Ibonds: 7.1% return

RobG

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I bonds are now returning 7.1% risk free. Don't get too excited; these follow inflation and will likely drop towards 3% after 6 months when the new rate is determined. Still, even if they drop to 2-3% they are returning far more than any other risk free investment right now and they also protect against inflation.

They are exempt from state taxes. You have to hold them for a year and will pay a small penalty if you cash them in before 5 years.

You can buy $10,000 per year, so that means you and your spouse could buy $10,000 each this year, and $10,000 each on Jan 1st. In other words, invest $40,000 in them over the next few months.

You could also overpay your taxes and have up to $5000 of your tax refund paid in I-bonds. I assume that means $5,000 per return, and not $10,000 if you file jointly.

You need to set up an account at www.treasurydirect.gov. I've been buying them the last few years.
 
Don't know how they can claim risk free. Looks like the debt snowball is starting to roll. Ibonds could be paying out 20% next year and that would not be good.
 
So these are a variable thing once the new rate hits or is it a fixed 7.1% if purchased in the next 6 months?
You get it for six months after the issue date. For example, if you bought it in November you would get that rate until May 2022, then you would get the new rate starting in June. Similarly, if you bought them in April 2022 you would get that rate until October 2022, then you would get the new rate starting in November, etc.

However, if you wait until May 2022 to buy, you will get whatever the new rate is until November.

If you use them to pay for education they are exempt from tax.

 
What a timely post! I just did my first buy Nov 1 at the new rate. A good product for parking extra cash.
 
I bonds are now returning 7.1% risk free. Don't get too excited; these follow inflation and will likely drop towards 3% after 6 months when the new rate is determined. Still, even if they drop to 2-3% they are returning far more than any other risk free investment right now and they also protect against inflation.

They are exempt from state taxes. You have to hold them for a year and will pay a small penalty if you cash them in before 5 years.

You can buy $10,000 per year, so that means you and your spouse could buy $10,000 each this year, and $10,000 each on Jan 1st. In other words, invest $40,000 in them over the next few months.

You could also overpay your taxes and have up to $5000 of your tax refund paid in I-bonds. I assume that means $5,000 per return, and not $10,000 if you file jointly.

You need to set up an account at www.treasurydirect.gov. I've been buying them the last few years.
$5,000 of refund per living tax filer and is not restricted to income cap.
 
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Ha ha, I'm still not clear on this. If I'm married filing jointly am I limited to $5000 of my tax refund in i-bonds or $10,000?

Oddly enough the answer is $25,000

Per the Treasury site:

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
Two points:

  • The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
Since you are filing jointly, then you and your spouse could do $20k total electronic then $5k paper through your federal return refund.

See also: https://www.google.com/amp/s/www.ny...your-money/us-savings-bond-inflation.amp.html

A couple, then, could buy up to $30,000 in I bonds for themselves annually. To reach that total — $10,000 each in electronic I bonds, plus $5,000 each in paper I bonds bought with an income tax refund — a couple must file separate tax returns. If they file a joint return, which is common, the maximum is $25,000 because the form used to buy paper bonds with a tax refund sets a maximum savings bond purchase of $5,000 per return.

Matt
 
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Amy type of related fees that take money off?
Basically no as Cheesehead said, but if you redeem them before five years you lose the last 3 months interest. You do have to pay federal taxes on the accrued interest when you redeem them. You can avoid those taxes if you use them to pay for higher education with some restrictions. That makes them a great way to save for college for most people. https://www.treasurydirect.gov/indiv/planning/plan_education.htm

Usually you would be better off owning Treasury Inflation Protected Securities (TIPS) in an IRA, but interest rates are so goofed up that I-bonds are a better option for a "safe" investment even though you might pay taxes on them when you redeem them.
 
Ha ha, I'm still not clear on this. If I'm married filing jointly am I limited to $5000 of my tax refund in i-bonds or $10,000?
You, as a living person can buy $5K of IBonds in your name by directing your refund to buy them. Your joint filer is SOL per Matt above. You need an account set up to buy the iBonds so go ahead and set that up now.
 
You, as a living person can buy $5K of IBonds in your name by directing your refund to buy them. Your joint filer, if alive, can also buy $5K in their name using the leftover refund. You need an account for each person set up to buy the iBonds so go ahead and set that up for each of you.
Matt posted above and I trust him more than me. There is a cap on what you earn so not everyone can buy iBonds. Everyone can use their refund to by $5K per year but appears per Matt joint filers are limited to one filer buying the bonds. Not sure if get to pick or has to be the lead person on the 1040.
 
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Matt posted above and I trust him more than me. There is a cap on what you earn so not everyone can buy iBonds. Everyone can use their refund to by $5K per year but appears per Matt joint filers are limited to one filer buying the bonds. Not sure if get to pick or has to be the lead person on the 1040.
There is no income cap. Anyone can buy $10K of ibonds per year. A married couple can purchase $10k each for a total of $20K annually. Doesn’t matter if you make 0 or millions per year.
 
There is no income cap. Anyone can buy $10K of ibonds per year. A married couple can purchase $10k each for a total of $20K annually. Doesn’t matter if you make 0 or millions per year.
You are correct. I never researched as read on a thread at another forum there was an AGI max so the refund was the only option. Well, feed me nails and call me rusty.
 
Dang I jumped too quick on my I-bonds this last go-around. Just came out that next series will be at like 9.6%, beats the crap out of my 7 and change. Win some/Lose some 🙄
 
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