New I-Bond Rate for 5/1/23 to 10/31/23

[ochotona]

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

[vnatale]

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

Possibly redeem them and use the proceeds to buy either nominal treasuries or TIPS?

[ochotona]

I hate to give up the tax deferred features, the no RMD, paying imputed income on TIPs. I guess it's really a bet on inflation and an individual's tax payment experience in the future... Well, not an urgent question. Maybe I just put an upper limit on what % of the portfolio to ibonds and maintain it. Now I have 5%, double that might be my limit.

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

Possibly redeem them and use the proceeds to buy either nominal treasuries or TIPS?

[vnatale]

I hate to give up the tax deferred features, the no RMD, paying imputed income on TIPs. I guess it's really a bet on inflation and an individual's tax payment experience in the future... Well, not an urgent question. Maybe I just put an upper limit on what % of the portfolio to ibonds and maintain it. Now I have 5%, double that might be my limit.

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

Possibly redeem them and use the proceeds to buy either nominal treasuries or TIPS?

I do not know if you ever go to the Bogleheads forum but this topic might be useful to you? 86 posts so far.

Is selling I-bonds in the current environment a wise move?

https://www.bogleheads.org/forum/viewtopic.php?t=408513

[Dieter]

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

Well, I don't have that much in I-Bonds (have more in T-Bills / Money Markets)

So, I'll likely not add; rollover older than May 2023 I-Bonds to higher fixed rate ones as it makes sense.

Stay the course to have some inflation adjusted "cash" in taxable

[barrett]

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

It looks like you've more or less answered your own question already, but...

When your wrote "T-Bills", did you mean the literal definition which is issues maturing between a few days and a year in the future? If so, I don't think one can really compare the two. I-Bonds plusses have been enumerated over and over on this forum and I know enough about you through your posts to know that you've got that info all stored away.

I think in general that we as investors had gotten so used to near-zero yields on T-Bills that the current 5.3% on the one-year bill messes with our brains a bit. I have definitely been a buyer of T-Bills over the last year but never with the idea that they are a good substitute for I-Bonds.

Of course for each investor there are personal factors. For example, there is a pretty big difference between holding I-Bonds with a 0% fixed yield and I-Bonds with a fixed yield of 2% or more. Also worth thinking about is the tax implications if you sold (you are still working, right?). Maybe think about unloading some as part of a bridge between retirement & SS at age 70 (assuming that last bit is part of your plan).

Lastly, there were a lot of people buying I-Bonds in 2021 & 2022 as a yield-chasing strategy, but it's just really nice to have a decent slug of existing I-Bonds *before* inflation comes along. Once you give them up, it takes ages to re-build a decent position.

[vnatale]

What's the way to think about using I-Bonds if the yield dips significantly below T-Bills?

It looks like you've more or less answered your own question already, but...

When your wrote "T-Bills", did you mean the literal definition which is issues maturing between a few days and a year in the future? If so, I don't think one can really compare the two. I-Bonds plusses have been enumerated over and over on this forum and I know enough about you through your posts to know that you've got that info all stored away.

I think in general that we as investors had gotten so used to near-zero yields on T-Bills that the current 5.3% on the one-year bill messes with our brains a bit. I have definitely been a buyer of T-Bills over the last year but never with the idea that they are a good substitute for I-Bonds.

Of course for each investor there are personal factors. For example, there is a pretty big difference between holding I-Bonds with a 0% fixed yield and I-Bonds with a fixed yield of 2% or more. Also worth thinking about is the tax implications if you sold (you are still working, right?). Maybe think about unloading some as part of a bridge between retirement & SS at age 70 (assuming that last bit is part of your plan).

Lastly, there were a lot of people buying I-Bonds in 2021 & 2022 as a yield-chasing strategy, but it's just really nice to have a decent slug of existing I-Bonds *before* inflation comes along. Once you give them up, it takes ages to re-build a decent position.

Yes. That is something I don't see in most get-rid-of-iBonds discussions.

[sophie]

I Bonds are like the tiger you keep in a cage for those times when they give you an enormous payback - like the past couple of years. Because, it takes years to build up a good stash of them.

Prior to that though, they were quite competitive with T Bills or even bank savings accounts. I don't know if you guys have noticed but banks are still paying appallingly low interest rates. Even the online banks, who have been a bit more generous, can't beat I Bonds.

They're also about tax deferral of the interest. That's a big deal for me at least.

They can be used as short term savings vehicles but that's not really their main strength. So if you've been regarding them that way, then yes, you probably want to stop buying them now that the rates are back down from the stratosphere. For me though, I'll keep buying my annual aliquot and not pay too much attention to the rates. Next time inflation comes around (a high probability for the near future IMHO) I'll be waiting with my fistful of I Bonds!

[Xan]

They also have the neat feature of being usable to fund higher education with no tax on the growth, like a 529. Sadly there's an income limit on that. Still could be VERY handy.