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US treasury I bonds
Posted: Thu Jun 02, 2022 6:57 am
by Gulliver
I know this is not technically a “stock” market question (maybe this section should be renamed “Stock and Bond market investing”).
But, since I’m sure many of us have taken money off the table by now: Are US treasury I bonds worth the trouble? (This is only for US citizens and residents).
The guaranteed inflation protected interest-rate is tempting, but the limited amount you can invest and the extra tax paperwork has me on the fence.
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 7:07 am
by goran
Gulliver wrote: ↑Thu Jun 02, 2022 6:57 am
....many of us have taken money off the table by now.....
wait. what?
I thought we just put in and forget about it.
sorry, still new to investment.
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 7:23 am
by Gulliver
gnakarmi wrote: ↑Thu Jun 02, 2022 7:07 am
wait. what?
I thought we just put in and forget about it.
I am by no means an expert but, you are correct when we are talking about long-term investments (retirement accounts for example) in which you have preexisting funds.
In my case, I liquidated a large amount of discretionary investments the day Russia invaded Ukraine because I speculated it would send the world economy into turmoil.
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 7:45 am
by RetireJapan
gnakarmi wrote: ↑Thu Jun 02, 2022 7:07 am
Gulliver wrote: ↑Thu Jun 02, 2022 6:57 am
....many of us have taken money off the table by now.....
wait. what?
I thought we just put in and forget about it.
sorry, still new to investment.
If you have decades until retirement, absolutely yes. Invest every month and leave it alone.
You'll probably get the urge to be clever at some point, but keep that restrained to a small amount of your portfolio as you will realise eventually that it doesn't work
(I have succumbed to the urge to be clever far too many times, and every time it was a mistake)
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 8:06 am
by goran
RetireJapan wrote: ↑Thu Jun 02, 2022 7:45 am
gnakarmi wrote: ↑Thu Jun 02, 2022 7:07 am
Gulliver wrote: ↑Thu Jun 02, 2022 6:57 am
....many of us have taken money off the table by now.....
wait. what?
I thought we just put in and forget about it.
sorry, still new to investment.
If you have decades until retirement, absolutely yes. Invest every month and leave it alone.
You'll probably get the urge to be clever at some point, but keep that restrained to a small amount of your portfolio as you will realise eventually that it doesn't work
(I have succumbed to the urge to be clever far too many times, and every time it was a mistake)
in my early 30's right now. so must be at least 3 decades+ to retirement.
But I feel myself being pulled towards FIRE life a lot these days. (those damned blogs)
So could be a decade or so, if I go that path.
Sorry to have taken this thread to drastically different tangent!
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 8:23 am
by Haystack
Gulliver wrote: ↑Thu Jun 02, 2022 6:57 am
I know this is not technically a “stock” market question (maybe this section should be renamed “Stock and Bond market investing”).
But, since I’m sure many of us have taken money off the table by now: Are US treasury I bonds worth the trouble? (This is only for US citizens and residents).
The guaranteed inflation protected interest-rate is tempting, but the limited amount you can invest and the extra tax paperwork has me on the fence.
You will be paying federal tax only, right? So, what's the final % at the end of the day? If it's under 20% Taro wants his cut, right?
I-bonds are for your emergency fund imo, and a no-brainer for any investor who can fullfil the requirements for purchase.
As for timing the market...just don't do it.
Re: US treasury I bonds
Posted: Thu Jun 02, 2022 9:05 am
by captainspoke
Haystack wrote: ↑Thu Jun 02, 2022 8:23 am...
I-bonds are for your emergency fund ...
I haven't followed up on theirs and outs, but I'm not so sure they can be cashed in so easily/quickly. Google does tell me it's pretty transparent, but I think I read that there are some conditions--i.e., you might lose some of the interest due, or that they need to be held for an initial term of some kind so that that does not happen.
Re: US treasury I bonds
Posted: Tue Jun 07, 2022 4:53 am
by Gulliver
Haystack wrote: ↑Thu Jun 02, 2022 8:23 am
I-bonds are for your emergency fund imo, and a no-brainer for any investor who can fullfil the requirements for purchase.
I’m beginning to think you’re right about the no-brainer part- but for the purposes of a safe haven for any profit taking we may have recently done, not as an emergency fund.
Even if you keep the bond for only one year, the return will not be huge for 10k, but at least you’ll be doing better than most with the guaranteed 9.62% interest. Also, if the unstable global economy, inflation, and geopolitical unrest continue for another five years you could have a 50k principal which would definitely give you a nice profitable safe haven account ready to convert into stocks when the time is right.
Re: US treasury I bonds
Posted: Tue Jun 07, 2022 6:25 am
by captainspoke
captainspoke wrote: ↑Thu Jun 02, 2022 9:05 am
Haystack wrote: ↑Thu Jun 02, 2022 8:23 am...
I-bonds are for your emergency fund ...
I haven't followed up on theirs and outs, but I'm not so sure they can be cashed in so easily/quickly. Google does tell me it's pretty transparent, but I think I read that there are some conditions--i.e., you might lose some of the interest due, or that they need to be held for an initial term of some kind so that that does not happen.
From the treasury site:
Where can I bonds be redeemed?
If you own electronic I bonds, you can redeem them in the TreasuryDirect application. If you own paper I bonds, you can cash them at some local financial institutions or by mail.
When can I cash (redeem) an I bond if I need the money?
You can cash your Series I bonds any time after 12 months. You receive the original purchase price plus interest earnings. I bonds are meant to be longer-term investments; if you redeem an I bond within the first 5 years, you'll lose your last 3 months interest. For example, if you redeem an I bond after 18 months, you'll receive the first 15 months of interest.
I didn't see where there were redeemable within the first year--so check whether there's actually a 1 year lock in.
Even for a year, when you lose the last three months (quarter) of interest, if the yearly rate is 9.62%, the effective rate for that year will be about 7.21%
Re: US treasury I bonds
Posted: Tue Jun 07, 2022 9:21 am
by Haystack
captainspoke wrote: ↑Tue Jun 07, 2022 6:25 am
captainspoke wrote: ↑Thu Jun 02, 2022 9:05 am
Haystack wrote: ↑Thu Jun 02, 2022 8:23 am...
I-bonds are for your emergency fund ...
I haven't followed up on theirs and outs, but I'm not so sure they can be cashed in so easily/quickly. Google does tell me it's pretty transparent, but I think I read that there are some conditions--i.e., you might lose some of the interest due, or that they need to be held for an initial term of some kind so that that does not happen.
From the treasury site:
Where can I bonds be redeemed?
If you own electronic I bonds, you can redeem them in the TreasuryDirect application. If you own paper I bonds, you can cash them at some local financial institutions or by mail.
When can I cash (redeem) an I bond if I need the money?
You can cash your Series I bonds any time after 12 months. You receive the original purchase price plus interest earnings. I bonds are meant to be longer-term investments; if you redeem an I bond within the first 5 years, you'll lose your last 3 months interest. For example, if you redeem an I bond after 18 months, you'll receive the first 15 months of interest.
I didn't see where there were redeemable within the first year--so check whether there's actually a 1 year lock in.
Even for a year, when you lose the last three months (quarter) of interest, if the yearly rate is 9.62%, the effective rate for that year will be about 7.21%
Most people ladder their i-bonds. The limit is only $10,000.
Yes you will have a lockup on year 1, however not a big deal assuming you keep a 6 month emergency fund.
And you're buying i-bonds, so you probably do!