I-Bond

[raaizin]

I am thinking of purchasing I-bonds going foward. Are there downsides to them. On the surface interest rate seems great. Someone mention the real return rate is zero unless fixed rate goes up. I dont understand how this could be.

 

[JohnnyG]

Inflation?

 

[Knerml12]

Link to information on I bonds, including how rates are calculated and pros/cons

 

[55hambone]

I series savings bonds have a few requirements that may be problematic. You can purchase up to $10,000 annually, or up to $15,000 if you use $5,000 of your income tax refund. No withdrawals are allowed for the first year and any withdrawal before the fifth year incurs a penalty of 3 months interest. Check out Clark Howard: https://clark.com/save-money/i-bonds/

 

[JHZR2]

I am thinking of purchasing I-bonds going foward. Are there downsides to them. On the surface interest rate seems great. Someone mention the real return rate is zero unless fixed rate goes up. I dont understand how this could be.

It can be because the bonds were designed to pay a rate of interest and a correction/adjustment for inflation.

As I recall, the interest rate is lower than E bonds.

Right now the actual interest rate is 0% (the govt takes your money and sits on it), but they pay like 9% for the inflation adjustment.

Since the money is fake anyway, just printed at will, they can print the money for the inflation adjustment if they desire.

 

[MrHorspwer]

The Indicator did a pretty good explainer on I Bonds back in May

 

[raaizin]

Thanks for the links. I will check them out

 

[spackard]

I decided to purchase $10k of them today. 9.6%. Better than sitting in my savings at 0.4%.

 

[JHZR2]

I decided to purchase $10k of them today. 9.6%. Better than sitting in my savings at 0.4%.

It’s as good as anything right now.

If you cash in sooner than five years you give up three months interest. I had a scheme to use some of my money and get 9%. I doubt that rate will drop next cycle. So long as I hold them for more than three months I’ll be going good.

 

[ondarvr]

It depends on your age and how you plan to use them.

For a young person investing for the long term you will probably get better returns in the market. As an emergency fund, or short term, they are currently a great option.

 

[Dave Hess]

It’s as good as anything right now.

If you cash in sooner than five years you give up three months interest. I had a scheme to use some of my money and get 9%. I doubt that rate will drop next cycle. So long as I hold them for more than three months I’ll be going good.

Did you buy I bonds ?

 

[JHZR2]

Did you buy I bonds ?

Yes. I suspect I’ll cash them in early but I’ll still be ahead in that timeframe.