Ibonds: 7.1% return

[npaden]

Sooo last question, I’ve stuck to the $10k me/$10k wife through Treasury Direct in the past. Never wanted to duck around with the additional $5k paper via tax returns before. That being said, are the tax returns the ONLY recourse for the extra $5k or can you do it say through a bank or like an Edward Jones type ?

The only way I know is the tax refund. Even then it has to be part of your refund, you have to intentionally overpay so that you can get the bond in lieu of a portion of your refund. If you have tax due with your return you can't elect to buy a paper bond and then pay in extra to cover it. It can only come out of a refund.

 

[npaden]

To your question: yes

To elaborate: you could get up to $30k
Post in thread 'Ibonds: 7.1% return'
https://www.hunttalk.com/threads/ibonds-7-1-return.310021/post-3285208

But you are generally going to owe more tax if you file separate so although they could technically both get the $5,000 that way it would most likely cost them more tax to do it.

 

[Cheesehead]

During deflation periods there have been times when they earn 0.0%. May 2015 the rate was 0.0% for 6 months, May 2009 the rate was 0.0% for 6 months.

But they are good during high inflation periods to at least hold your value anyway. We really are in a unique financial period where short term interest earnings are under 1% and inflation is approaching 10%. Usually if inflation is high then interest rates are going to be high and they pretty much even out.

But you are generally going to owe more tax if you file separate so although they could technically both get the $5,000 that way it would most likely cost them more tax to do it.

Yep. Circumstances vary but generally yes.

 

[Flatrock]

During deflation periods there have been times when they earn 0.0%. May 2015 the rate was 0.0% for 6 months, May 2009 the rate was 0.0% for 6 months.

But they are good during high inflation periods to at least hold your value anyway. We really are in a unique financial period where short term interest earnings are under 1% and inflation is approaching 10%. Usually if inflation is high then interest rates are going to be high and they pretty much even out.

Yes. Agreed. I meant in the current environment.

 

[Lawnboy]

This article help me understand the current I bond situation

How To Buy I Bonds in April 2024 at 5.27% | Keil Financial Partners

April I Bond interest rate is 5.27%! This includes the April I Bond Fixed Rate of 1.30% which is a 16-year high! May Inflation Rate drops to 2.96%.

keilfp.com

 

[David658]

My money is in money markets right now - I will give up growth (or loss) to preserve my principal.

 

[Southern Elk]

I need to in invest some money that is sitting in a SEP IRA. Could I purchase these bonds with that money?

 

[Flatrock]

My money is in money markets right now - I will give up growth (or loss) to preserve my principal.

From what I understand, I bonds are guaranteed not to lose money. As stated in an article or two, "they do not lose redemption value."

 

[SAJ-99]

Wait till May 1 @schmalts
That way you’ll lock in the better rate

What happens when Nov 1 CPI is 3.5%? Or worse, we are in a recession and it is actually negative?

 

[MarvB]

Return goes to zero at worst, about the same as current bank accounts. Can’t go “negative” so earnings/principle are always protected or so I’m led to believe

 

[NEWHunter]

Anybody else giving any thought to pulling $20K off your HELOC to buy these?

 

[Cheesehead]

What happens when Nov 1 CPI is 3.5%? Or worse, we are in a recession and it is actually negative?

Jah not a terrible choice either way (i.e., buy now or wait till May1)- it's essentially a bet whether one thinks inflation Nov 1 is <7.1%. I’m pessimistic but

 

[RobG]

I thought that only a portion of the I-bonds are variable rate, that is, my 7.12% will likely go up but NOT to the new release level (9.6%) due to the fixed component. Am I wrong there?

I think you are confusing the fixed rate and the inflation rate. The total return is the fixed rate (0%) plus the inflation rate (7.12% for your purchase). The inflation rate updates every six months so you’ll get your six months of 9.6% a few months from now.

The only reason not to buy asap is if you think the fixed rate is going up, and that isn’t going to happen for a while.

 

[RobG]

Here’s some info if you want to buy some with your tax return refund. It shows the steps if you’re using turbo tax, etc

If you don’t have a refund coming this article seems to suggest that you can file an extension, overpay your tax estimate, and then get the refund in ibonds when you do file.

Overpay Your Taxes to Buy $5,000 in I Bonds

I Bonds offer a better yield than all other safe investments. After you max out your annual limit, you can buy another $5,000 by overpaying your taxes.

thefinancebuff.com

 

[RobG]

Check out that article I just posted. I think you can “pay in extra to cover it” by filing an extension.

The only way I know is the tax refund. Even then it has to be part of your refund, you have to intentionally overpay so that you can get the bond in lieu of a portion of your refund. If you have tax due with your return you can't elect to buy a paper bond and then pay in extra to cover it. It can only come out of a refund.

 

[RobG]

Correct me if I'm wrong. If you buy before the end of April you will get six months of 7.1%, followed by six months of ~9%, followed by six more months of whatever the inflation is at six months from now, etc. However, if you wait until May you will go directly to 9% and miss the six months of 7.1%.

By the way, it takes a day or two to process the sale so factor that in when buying.

 

[MarvB]

Yes, weekends & holidays aside, when I have “bought” the actually issuance has been the next day.

 

[Willy Dee]

Department of the Treasury: Questions and Answers about
Series I Savings Bonds

Attached.

 

[tyhanson]

Can you buy $5k before May 1 and $5k after?

 

[Nick87]

Dumb question is there a penalty for pulling the money out or can you not pull it out?