I-Bond Question

[WildAboutHarry]

1. How do you make this decision?

2. Say, nearing retirement, you have finally accumulated 200K in I-bonds. We then enter another 1970's style inflationary environment. You'd like to sell and buy new, but you are limited to purchasing only 10K. Back to square 1. What to do?

I-Bonds are now, for all practical purposes, a one-decision investment (or money parking place) due to the purchase limit you mention.  It doesn't seem worth paying the taxes due and reinvesting, especially since you have the 1 and 5-year redemption issues. 

I plan on spending down whatever I-Bond balance I have in retirement, spending the 0s first and holding on to the 2s and 3s until the 2030s!

[sophie]

I'm with Wild.

I see I Bonds not only as "deep cash" with a winning combination of safety and good returns, but also as a vehicle for tax deferral, if you're within 30 years of retirement.  They're sort of like a non-deductible IRA contribution, except with far more user control.  If you sell an I Bond, you have to pay taxes on the entire amount of interest you've earned, which is probably not worthwhile in order to up the fixed rate a few %.

I have the permanent portfolio & Bogleheads to thank for opening my eyes to I bonds.  Amazingly, you won't read about them anywhere else.

[WildAboutHarry]

They're sort of like a non-deductible IRA contribution, except with far more user control.

This is a really good point about I-Bonds that is often overlooked.

I have a July 2001 I-Bond (at 3%) that is on the verge of doubling ($1.00 is now worth about $1.90).  All that interest was immune from federal income taxes and will be until I cash it in in 2031.

[dualstow]

Yeah, soon after I moved to my current location and found myself suddenly unemployed for many months, my dad advised me to buy I Bonds in lieu of having a retirement account. This was long before I knew about bogleheads or the pp. I didn't realize just how wise he was/is. :-)