Does it tell you the penalty being paid before redeeming the bond?
Thanks. I’ll use the same bank I have on record with TD.
After 12mo, there is a 3mo interest “penalty” but since the last 3 months of interest is never factored into the value of the bond(s) until the 5yr mark, you won’t be notified of the loss of interest if you cash in before 5yrs.
Per the TD site: “For bonds less than 5 years old, values shown in TreasuryDirect and the Calculator don’t include the last 3 months of interest. That’s because if you cash a bond before 5 years, we don’t pay you the final 3 months of interest.”
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Yes, but the displayed rate is what’s currently being earned, despite the displayed value lagging 3 months. I was wondering if there’s any info given to confirm, or easily calculate, the the rate of those 3 months being lost. I want to sell after 3 months of earning the current 3.X%, so that that is the penalty being paid. With a number of bonds purchased at various times all with different rate schedules, some sort of confirmation for a given sale would be nice.
You’re not going to get confirmation from TD. With regard to calculating I Bonds, perhaps this will help (just change the amount from $25 to whatever the amount of the bond(s) are)-
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Kind of a tangent, but do you get confirmation on the 1099 at the end of the year? I’d assume they’d have to gross the interest earned then list an early withdrawal penalty for what was forfeited?
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This article discusses the best time to sell an I-bond to minimize the three month interest penalty. Also, it makes sense to sell the i-bonds with 0% real rate before you sell the bonds with greater than zero rate. The article makes recommendations depending on when you bought them
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Kind of a tangent, but do you get confirmation on the 1099 at the end of the year? I’d assume they’d have to gross the interest earned then list an early withdrawal penalty for what was forfeited?
The 1099’s post almost immediately after you get your money. They remind you in January to download it but if you want to calculate how much you need to declare, you can do so immediately. As stated above, the interest doesn’t post at all for the first three months you hold the bond, then interest is credited three months in arrears, and then on the fifth anniversary the three months post all at once and interest is credited monthly. Thus, there is no “early withdrawal penalty” to speak of.
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Viewed 1099s from previous years. No confirmations of 3mo interest penalty; it’s just not factored in.
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It still seems rather shady (but nothing compared to what some banks have tried to get away with) to display a “current” rate, when holding the bond an additional month will actually add a different rate to your redemption value. For all the things that do get declared unfair to consumers, I’d consider this issue to have more merits than most.
It’s essentially a mark to market sort of thing. It shows you what you get if you liquidate right now. Remember, this is just a low rent website built up out of necessity based on a legacy paper bearer instrument meant to be held forever 
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You’d think that banks would offer CDs doing the same with early withdrawal penalties. A 12-month EWP would essentially defer tax on the first year’s interest earnings. A rather narrow window of who would benefit from that, but big enough that you’d think some niche banks would do it.
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Good discussion about timing of i-bond sales from David Enna of tipswatch. Discusses times depending on when the bond was issued. Worth bookmarking
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Great article. Thanks.
I also found it quicker to figure out my purchase dates by just searching my email for “one time purchase“ rather than logging into all the various trust accounts.
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If you have paper i-bonds or E series, be aware that Chase recently changed their savings bond redemption amount to a maximum $200 face value, possibly per day.
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The implication of the recent inflation print. I’m working on my wall street speak. 
What this means for TIPS and I Bonds
Investors in Treasury Inflation-Protected Securities and U.S. Series I Savings Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust principal balances for TIPS and set future interest rates for I Bonds. For August, the BLS set the inflation index at 307.026, an increase of 0.44% over the July number.
For TIPS. The August inflation index means that principal balances for TIPS will increase 0.44% in October, after rising 0.19% in September. Here are the new October Inflation Indexes for all TIPS.
For I Bonds. The August inflation report is the 5th of a 6-month string that will set the I Bond’s new inflation-adjusted variable rate, which will be reset Nov. 1 for all I Bonds (the starting date depends on the original month of purchase). Inflation from April to August has increased 1.72%, which at this point would translate to a variable rate of 3.44%. But one month remains.
If non-seasonal inflation increases 0.2% in September, you’d get a variable rate of 3.84%, higher than the current 3.38%. Nothing is certain, of course.
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I’m redeeming some I bonds this month. Entered the requests today (Sunday), with an execution date of 10/3 (Tuesday).
I presume that had I entered the request last Friday, it would’ve executed Monday. But the details of the request wouldn’t have included September’s interest in the total and I don’t know if it would auto-update when executing?
So, for future reference, which is the proper way to redeem a bond at the beginning of the month?
As long as the execution date is 10/1, it would include the interest. You can verify this by comparing the current value vs the redemption value when you enter in the request. I have done such redemptions twice recently.
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So a “proper” redemption requires entering the redemption request on the last [non-weekend] day of the prior month (Sept 29 for a Oct 2 redemption)?
You can enter the transaction a day or two before the 1st of the next month and still collect the interest. I don’t exactly remember which day because i usually login to try it out.
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