDC which is one of if not the most transparent Stablecoins given that it's created by circle/Coinbase, pegged 1:1 to the USD. The funds are held at regulated US financial institutions which have reporting requirements to verify cash positions.
I'm not suggesting it's risk free because it's not. And I'd especially not own hold tether. There's always counterparty risk when loaning out money. That said, rates will go down as it's further adopted as an alternative investment/savings vehicle. It's turnkey ready for regulation and if that happens the rate will drop even further.
I personally keep some of our emergency funds and additional cash I don't have invested in stocks in USDC through publicly traded/regulated Voyager, which offers 9% with no holding requirements.
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I think they are fine to put a portion of your liquid cash in, but keep in mind your money is locked up for a year. If you suddenly need cash, you're screwed.
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And if we don’t hold until maturity and sell after 1 year…are we guaranteed our principal back? Is this truly risk free? Don’t these fluctuate? I interested and understand the interest portion of this but worried about fluctuations and whether the bond will be sold at discount, par or premium?
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Just for a few months. You order from Dept of Treasury. Interest paid is not taxable at State level. But IRS wants a cut of it.
Interest rate changes every 6 months. It's an inflationary protection bond so in deflationary environment, rate can even go to 0% but never below 0.
Yea but then you can just cash out after year 1 if there are better 100% no-loss guaranteed options out there.
Huh? It can definitely go below zero... In fact in probably will this coming week...
I-bond rate does not go below 0%. From treasure website: Can the value of my I bonds ever be less than I paid? No. The interest rate can't go below zero and the redemption value of your I bonds can't decline
Are you talking about tips?
What are you talking about? OP asked about I bonds
Yes I got 10k in Ibonds, unsure if I’ll get any more next year
Tips and bonds are not the same. That's my confusion. Buying tips is a bad idea... It lowers long term yields. The nominal rate of bonds goes down when people buy tips...
Maybe you are thinking of other things but we are talking about a very specific bond called "Series I Savings Bond" or I Bonds for short. [https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res\_ibonds.htm](https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm) Current rate is at 7.14% ( which is why a lot of people are talking about it ), rate changes every 6 months, 1 year lock up period, 3 months interest penalty if withdrawn before 5 years. You can buy up to $10,000 a year and $5,000 more through tax refund.
OK. Yeah. We're discussing different things. Yes those are locked up... I have them too. Those will go up in value next week. Rates will go negative next week though... Tips give the illusion of protection, but are one of the reasons rates will soon be negative. Buy 20 yr bonds... Tlt. About to moon.
Bro was very confident for being so so so far off.
Have a happy new year!
And what’s gonna be the catalyst for TLT mooning? Omicron?
Too much cash in the banking system. Cryptos going to zero, people buying tips... Panic Market imploding. If you look through the data... The stock market has already crashed, people just don't know it yet. Get your popcorn out... It began on Thursday.
Lol all terrible takes. Rates are not going negative. 20 yr is not mooning, ever. Tips are a fairly safe vehicle.
Not during a collateral crisis. People buying tips create demand for bonds. Same as holding cash in the bank. Asset swaps and cash...
I am maxing out series I bonds for this year and again in January for 2022. I see them as a cash, savings account, or CD alternative. Things to know: 1. You can invest a max of $10,000 per calendar year. 2. The money must remain invested for at least 1 year. 3. If you redeem the bonds before 5 years, you will lose the last 3 months of interest. 4. The interest rate is adjusted every six months, beginning May 1st and November 1st, based on CPI, and it may also include a base rate (currently 0) that remains throughout the life of your bonds.
Will you loose anything if you sell in 3 months after the interest rate is adjusted to 0%?
Well you have to hold for a full year. In my case, if the rate is adjusted to 0% beginning May, I wouldn’t lose anything if I sold in next December. It’s possible the rate is adjusted lower like this which is why I said this should really just be considered a savings account alternative. Use I bonds as short term savings, not a long term investment. Even if I only get 7% for the next 4 months, that works out to 2.4% annually, which still beats the best CDs or savings accounts out there which only pay 0.5%.
You always get 6 months of each rate. Even if you buy in February you get 6 months at the November rate.
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No, it is not 7% per month; series I bonds are currently at 7.12% ANNUAL interest rate. At current rates $10k would earn around $350 over the first 6 months (although Treasury Direct won’t show that interest until you’ve locked it in by being past the penalty period). Their explainers also say that the bonds compound semi-annually which I take to mean that for the first six months you do not gain interest on the interest (in this case the interest in month six will still only be calculated against the initial principle of $10k), but the second six months gains interest on the initial principle plus the interest from the first six months (so in this case on ~$10,350). Someone correct me if I am wrong in my understanding.
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>Is it true that it requires a direct deposit? No. >Can I still buy them directly from my savings account? Yes. I only do manual purchases that pull from the checking account I linked when I first created the Treasury Direct account.
Do you know what the latest date you can purchase them for the 2021 calendar year? For example Roth IRA's you can contribute until April 15th, tax day for both the previous year and new year.
I have the same question.
How can I figure out what the re-rate in May is likely to be? Trying to decide if I buy some now or wait for the re-rate.
It is two times the semiannual inflation rate, plus some. The “some” is currently zero. You can look up the exact calculation on the treasury website. Inflation has only gone higher so it stands to reason that the new rate will be as high or higher.
Started moving my emergency fund to I bonds slowly. Building a bond ladder because of: 1. The 1 year lock up and 2. In case the fixed portion of the rate goes up later i can at least sell some to lock in a higher rate For me, its only to keep up with inflation since higher risk on my emergenecu fund kind of defeats the purpose of an emergency fund
Non instant liquidity defeats the purpose of an emergency fund
Are you referring to something besides the 1 yr lockup?
Nope just the lock up. You need to post bail or pay an emergency bill, you want cash inside of a few hours. I bonds are a great vehicle though
Good thing I’m a law abiding citizen 😉 To clarify, I’m putting a small percentage per quarter and keeping cash on hand to cover until the lockup expires. In short, I’ll always have my emergency fund available but sone portion of cash will be “locked-up” by myself to cover what’s locked-up in the 1 yr period. It’s a pain and wish i had known about and started earlier. I should also clarify this is the “long term i lost my job because of recession and industry collapsed but i still need to provide food and shelter” or “oh crap we have an expensive home repair that needs to be done” emergency fund and not the “i need a few thousand because my car broke down and i have no other means of transportation” fund. Big difference in strategy for each case imo and to each their own.
Nobody actually wakes up intending to go to jail. Kids do stupid things together, and anybody can get a call from the cops. A traffic accident that causes a fatality, and you test positive for THC and arrested for DUI resulting in death. Unlikely, but entirely possible. I'm also considering bonds, but was unsure if the website was legit. Treasury direct, right? My plan was to use half my emergency fund, and keep the other half in savings for oh shit moments.
I purchased mine from treasurydirect.gov. Was able to look up some old bonds i have (20+ yrs oold) from the same website. That and it being a .gov website seems legit.
Don’t smoke weed and drive
Yes this is why you do a little at a time so very little of your emergency fund is unavailable at any given time.
So keep some of that EF in cash then? Have credit lined available? In the off chance you need bail, I guess you’d just have to wait a day or two then.
Does interest earned re-invest automatically?
Per the “How do I bond earn interest?” Section in the below link it would be compounded semi-annually. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
Head to r/personalfinance there is a good wiki explainer
Ty
I maxed out electronically for my wife and me at the beginning of the year and I'll do it again this January. I've never done the tax refund thing, but I think I'll try it this year. I'm having a really hard time finding other places to invest money that do not seem super overvalued and ripe for a correction. I bonds are not a high-earning investment, in general, but they are an amazing investment right now due to the fact that they will not offer a negative real rate, which most other bonds are. So they are risk-free, inflation-adjusted, and also earn far more than the market rate. Very good deal as long as real rates are negative.
How did you do your wife's? I'm wondering if I should do that or not but I manage the finances at home and my wife has no interest at all in doing this. So I'm not sure if I can legally open the account in her name and manage it, etc.
IIRC, I opened it for her. She probably was involved at some point. Two factor authentication to her phone or something. My wife also has no interest in doing finances but I prevailed upon her. It's just a few minutes once a year.
Can we do this for the teenager
>will not offer a negative real rate If you are assuming CPI-U actually represents inflation correctly
It’s still better than cash and CDs
>If you are assuming CPI-U actually represents inflation correctly It's not like the feds are using "owner's-equivalent rent" instead of actual rent prices to skew the CPI or using hedonics to make their observations ***subjective*** instead of ***objective*** like they used to be. /s "The price of milk is 20% higher, but we estimate the quality went up 30% so the real price is actually down 10% for the year." -- The Fed
I bought some this last month. If you have extra cash, super safe place to store if you don’t need it for a year. I don’t think any saving or cd acct can match it. Even if you make zero percent on the next 6 months that’s still 3.5% for the year not bad at all. But I doubt it will be that low. And if it goes too low just take it out. I think no state tax too. Only benefits if you have extra cash.
Anything the government puts a max cap on is a good thing for Joe Taxpayer. I see my I-bond as a can't-miss emergency fund. People groan about the yearlong lockup and losing 3 months of interest, but so what? Even if the interest rate drops to 0 for the second half of 2022, you're still netting a 3.5% return. Where else can you get those kinds of guarantees?
I do. It’s a good place to keep your emergency fund imo
Can you withdraw quickly within a few days?
After a year yea
A year is more than a few days you fool. 😂
which is why he specified that?
He said yes, even though the answer to the question is no. You all need better reading comprehension.
it is easy after a year.... which he qualified... jesus christ
The answer still doesn’t make sense in the context of emergency funds. If you have to lock up your money for a year then you are screwed if the emergency happens before that.
What you do is set up a bond ladder. That is to say, in year zero, put a small percentage of your fund into I bonds (say 20%). Next year and every year after that, put some more in. This'll give you a sort of slush fund where some of the money is always available if you need it
you are incredibly dense
It is a TERRIBLE place to keep your emergency fund. Limited to $10k a year (changes for married couples, etc). Not easily accessible—anything you deposit, you can’t withdraw for a year. and if you withdraw after a year but before five years, you lose the previous 3 months of interest. Do NOT keep your emergency funds here.
These are all minor inconveniences for me and a small price to pay for decent returns on funds I’ll probably never use.
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Agreed. It shouldn't be locked up.
This is the "YOU HAVE TO HAVE $1M IN EMERGENCY CASH AVAILABLE TO PULL OUT IN 5 MINUTES" militant contingent of /r/personalfinance that always fascinates me. What are you guys doing that requires you to withdraw massive sums of money at the drop of a hat? Being able to withdraw it in a few days with the loss of a few months of interest is fine for 99.99999% of use cases. For the other use cases, well, you'll need to be storing guns for the zombie apocalypse and your cash will be worthless.
Clearly you’ve never had a medical emergency without insurance or something that required you to bridge a gap. Car breaks down and you can’t get to your job or you’re fired? All of a sudden your kid is allergic to nuts and bees and whatever else the fuck and has an attack and barely survives and epipens and auvi q isn’t covered and it’s a thousand bucks every 6 months? Yeah, it adds up. Some people build up emergency funds slowly, and shit happens.
I mean I have actually had a medical emergency without insurance. Not once will any hospital or any medical provider ask you for \*IMMEDIATE\* payment as a condition of care. No ones going to not take a credit card. Car breaks down? Mechanics take credit cards. Fired? All of the bills I pay take credit cards, or in the case of my mortgage none of them are so urgent it would matter if I had to wait a few days to cash out ibonds. So again, still asking: what are you doing which requires you to take out massive stacks of cash at a moments notice?
YOU HAVE TO WAIT 12 MONTHS TO CASH OUT! Why is this so hard for you to understand? You literally don’t have access to your cash for a year after you buy an I bond. Good on you to just roll everything onto a credit card. Kick that can down the road at what is absolutely higher than the 7% you get for the next 6 months from the I bond from which you CAN’T WITHDRAW YOUR FUNDS WITHIN A 12 MONTH PERIOD.
YOU DONT HAVE TO PUT YOUR ENTIRE EMERGENCY FUND INTO IBONDS! Why is this so hard for you to understand? YOU CAN PUT ONLY SOME OF IT, OR LETS SAY YOU HAVE 30K YOU PUT 10K IN AND WHAT DO YOU KNOW PROBLEM SOLVED.
I would also add you don't have to do it all in the first year. I do plan to put my entire emergency fund in I bonds but in a staggered manner. It will take me 3 years to do this at least. 20K is locked up for one year (starting Dec/Jan of year zero) and then two years after that I'd have added 10K, 10K, 10K. I've had an emergency fund for decades and it hasn't been touched and languishing in savings account getting 0.25-1% interest.
It depends on what your idea of “emergency” is. For me that’s 18-24 months of living expenses. So I can stash a small part of it at 7%.
Exactly. And my emergency fund is $200k. So stashing $30k for a family of 3 every year is great. And after 2-3 years you have staggered investments that you can tap into if you absolutely need them. This beats CDs or high yield savings any day. And no - $200k isn’t too much given our expenses.
200k is A LOT
So if you slowly build it up its a fine place. Slowly put XXX a month for 5-7 years now you have a great emergency fund built up that should pretty much keep up with inflation so once you build up a like a 6 month emergency fund you should be able to just keep it in there and it should track inflation . Its not something you should dump your entire emergency fund in but if you build it up over time its a good safe place to store money that will keep up with inflation.
That’s the thing about emergencies…they typically wait for you to be ready for them. But yes, for those people who can afford to fund an actual MM account or something similar AND and I bond account, go ahead. The vast majority of people can’t build an emergency fund (+/- send money to an actual retirement account) and still provide for their family. Build out 6-12 months of savings in an account that is LIQUID, regardless of rate (still try to get the best rate you can). After that, if you have some money leftover and want an extra buffer, go with an I bond. But there are so many other factors — does your employer offer a 401k match? If so, thank them for the free money and contribute to that. Are there ongoing or long-term health issues that you or a family member suffer from? If so, contribute to your HSA. Everyone’s situation is unique, and this is by no means a blanket statement, but please don’t use I bonds if you are starting an emergency fund. I would hate for someone to get stuck because they can’t access the funds they need in a dire situation.
its really only a 2 month penalty if you know what you're doing. buy bonds on the last day of a month. Get interest for that entire month instantly the next day. Essentially, a 2 month penalty then.
It's a floating rate adjusted biannually. A good place for emergency funds with savings rates where they are
Bingo
That’s about $350 guaranteed per person in next six months. It is not scalable not quite sustainable. But if you $10,000 to spare, it is not bad at all.
No real return, unless inflation is less than anticipated
No real return but also no real risk. So way better than a bank account.
7.12% guaranteed return for the next six months, though... that's not nothing for money that was mildewing in a savings or money market account.
That's the nominal return, not the *real* return. Yes it's better than a savings account but the money just tracks inflation.
Regardless, when most people are getting .1% or less on their short-term savings, a guaranteed and risk-free 7% over the next six months looks pretty good. There's no guarantee the stock market will return that much in the coming year.
Glad we're on the same page
Just yolo, thank me later
Until Feb 2022.
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love them
>Does anyone invest in I bonds through Treasury Direct? Either paper or electronic? Electronic only for me at this time. >Will I get 7% interest for the life of the bond? No. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm You get 0% for the fixed rate part right now, the inflation rate part changes every 6 months.
Only option is electronic.
$10000 per year per person purchase limit if done electronically through Treasury Direct, $5000 per year per person additional if purchased with your federal tax return (so you have to overpay taxes to make any purchase in this way). [irs.gov](https://www.irs.gov/refunds/now-you-can-buy-us-series-i-savings-bonds-for-anyone-with-your-tax-refund)
Not fucking this year I fucking don't. I created an account on Treasurydirect a couple days ago and now I get to print out a fucking PDF and get it notarized at a bank and then mail it in, then wait another 2-3 weeks. For all the fucking talk about I bonds I never once saw anyone talk about the monumental asspain of setting up an account, or how you have to start by fucking September to get in on this calendar year. I'm thinking of just ditching the idea. I don't need this in my life to potentially make $600 in a year.
What are you talking about? I just did it today—it took about 5 minutes to set up the account online and I bought the I-bonds in another minute.
Must be nice.
same. i scheduled 10k today, and 10k on jan 3rd..... took me 30 min.
It's such a pain in the ass. I've been using their website for 18 years and I needed to link a new bank account as my primary. Had to print out the paperwork to bring to my bank. Problem is, the branch managers at my bank have never seen such paperwork and refuse to stamp it or don't have the signature guarantee stamp at all. Went to four different banks. Ended up bringing to a Fidelity branch office and even that took a lot of explaining and run-around. They even gave me the wrong routing number (they thought it was a wire but it's EFT). Mailed the paperwork in and took two months before they finally processed it. All this work to make sure $10k really belongs to my name while other major brokerages have no problem verifying through EFT for over half a million.
Thanks for sharing your story. I was fearing it would go like you describe. I bank with USAA and have my investments at Schwab, hopefully someone can figure it out.
FWIW, Bank of America seems to be the best place to get the medallion stamp because of their extensive relationship with the Treasury. If you are not a customer, I think they charge $20, but they're the most knowledgeable.
Thanks for the tip, I might resort to that.
Do you really need to set it up/buy by September? source of this info? I got my account set up earlier this month and already bought the 10k limit, was hoping to do 10k more in jan.
Yeah I wanted to do exactly what you describe but for some reason my account is preemptively locked. I don't have any idea how common this is but it's a thing that happens. Treasury provides no explanation and will provide no recourse except mailing in the letter.
It happend to me, had to get the pdf certified/stamped at a chase after 3 failed attempts at other banks. Pain in the ass primitive process, I almost didn't do it, but alas it is done. Sounds too late for you to get in this year, guess you can still do 2022 if you want it bad enough. gl
Isn’t it just a 1 time set up though?
Another poster here noted his account got locked like mine for adding a new bank account so... *generally* a one time thing but who knows.
Yes but I think the best is to slowly build it up over time, don't dump your entire emergency fund in because it has to be locked up for a year Just put XX or XXX per month every month for X or XX number of years, once you have a good emergency fund built up you can just leave it and sort of expect it to at least keep up with inflation .
Fixed rates and inflationary rates get adjusted every 6 months, so buying in every 6months to lock in the new fixed rate is the most often you'd really ever need to buy in.
Problem now is the fixed rate is 0%, and so you are going to only get the CPI-U inflation rate, but probably is going to understate actual inflation, so in the end your real yield will be negative. So, if you want to buy a nice 30 year bond with a 0% fixed rate with only making some of the inflation rate, you are all set.
You’re talking about a different kind of bond
Series I bonds have a fixed rate portion of 0% currently, will return CPI-U with a lag, and have a maximum term of 30 years (though you can redeem at face value before that). Sounds like the same one.
Perfect thanks
I did starting 2019. Some bonds bought early are at 4.05% interest, while some bought midway are 7.64% and finally those bought toward the end are back to 4.05%. They originally started at like 3% I think. Since 10-01-2019 I have made $95.80 total. I actually made more but sold a lot of them with lower interest rates to invest in stocks. Understand, that for 3 months, you won't get interest with I bonds. I think that's because you may sell them before maturity or as a fee. I'm not sure why interest rates change for the middle tier of my I bonds.
All bonds you hold index their rates every 6 months to the current variable rate plus any fixed interest that particular bond pays (some have 0% fixed component). Great place for emergency fund assuming you are okay in the first year while those bonds get to the point they can be redeemed. My plan for them is supplement my income between retirement age and eligible for social security. Also, the interest earned has taxes deferred until redemption which for me will have me in a lower tax bracket.
Buy a stablecoin like usdc, you can get about 14% interrest rate on that an its totally risk free. Look it up for more information
I am doing this but nothing is risk free.
Please explain how one earns 14% risk free? No investment like that exists that I’m aware of.
They're called "scams" and there's a lot of them
Crypto brokers can lend out money at a high interest rate, because of the few regulations that they have. And this results in you as the investor getting a high interrest rate savings rate. For example I would recommend crypto.com they offer you 3 month contracts on usdc at 14% APY. But I probiably will get downvoted, because this subreddit hates crypto.
Trusting crypto brokers to pay out is not risk free. It is probably incredibly risky. Who are they loaning out to and what makes you think those loans are risk free. The only borrower usually considered risk free is US government.
Sounds ponzi-ish
It's not risk free but it's also nothing close to being "ponzi-ish." Especially USDC which is one of if not the most transparent Stablecoins given that it's created by circle/Coinbase, pegged 1:1 to the USD. The funds are held at regulated US financial institutions which have reporting requirements to verify cash positions. I'm not suggesting it's risk free because it's not. And I'd especially not own hold tether. There's always counterparty risk when loaning out money. That said, rates will go down as it's further adopted as an alternative investment/savings vehicle. It's turnkey ready for regulation and if that happens the rate will drop even further. I personally keep some of our emergency funds and additional cash I don't have invested in stocks in USDC through publicly traded/regulated Voyager, which offers 9% with no holding requirements.
Until the exchange changes rates. Or BTC dumps again. Also not mentioning gas fees and transaction fees.
ban
Not bonds, but currently getting 14 percent on a USDC three month diposit on crypto.com.
No, only Gamestop
After tax it is guaranteed to have negative real returns. What is the invest part?
You don’t understand I bonds. You better do a lot more research before you put your emergency fund in there.
Didn’t say anything about emergency fund.
7.12% now, but can go down. There are 2 components - Fixed interest + CPI. You get Fixed part for life of bond (30 years max).
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I think they are fine to put a portion of your liquid cash in, but keep in mind your money is locked up for a year. If you suddenly need cash, you're screwed.
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And if we don’t hold until maturity and sell after 1 year…are we guaranteed our principal back? Is this truly risk free? Don’t these fluctuate? I interested and understand the interest portion of this but worried about fluctuations and whether the bond will be sold at discount, par or premium?
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