Treasury bonds

[Son of Butch]

Treasury series I savings bonds are paying 7.12% interest (11/1/21 - 4/30/2022)
interest rate based on inflation resets every 6 months, next reset May 1st and guaranteed to go over 8% the previous 6 months paid 3.54%

I-Bonds can only be purchased directly from the Treasury by U.S. citizens,
$10,000 maximum per person per year. minimum purchase $25
30 yr bond with minimum holding time 1 year.
penalty for cashing in before 5 years, the previous 3 months interest.
no penalty or fees for cashing i bonds after 5 years.
savings bonds are exempt from state taxes, interest is subject to federal taxes
savings bonds are not allowed to be held in ira accounts

With stock market flat, bonds negative and savings accounts less than 1% interest
You might want to buy an I bond to hold for the next 5 years.
Check 'em out online at treasury direct.

 

[Son of Butch]

I bonds interest rate is paying 9.62% from May 1st to October 31st
up from 7.12% the previous 6 months. The rate changes every 6 months.

 

[puzzled in oregon]

If I understood correctly you can purchase the bonds in any increment you want up to the $10,000.00
That way if a person ran short of cash you could opt to sell a portion of the bonds rather than all of
them and not risk a penalty/loss of interest.

 

[Hunter]

Electronic bonds in TreasuryDirect	You can cash a minimum of $25 or any amount above that in 1-cent increments. If you cash only a portion of the bond's value, you must leave at least $25 in the TreasuryDirect account. Redemptions are comprised of principal and interest. (In a partial redemption, we pay interest only on the partial amount you cash.)
Paper bonds	Local banks have varying policies on how much they will cash in one transaction and some banks don't cash savings bonds at all. If you send your bonds to Treasury Retail Securities Services, we cash them regardless of value if you meet requirements for cashing. Note: Individual paper bonds may not be split and must be cashed in full.

 

[hurleyjd]

If a person at fifty could swing one I bond a year at $10000 and keep it up each year until 62 which would be able to have one maturing and if at 6 percent you would have in the neighborhood of a pension that you could cash at 62 worth more that $20000 per year. This would give you a pension for 12 years which would get you to 74 years old. This would mean you Have spent $120000 and made $120000

 

[Hunter]

starting at 0 and investing 10K for next 12 years at 6% I think will get you to about 178K.
Maybe my calculation is wrong but that is still decent and you can't lose money on those.

Never mind as I didn't include the interest from the age of 62-74....my apologies, carry on.

 

[puzzled in oregon]

I believe the interest rate changes every 6 months. If there is no inflation, there is no interest, unless you purchase
them at a fixed rate, like 2%, then you would have that rate every year plus the inflation rate, if one applied. I think

 

[Son of Butch]

I believe the interest rate changes every 6 months. If there is no inflation, there is no interest, unless you purchase
them at a fixed rate, like 2%, then you would have that rate every year plus the inflation rate, if one applied. I think

not quite, with I bonds you get treasury interest rate which is the lowest going rate + inflation adjustment made every 6 months on May 1st & Nov. 1st and repeat.
But it's understandable why you would think that, because the last couple of years Treasury rate has been so low that it seemed like zero.

They are an excellent safe (defensive) investment to keep pace with inflation
but not to grow investments.

I would suggest holding to pay for a planned future expense. education, funeral, wedding ect.
ie IF your estimated funeral expense today is 10k
estimated future funeral expense due to inflation 18k or 10k in today's dollars
at that rate of inflation the 10k I bond today would = about 19k when needed

 

[Son of Butch]

If I understood correctly you can purchase the bonds in any increment you want up to the $10,000.00
That way if a person ran short of cash you could opt to sell a portion of the bonds rather than all of
them and not risk a penalty/loss of interest.

$25 minimum 10k maximum per person per year - 30 yr duration
No withdrawal for 1 year
Early Withdrawal Penalty before 5 years: = to the last 3 months of interest earned
No Penalty after 5 years

 

[1982vett]

I sold all I had in 2014....course I was paying for a house....Bought back in April 28 for my wife. Will likely buy for myself if I can scrape up the cash.

 

[hurleyjd]

If a person at fifty could swing one I bond a year at $10000 and keep it up each year until 62 which would be able to have one maturing and if at 6 percent you would have in the neighborhood of a pension that you could cash at 62 worth more that $20000 per year. This would give you a pension for 12 years which would get you to 74 years old. This would mean you Have spent $120000 and made $120000

This plan was advocated several years ago and it was about laddering bonds for retirement. Was not about savings bonds but should work the same way. I bought series EE bonds for the all the years that I worked. They matured at twenty years but kept paying for thirty years. Cash out now amounts to around $5000 each month. But keep in mind these bonds I bought at that time had a very good interest rate. Our farm and home and all equipment has been paid off for many years. Once we paid something off we did not look for something else to buy with the payments we were not making. This adds up over the years. Land has been a good investment but will have to cash out to realize it.

 

[hurleyjd]

not quite, with I bonds you get treasury interest rate which is the lowest going rate + inflation adjustment made every 6 months on May 1st & Nov. 1st and repeat.
But it's understandable why you would think that, because the last couple of years Treasury rate has been so low that it seemed like zero.

They are an excellent safe (defensive) investment to keep pace with inflation
but not to grow investments.

I would suggest holding to pay for a planned future expense. education, funeral, wedding ect.
ie IF your estimated funeral expense today is 10k
estimated future funeral expense due to inflation 18k or 10k in today's dollars
at that rate of inflation the 10k I bond today would = about 19k when needed

How about divorces they are expensive I have seen this but not experienced it.

 

[Son of Butch]

How about divorces they are expensive I have seen this but not experienced it.

Yes, if both are planning on divorcing in 5+ years, you should discuss it with your spouse and then decide together how much to put in each individual account.
Whichever spouse initiates the conversation may want to change the beneficiary designation on their life insurance policy before the discussion.
I would make such a good marriage counselor. (Tongue firmly in cheek)

 

[Stocker Steve]

not quite, with I bonds you get treasury interest rate which is the lowest going rate + inflation adjustment made every 6 months on May 1st & Nov. 1st and repeat.

What is the goal of this program? Is it for folks that have maxed out an IRA?

Obviously, the government would be better off just borrowing at the T bill rate.

 

[hurleyjd]

What is the goal of this program? Is it for folks that have maxed out an IRA?

Obviously, the government would be better off just borrowing at the T bill rate.

Are you asking what is the goal of the government or the person buying the bonds. If for the person a safe investment with a guaranteed return.

 

[Son of Butch]

What is the goal of this program? Is it for folks that have maxed out an IRA?
Obviously, the government would be better off just borrowing at the T bill rate.

Darn Steve, you always have good questions. Tough to say what the government's goal is. The paper bond part of it only available if you use tax refund might be aimed at taking dollars, that otherwise would be spent, out of circulation to combat inflation. The other part seems to target individuals who already have assets and won't buy low interest cds or have them coming due and are willing to park them someplace else and prevent them from spending it short term, again to limit number of dollars in circulation. The Fed printing money like it was going out of style for the last 2 years has put so many dollars in circulation that something
needs to be done to absorb them to slow inflation.
But honestly I don't know, just speculation on my part.
Other than I know the government always has your best interest at heart.

p.s.
only available to individuals and 10k max per year, but still subject to federal tax = they don't really care about individual tax breaks, only tax breaks for businesses.
just my 2 cents

 

[hurleyjd]

I have wondered why they did not make a bond that was tax free like a Roth saving bond. I guess to many money managing companies would not want that because they could not manage your account and make a killing off of you.

 

[D2Cat]

 

[Son of Butch]

If you're like me (and I know I am) when you buy I bonds, in 6 months inflation will drop to about zero.