I-bonds going to under 1%

What small tips and tricks have you found that made a difference in your personal finance life? What great article did you just read? Found a great blog?

Moderator: lvergon

Bichon Frise
Posts: 1106
Joined: Fri May 04, 2012 2:23 pm
Contact:

I-bonds going to under 1%

Postby Bichon Frise » Tue Oct 16, 2012 7:43 am

ick. CPI-U data came out this morning, and as expected, the interest rate is under 1%. I calculate the new composite rate starting Nov 1 will be 0.86%.

If you have any interest in buying I-bonds, the last week of Oct is the time to strike.

If you play your cards right, you only need to hold on to the bonds for 10 months + a couple days on each end. Doing this, gives an effective 1.57% APR (1.58% APY). If you choose to hold for an entire 12 months, that is an effective 1.32% APR (1.33% APY).

compare to a 5 yr CD at Ally (who has the lowest early redemption penalty that I have found and decent rates) that is fetching 1.68% APR. Hold that for 10 months and you get an effective 1.18% APR.

Not the good news I was hoping for, but still may not be a bad place to park $10k in safe money for 10 months or so.
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

Bichon Frise
Posts: 1106
Joined: Fri May 04, 2012 2:23 pm
Contact:

Re: I-bonds going to under 1%

Postby Bichon Frise » Tue Oct 16, 2012 8:53 am

Please excuse, it is 1.76%. I used the wrong number in the calculation.

That brings effective APR to 1.5448% if you hold 12 months exactly, 1.841% if you hold 10 months.

Assuming you buy buy the end of the month...
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

stannius
Posts: 1680
Joined: Fri Sep 12, 2008 12:29 pm
Location: Seattle, WA
Contact:

Re: I-bonds going to under 1%

Postby stannius » Thu Oct 18, 2012 2:31 pm

Can you sell i-bonds after 10 months?

Bichon Frise
Posts: 1106
Joined: Fri May 04, 2012 2:23 pm
Contact:

Re: I-bonds going to under 1%

Postby Bichon Frise » Wed Oct 24, 2012 12:23 pm

stannius wrote:Can you sell i-bonds after 10 months?


If you buy at the end of Sept, the bonds record on 10/1/12. You are credited interest for the full month. As far as the gov't is concerned, you have held the bond since 10/1/12.

If you sell on 10/1/13, you are credited interest for the whole month. If you buy on the last day of the month, and sell on the first, you will have held the bond for 335 days (11 months) and satisfied the 12 month requirement. I suggest a couple business days of buffer on the buying end.
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

stannius
Posts: 1680
Joined: Fri Sep 12, 2008 12:29 pm
Location: Seattle, WA
Contact:

Re: I-bonds going to under 1%

Postby stannius » Thu Oct 25, 2012 10:29 am

How hard is it to buy them nowadays? I signed up for a treasury direct account once, and logging in required 3 or 4 separate pieces of identification, including at least one that had to be received via snail mail.

Bichon Frise
Posts: 1106
Joined: Fri May 04, 2012 2:23 pm
Contact:

Re: I-bonds going to under 1%

Postby Bichon Frise » Thu Oct 25, 2012 11:14 am

stannius wrote:How hard is it to buy them nowadays? I signed up for a treasury direct account once, and logging in required 3 or 4 separate pieces of identification, including at least one that had to be received via snail mail.


I've never received the snail mail. I was able to, last April, do everything online.
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

User avatar
bejki
Posts: 26
Joined: Thu Jan 26, 2012 9:23 pm
Location: Michigan
Contact:

Re: I-bonds going to under 1%

Postby bejki » Sat Feb 09, 2013 6:26 pm

stannius wrote:Can you sell i-bonds after 10 months?


I know this thread is several months old, but thought I'd post the minimum holding period. EE and I bonds can be redeemed after 12 months. In certain "hardship" situations they will allow you to redeem them before that period.

If you redeem the bonds between 1 year and 5 years, you forfeit the last three months of interest as a penalty. After 5 years, there is no penalty.

I actually like "I bonds" a lot. I automatically make "I bond" purchases at the end of each month. The bonds that I have purchased since 2/2011 are either earning 1.76% or 2.20%. Now most (or I think even all) of these rates are variable as I think the fixed rate component has been 0 throughout the duration of my purchases. However, the current rate can't be beat for a safe savings vehicle and I don't expect the inflation component of the bonds to be less than the average savings/money account rate anytime soon.
"I figure you have the same chance of winning the lottery whether you play or not."
Fran Lebowitz

Don't be passive about your finances: http://thefinancialreader.com

Bichon Frise
Posts: 1106
Joined: Fri May 04, 2012 2:23 pm
Contact:

Re: I-bonds going to under 1%

Postby Bichon Frise » Wed Feb 13, 2013 9:20 am

bejki wrote:
stannius wrote:Can you sell i-bonds after 10 months?


I know this thread is several months old, but thought I'd post the minimum holding period. EE and I bonds can be redeemed after 12 months. In certain "hardship" situations they will allow you to redeem them before that period.

If you redeem the bonds between 1 year and 5 years, you forfeit the last three months of interest as a penalty. After 5 years, there is no penalty.

I actually like "I bonds" a lot. I automatically make "I bond" purchases at the end of each month. The bonds that I have purchased since 2/2011 are either earning 1.76% or 2.20%. Now most (or I think even all) of these rates are variable as I think the fixed rate component has been 0 throughout the duration of my purchases. However, the current rate can't be beat for a safe savings vehicle and I don't expect the inflation component of the bonds to be less than the average savings/money account rate anytime soon.


You should also take note of when the buy is recorded. If you buy on the 30th, it is recorded on the 1st. So, if you buy on the 28th of this month and then sell on the 1st of Feb, 2014, you will have held 11 months, plus a day or two. My 10 months above, is untrue.

Also, the inflation component of the ibonds is tied to the CPI-U. It has nothing to do with what your checking/savings account is offering. Currently, if the government was to calculate the ibond rate, it would be 0% (really it's negative).
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!


Return to “Tips, Tricks, Links, Pointers”

Who is online

Users browsing this forum: No registered users