So are these gonna go up or what and if so should I get a new account
If you have some cash that youâre willing to park for at least a year, I bond rates are insane right now since they track with inflation. If you buy before the end of the month the annualized rates are 7.12% for the first 6 months and 9.62% for the next 6 months. There are annual purchase limits and you forfeit 3 months of interest if you cash out within the first 5 years, but itâs still a great deal right now.
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Well they surely arenât going down
Other than perhaps losing a bit of interest if you cash out early, are there any other âgotchasâ with these bonds? I understand youâre limited to $10k, I read somewhere that you might be able to go higher by exploiting a âgift loopholeâ (for lack of a better phrase), but letâs assume Iâm fine with <$10k.
Those are the only 2 drawbacks I can think of off hand.
There are also tax benefits as the interest is subject to federal income tax, but not state income tax. Also, you do not have to pay federal income tax on the interest until you cash out. The interest can also be tax free if the bond is used for educational expenses, but that is subject to income limits.
The Treasury Direct website is clunky with weird old school security measures (virtual keyboard and security picture/phrase), but I think itâs not so bad as to avoid them, especially if youâre purchasing in chunks and only dealing with the site once a year or so.
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Oh, one more thing that I mentioned in passing in my first comment, but may not be clear - you do have to keep them for 12 months before cashing out.
Oh, good to know. So I shouldnât park my emergency fund here. I may use these to fund some home improvement projects that are over a year out. I donât want that money in equities, and this is better than cash. Hmmmmmmm.
Yep. Iâm converting our emergency fund over time, but always keep in the back of my mind how much is currently untouchable. I think they are good for an emergency fund once you get past the 12 month holding period though because they are inflation protected and we rarely have to use the emergency fund anyway.
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How about 401K proportion?
Asking for a friend.
Interesting to noteâŚfrom https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm:
See the link for the second pointâŚ
Or, buy a bunch of already-released bonds paying some shitty dividend. The price of those will have dropped.
In oneâs 401k, sovas to delay tax.
Interesting point about buying $5k using your federal income tax refund is that you have to actually have a tax refund.
Hereâs an article that talks about it some more: Overpay Your Taxes to Buy $5,000 in I Bonds
I bought $10K late last year and another $10K early this year. I donât plan on accumulating a ton of these but I could see myself making a few more purchases. Yes, the website looks clunky but purchasing them was easy enough.
Article in wsj about people having trouble buying I Bonds:
another link
Your Personal Newspaper (fivefilters.org) â clicky clicky
Ally bank currently gives 4% on its money market savings & 3.75% on its online savings account.
E*Trade gives 3.75% on its online savings accounts too.
If you have an account at Treasury Direct (easy to set up), you can likely get a better rate for a little while yet anyway. The most recent auction for a 13-week T-bill was 5.128% with new auctions every week.
I bought another $10K I bond last month but it wouldnât surprise me if I ended up cashing those out in a year or two.