I-Bonds Discussion Thread (continuation of the FW thread)

I-Bonds Discussion Thread (continuation of the FW thread)
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#21

If I was buying, I would buy now. Do not wait until last day or two of month or it might not get done when you want it.


#22

I’m pretty content knowing the full minimal yield I will get by purchasing before 11/1. 6 @ 1.96 and 6 @ 2.48 is going to beat most CDs that don’t require special memberships. I guess I try to think of it in a worst-case scenario: if in 6 months, the next rate is going to be close to zero, would I still buy the bonds before the deadline to lock in the 6 @ 2.48 with another 6 gaining virtually no interest? Probably not.
I also hedge in case there is a fixed rate by having my wife buy 10k before 11/1, allowing myself to buy another 10k at the next rate change.


#23

Thanks for the advice, bought in before 11/1. Trying to keep bonds at 10% of my investments currently so didn’t go all in yet.


#24

From https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#now

The composite rate for I bonds issued from November 1, 2017 through April 30, 2018, is 2.58%. This rate applies for the first six months you own the bond.

It has a .10 fixed rate and a 2.48% inflation rate.


#25

Thank you for the update!

I can never predict the thinking behind the fixed rate. Anyone know why they offered 0.1% this time?

(I’m not complaining, just asking). :slight_smile:


#26

I used to go to eyebonds.info after new I-Bond rates were out(Nov and May) and the fellow had a clickable link to find your individual I-Bond value since you bought it to end of current rate period. It has not been updated. I sent him a e-mail asking if he was going to continue but no answer. Anyone know who had that site and/or if there is another one out there. I really used and liked it.
I found his site from the old I-Bonds thread at Fatwallet.com


#27

I sent message to the the site owner, he is a member on Bogleheads.org, hopefully we will see updates soon.


#28

October CPI-U = 246.663
Baseline for the next change (September) = 246.819
Total Inflation for Oct = -0.06%
We have 5 months to go before new inflation based component of I-Bond rate will be set.


#29

This is the site I was talking about in earlier message. Site owner answered he was away and just got back. Site is updated. Click on month and year you purchased your I-Bond and go to a spreadsheet showing monthly progression of value.

http://eyebonds.info/ibonds/home10000.html


#30

You can schedule your purchases in TreasuryDirect. I schedule mine for the 2nd to last weekday in a month when buying ibonds.


#31

November CPI-U = 246.669
Baseline for the next change (September) = 246.819
Total Inflation for Oct+Nov = -0.06%
We have 4 months to go before new inflation based component of I-Bond rate will be set.


#32

Even when inflation is negative, they never lose value because iBonds are made by Apple.


#33

There’s another tax strategy I used before.

You can choose to defer taking coupon payments as income, or take them yearly. However, there is a way to switch from one form to the other at will. So if you’re facing a low tax year, say if you quit your job, you could choose to take all accumulate coupon payments (interest) as income for that year. The next year, or whenever you feel suitable, just switch back to deferring income.

Remember you don’t get cash unless you redeem the bonds. And these are state/local tax exempt.


#34

Uhm, what? Are you talking about the interest on ibonds? I thought it was only taxable in the year it is redeemed…


#35

I renamed the thread to give it a more generic subject, since the original deal is no longer applicable. Hope it’s ok.


#36

From Treasury Direct.

When must I report the interest on my tax form?
You have a choice. You can

report the interest every year
put off (defer) reporting the interest until you file a federal income tax return for the year in which the first of these events occurs:
you redeem (cash in) the bond and receive what the bond is worth, including the interest, or
you give up ownership of the bond and the bond is reissued, or
the bond stops earning interest because it has reached final maturity


#37

Like I said, the choice is yours. No need to wait till the very end if you have a low tax year. I’d double check this after 2018 changes comes out though. I referred to coupon payments for the bonds, but I guess TD refers to it as interest. You can think of them as the same.

For example:
You buy a bond and have interest accrued (but not paid to you) every year. You work, so you’re in a high marginal bracket.
At year 15, you decide to take an unpaid sabbatical - your income falls drastically, but you had already saved lots of money for this anticipated event. You’re in a low marginal bracket.
At that point, you can decide to stop deferring the interest reporting - at which point the past 15 years worth of interest becomes income, and you pay tax at a hopefully low rate
Year 16, you go back to work and getting paid. At this point, you tell the IRS you decided to continue deferring the interest. You’re in a high marginal bracket.
Year 30, bond matures, but you’re still working. Instead of paying taxes on all 30 years of interest payments at that time, you only pay the portion you haven’t already paid.


#38

Zaos,
I have not seen a method of changing how you report interest on I-Bonds after the first year.Have you actually seen this or just assume you can currently? I looked and could not find anything on this .I’ve owned I-Bonds for 16 years .
Dave


#39

I have personally done so about 5 years ago.

As of tax year 2016 - See “Reporting options for cash method taxpayers”, Pub 550, page 8, chapter 1.

It outlines how to change to/from each method.

Do think through the pros/cons before doing so, of course.


#40

Zaos,
Thank you so much for the link and info.I have printed that page and put with my I-Bond info for future reference. This is the reason I read these blogs, because you can learn from others.I wish I had known this about 7 years ago, as I would have done it at that time. Probably too late for me now,since you have to declare ALL accrued interest when changing, but I have been thinking of my exit strategy when my
2001 I-Bonds mature in 2031.I figure I’ll have to start 3-5 years early to manage my tax brackets. I’ll look into this further when 2018 IRS info is all known.
Dave