Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Jan 26, 2022 9:24 am
Which I suppose is why you consider it a "deep bond". That makes sense.
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i-Bonds How-to Q&A as of 2021 November
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Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Jan 26, 2022 10:32 am
For the benefit of newbies, we should perhaps add to our discussion that each quadrant has a "deep" asset:
Cash = I-bonds
Bonds = EE bonds
Gold = Physical gold personally held
Stocks = individual stocks
The goal is to hold some of each asset with "as few pieces of paper" as possible, as Uncle Harry used to say.
Cash = I-bonds
Bonds = EE bonds
Gold = Physical gold personally held
Stocks = individual stocks
The goal is to hold some of each asset with "as few pieces of paper" as possible, as Uncle Harry used to say.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Jan 26, 2022 2:49 pm
I haven’t moved any posts from here, but I figured EE Bonds deserved their own thread, so here it is ⇢ EE Bonds as Deep Bonds
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Thu Mar 31, 2022 1:42 pm
@JHogue - What is most efficient way to purchase IBonds?
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Fri Apr 01, 2022 1:31 am
IBonds pay interest for the full month no matter when bought, so, buy later if can make money elsewhere earlier in the monthGT wrote: ↑Thu Mar 31, 2022 1:42 pm @JHogue - What is most efficient way to purchase IBonds?
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
I like splitting yearly purchases, although nowadays holding on to cash don’t pay.
But, if don’t want to lock up too much all at once, split
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Fri Apr 01, 2022 7:06 am
You can still sell every six months after the first year even if you buy all 10K at the same time. For example, if you put 10K into I-Bonds today, you could sell 5K 12 months from now and another 5K 18 months from now. You already know that the for first three months, they earn no interest, right?
Lots of people who buy I-Bonds do so toward the end of the month, because by doing so the bonds are treated as if they had been purchased on the first of the month. Purchasing at the end of the month makes sense if you either temporarily need the funds for cash flow or if you can make a bit of $ on those funds in the meantime.
You may already know this but the inflation component (as opposed to the fixed-rate component) is not actually announced until 5/1 & 11/1 but it is calculable as soon as the CPI-U data for March & September is made public (I think, in general, that takes place about ten days before the end of April and ten days before the end of October, but jhogue will hopefully correct that if it's wrong). If the CPI-U is up 4% for the six months October to March, I-Bonds issued 5/1 to 10/31 will pay an annualized inflation rate of 8%. There may be a tiny fixed rate on top of that but it is doubtful as there is no need to make them more tempting than they already are. That 8% would then reset again on 11/1.
The above explanation, by the way, is classic jhogue but I have the special talent of being able to express his thinking by using twice as many words!
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Fri Apr 01, 2022 7:14 am
Thanks Dieter!Dieter wrote: ↑Fri Apr 01, 2022 1:31 amIBonds pay interest for the full month no matter when bought, so, buy later if can make money elsewhere earlier in the monthGT wrote: ↑Thu Mar 31, 2022 1:42 pm @JHogue - What is most efficient way to purchase IBonds?
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
I like splitting yearly purchases, although nowadays holding on to cash don’t pay.
But, if don’t want to lock up too much all at once, split
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Fri Apr 01, 2022 4:46 pm
-@ GT:GT wrote: ↑Thu Mar 31, 2022 1:42 pm @JHogue - What is most efficient way to purchase IBonds?
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
The most efficient timing of I-bond purchases depends on your personal strategy for Cash. Your suggested strategy of making a purchase every 6 months at the time of the 1 May and 1 November interest rate re-sets will work out fine for you. Monthly or annual purchase plans would yield similar results.
More important than efficiency—at least for me- is the simple plan of increasing my pile of I-bonds as fast as I can. Why? There are several reasons:
1. In any given year, you are limited to $10,000 per SSN. If you don’t buy up the max amount, you permanently lose the opportunity to buy them in future years.
2. The sooner you buy your I-bonds, the sooner they will age past the 1 year and 5 year restrictions and penalties and become fully liquid. That is always a good thing, even if your intention is to hold them as “Deep Cash” to their full 30 year maturity.
3. You can successfully game the variable interest rate by watching the publication of the CPI-U index, but you can’t predict if Treasury will tack on a fixed interest rate. In sum, there is no reason to wait for a better rate than the present.
Consider the example of a smart couple who bought their yearly max of I-bonds at Treasury Direct plus their max from their IRS refund ten years ago:
After ten years of disciplined saving they now have:
2 x $10,000 + $5,000 = $25,000/ year x 10 years = $250,000 plus tax-deferred interest, compounded semi-annually.
Some posters on these boards complain that they can’t be bothered with I-bonds because the annual amounts “are too small.” They are looking through the wrong end of the financial telescope. Ten years from now your future self will thank you for that risk-free quarter million you saved and invested.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Sat Apr 02, 2022 6:52 pm
Thank you barrett - Thank you Jhoue - Great info - I am going to give it a try !jhogue wrote: ↑Fri Apr 01, 2022 4:46 pm-@ GT:GT wrote: ↑Thu Mar 31, 2022 1:42 pm @JHogue - What is most efficient way to purchase IBonds?
My goal is 5K to 10K per year, but I am not sure of the best timing - all at once - every six months - purchase at the end of a month or wait and purchase at the beginning of the month. I see the TD website offers a direct payroll deduction option; any benefit to having a direct payroll deduction?
I was thinking of making a purchase every 6 months at the rate change. This would be deep cash, but I like the thought of being able to sell every six months after the first year.
The most efficient timing of I-bond purchases depends on your personal strategy for Cash. Your suggested strategy of making a purchase every 6 months at the time of the 1 May and 1 November interest rate re-sets will work out fine for you. Monthly or annual purchase plans would yield similar results.
More important than efficiency—at least for me- is the simple plan of increasing my pile of I-bonds as fast as I can. Why? There are several reasons:
1. In any given year, you are limited to $10,000 per SSN. If you don’t buy up the max amount, you permanently lose the opportunity to buy them in future years.
2. The sooner you buy your I-bonds, the sooner they will age past the 1 year and 5 year restrictions and penalties and become fully liquid. That is always a good thing, even if your intention is to hold them as “Deep Cash” to their full 30 year maturity.
3. You can successfully game the variable interest rate by watching the publication of the CPI-U index, but you can’t predict if Treasury will tack on a fixed interest rate. In sum, there is no reason to wait for a better rate than the present.
Consider the example of a smart couple who bought their yearly max of I-bonds at Treasury Direct plus their max from their IRS refund ten years ago:
After ten years of disciplined saving they now have:
2 x $10,000 + $5,000 = $25,000/ year x 10 years = $250,000 plus tax-deferred interest, compounded semi-annually.
Some posters on these boards complain that they can’t be bothered with I-bonds because the annual amounts “are too small.” They are looking through the wrong end of the financial telescope. Ten years from now your future self will thank you for that risk-free quarter million you saved and invested.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Apr 06, 2022 7:55 am
Prior to May of 2021 I had only ever purchased paper I-Bonds and the last of those I got in 2011 when one could still do so. My first electronic I-Bonds were purchased from Treasury Direct on 5/3/21. I am puzzled that I did not see an interest payment on 8/1/21, figuring that May - July was the three-month, non-interest earning period. Instead the first interest shows up on 9/1/21. Here is the monthly value of my $10,000 purchase:
5/3/21 - $10,000
6/1/21 - $10,000
7/1/21 - $10,000
8/1/21 - $10,000
9/1/21 - $10,028
10/1/21 - $10,060
11/1/21 - $10,088
12/1/21 - $10,116
1/1/22 - $10, 148
2/1/22 - 10, 176
3/1/22 - 10, 236
4/1/22 - $10,296
(And by 8/1/22 the value should be roughly $10,533 based on six months at 3.54% and another six at 7.12%).
I can't see the 5/1/22 value yet on the TD calculator. Note that the first six months that interest was paid, I was only getting about $30 per month. And for months seven and eight that has jumped to $60 per month. So that is obviously due to the inflation rate jumping from 3.54% (annualized) to 7.12% (annualized) on 11/1/21.
I guess what I am not getting is the fact that these didn't post any interest until 9/1/21, seeming to indicate that there is not a three-month, non-interest period but one that instead lasts four months. Trying to understand the often repeated refrain (including by me a few posts back!) that I-Bonds start "paying" interest after three months regardless of what day of the month they were purchased. Thoughts jhogue if you happen to be reading?
I am probably missing something obvious but just can't see it at the moment.
5/3/21 - $10,000
6/1/21 - $10,000
7/1/21 - $10,000
8/1/21 - $10,000
9/1/21 - $10,028
10/1/21 - $10,060
11/1/21 - $10,088
12/1/21 - $10,116
1/1/22 - $10, 148
2/1/22 - 10, 176
3/1/22 - 10, 236
4/1/22 - $10,296
(And by 8/1/22 the value should be roughly $10,533 based on six months at 3.54% and another six at 7.12%).
I can't see the 5/1/22 value yet on the TD calculator. Note that the first six months that interest was paid, I was only getting about $30 per month. And for months seven and eight that has jumped to $60 per month. So that is obviously due to the inflation rate jumping from 3.54% (annualized) to 7.12% (annualized) on 11/1/21.
I guess what I am not getting is the fact that these didn't post any interest until 9/1/21, seeming to indicate that there is not a three-month, non-interest period but one that instead lasts four months. Trying to understand the often repeated refrain (including by me a few posts back!) that I-Bonds start "paying" interest after three months regardless of what day of the month they were purchased. Thoughts jhogue if you happen to be reading?
I am probably missing something obvious but just can't see it at the moment.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Apr 06, 2022 8:39 am
I thought you get paid the interest for the month on the first day of the next month. So the interest you accumulated in August was paid on 1 September.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Apr 06, 2022 9:34 am
Well, that would certainly explain it! So, in that case, I-Bonds pay no interest for the first three months PLUS however many days prior to the end of the month they are purchased. (And, yes, I realize that this three months of interest "penalty" falls away after the bonds hit the five-year mark.)Kriegsspiel wrote: ↑Wed Apr 06, 2022 8:39 am I thought you get paid the interest for the month on the first day of the next month. So the interest you accumulated in August was paid on 1 September.
I think what might be throwing me off is that I have been selling off my inventory of EE-Bonds that I accumulated in the early 1990s. For my bonds purchased DURING the month of May, 1992. I get my last interest payment on 5/1/22, not 6/1/22.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Tue Apr 19, 2022 7:18 pm
It's not clear to me how I-bonds are deep cash, given that they mature in 30 years. What am I missing?jhogue wrote: ↑Mon Nov 22, 2021 9:57 amIt’s not a big deal, but I try to emphasize that I-bonds and EE-bonds are not the same thing. I-bonds are for “Deep Cash.” EE-Bonds are for “Deep Bonds.” Think of opposite ends of the barbell.dualstow wrote: ↑Fri Nov 19, 2021 4:22 pmI struggled over that, JHogue. :-) You’re right. Even though i*Bonds are often used for deep cash and certainly not for what we know as the Bond portion of the pp, I figured “Bond” is right in the name, so it felt right to put it in the Bonds §.I edited a note into the top of the first post.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Tue Apr 19, 2022 7:24 pm
You mean as opposed to being deep bonds? A bond matures in 30 years and you have no option to cash out early (not including the coupon) other than selling it, and its value can gyrate wildly. The rate is locked for the life of the bond.stpeter wrote: ↑Tue Apr 19, 2022 7:18 pmIt's not clear to me how I-bonds are deep cash, given that they mature in 30 years. What am I missing?jhogue wrote: ↑Mon Nov 22, 2021 9:57 amIt’s not a big deal, but I try to emphasize that I-bonds and EE-bonds are not the same thing. I-bonds are for “Deep Cash.” EE-Bonds are for “Deep Bonds.” Think of opposite ends of the barbell.dualstow wrote: ↑Fri Nov 19, 2021 4:22 pmI struggled over that, JHogue. :-) You’re right. Even though i*Bonds are often used for deep cash and certainly not for what we know as the Bond portion of the pp, I figured “Bond” is right in the name, so it felt right to put it in the Bonds §.I edited a note into the top of the first post.
I-bonds are very different: you get a variable rate that resets every 6 months, so it reacts to short-term interest rates (and/or short-term inflation). You can cash out (with a couple of caveats) virtually any time you want and get your dollars back.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Tue Apr 19, 2022 7:26 pm
Ah, that makes sense. Thanks for the clarification!Xan wrote: ↑Tue Apr 19, 2022 7:24 pmYou mean as opposed to being deep bonds? A bond matures in 30 years and you have no option to cash out early (not including the coupon) other than selling it, and its value can gyrate wildly. The rate is locked for the life of the bond.
I-bonds are very different: you get a variable rate that resets every 6 months, so it reacts to short-term interest rates (and/or short-term inflation). You can cash out (with a couple of caveats) virtually any time you want and get your dollars back.
Re: i-Bonds How-to Q&A as of 2021 November
Posted: Wed Apr 20, 2022 1:11 am
With a couple of the key caveats being:stpeter wrote: ↑Tue Apr 19, 2022 7:26 pmAh, that makes sense. Thanks for the clarification!Xan wrote: ↑Tue Apr 19, 2022 7:24 pmYou mean as opposed to being deep bonds? A bond matures in 30 years and you have no option to cash out early (not including the coupon) other than selling it, and its value can gyrate wildly. The rate is locked for the life of the bond.
I-bonds are very different: you get a variable rate that resets every 6 months, so it reacts to short-term interest rates (and/or short-term inflation). You can cash out (with a couple of caveats) virtually any time you want and get your dollars back.
* Have to hold for a year
* You pay three months interests if cash out before five years
Still a great deal