Although you’re not behind the population, you’re not exactly ahead of it …
Comment seen elsewhere, so check the details but with inflation running the way it is, it could be a good time to make a 1 year CD out of I bonds and their backward looking 6 months of known high inflation based rates.
Anybody stuffing any coins in IBonds? One can put 10k in before Nov. 1 and will likely get close to 5% or more for 12 months. One then can put 10k more in post Jan. 1 and get 6 more months and net probably over 3% (annualized 6%).
Couples can double the purchases. You take a 3 month interest penalty if you dont hold 5 years, but you can buy at end of month and get credited entire months interest, so that mitigates it closer to a 2 month penalty. Even then the guaranteed return bets anything else in terms of 100% safety short term.
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It’s definitely a good time to get I-Bonds now, and it will almost definitely be even better after November numbers (but waiting is not better – get it now then get more next year).
One can also overpay federal income tax and get up to 5K in paper i-bonds as a refund (in addition to the $10K electronic maximum). Unfortunately I’m not sure of the issue date on that paper bond. If they take 3 months to process a return filed ASAP, like in February, it could miss the likely high November rate.
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I would say it’s better now because the first 6 months will be 3.54% and the 2nd 6 months will be well above that. It could go back down in the subsequent 6 months, we just don’t know. I’ll probalby buy before end of Oct and again in Jan, if I have the cash.
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Yes, it probably will, but the I-bond will still beat any other CDs or savings accounts until then. Even more so if you’d owe tax on interest to your state on those other investments.
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In more detail. Note TIPS are paying -2% or so, plus inflation, so the 0% floor rate of I bonds (plus inflation) is already a good deal even without the look back features that let you capture 6-12 months of known high rates.
Related discussion
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=350391&start=150
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with the August inflation rate in it looks like even with a zero real rate ibonds bought after Nov 2021 will yield over 6%. From the Bogleheads
August inflation points to a 6.5%+ inflation-adjusted rate for I Bond
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wow 6% for how long?Whats the max and best way to buy on 11/1?
Also this reminds me I still have the paper I bonds from the FWF thread , back when we could buy with CCs. Do I need to do anything with them? Maybe time to go all online Home — TreasuryDirect?
Open an online account on treasurydirect.gov to purchase I Bonds. The rate is good for 6 months before it resets. The maximum purchase per person is 10K per calendar year (plus up to an additional 5K as a refund if you overpay your federal income tax). The process to convert your paper I Bonds is explained on the site as well.
https://www.treasurydirect.gov/
https://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm
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I recommend buying before Oct. 31 to lock in the 3.54% rate for six months, and then you will get that close-to-7% rate for the next six months. Starting off with six months at 3.54% and then getting 6 months at 6.9% is super attractive in today’s market.
You have to hold an I Bond for 12 months before you can redeem. The combined rate over the year is going to top 5.2%, about 10 times what you can earn on a 1-year CD. But either way — before or after Nov. 1 — the investment is attractive. Also, keep in mind that the purchase cap resets on January 1, so you’ll be able to make another purchase getting the full six months of near-7% rate.
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I agree 100% with Xerty. If you are on the fence on buying , do it before the end of the month to lock in 12 months of good rates. Also, do not wait until the last day or two of October. It can take a few days to get your new Treasury Direct account opened and your bank account proven out to purchase the bonds.
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You don’t want to buy on Nov 1 - bonds are marked as Nov 1 no matter when you buy during the month.
It’s up to you whether you wait for Nov, or buy in Oct. The stated rate is for a rolling 6-month period; buy now and get the current 3.5% for 6 months, then the 6.X% the second 6 months. Wait to Nov, and get 6.X% the first 6 months and ???% the second 6 months. Surely 3.5% is beating what you are getting now, and if the future rate ends up remaining high you simply hold the bonds longer - the 1 year timeframe is just the earliest you can sell, so you will not miss out on any further high rates unless you actually sell the bonds.
Personally I think these should be thought of a long term investments, until savings rates become competitive again (or you need the cash). So buying in Oct basically guarantees you an extra 6 months of high rates beyond whenever it ends.
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Does anyone have actual experience with this besides me? I was able to open an account in seconds (though I’ve already had accounts there, but they automatically closed due to inactivity). I didn’t have to “prove” the bank account – they didn’t bother with trial deposits or anything. They withdrew the money and issued the I-Bonds the same day I requested it. You can even schedule a future purchase, which I expect to be effective on that day.
I suppose a few days of lost interest on $10K is not worth the risk of losing out a whole month at a great rate, but I’d still like to hear others’ experiences.
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I had no previous accounts, but my account opening was pretty instant as well. Changing/adding a bank account after the TD account is set up seems like it might be a chore though.
There’s no need to lose interest - you can set up the account now, then wait until the end of the month to make the purchase. And that’s just good advice in general - dont intentionally wait until the last minute and count on the instant account opening, when you can get it dont now.
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I have bought I-Bonds 4 or 5 times the last 10 years from Treasury Direct. They have issued my I-Bonds no earlier than the next Business Day. I last bought in late January this year on two accounts. If someone waits until Friday Oct 29th, from my experience, it would be a Nov I-Bond. I have heard of others with the same experience.
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Yes, they clearly state that the ‘immediate’ purchase is effective the next day. You cannot make a true same-day purchase. Presumably because they pull the funds today, then make the purchase when the funds are received tomorrow.
When scheduling a purchase, I dont know if it’s the same, or if the purchase will be made on the actual date specified.
Final Sept CPI is out, last one for the bond calcs.
US Sep Consumer Prices 0.4%; Consensus 0.3%*US Sep CPI Ex-Food & Energy 0.2%; Consensus 0.3%
US Sep Consumer Prices Increase 5.4% From Year Earlier; Core CPI Up 4% Over Year
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7.12% for next six months if my calculations are correct
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Looks like these guys agree with you MoneyOCD. 3.56% for the most recent 6 months worth of inflation, or about 5.33% for the first 12 months of interest if bought before end of month.
Can someone help me with the calculation for this scenario?
Buying $10K (max) in 10/2021 and holding for 13 months. It looks like they will keep 3 months interest.
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