Information about I bonds
You must hold I-bonds 1 year but you can hold them up to 30 years. f you sell between 1 year till 5 years, there is only a 3 month penalty for withdrawls. The amount that you make on i-bonds is recalculated every 6 months depending on the inflation rate. It has 2 portions that are figured, the base rate (which never changes and is dependent on when you purchased the bond (rate at the time) and the inflation rate). These i-bonds serve as a hedge for inflation.
They have the following characteristics:
Federal guarantee:
i-bonds are completely guaranteed by the United States government! Wonderful! You can't loose your principle and will earn a set variable interest rate which changes and is set every 6 months( could go higher or lower depending on inflation).
Taxes advantage:
You have deferred federal taxes until you sell the bonds. Also, the gains are completely state tax free! If you are in a high tax state, this is important. If you have children, I-bonds can be federal tax exempt if you fall into set income limits and use the proceeds for college expenses. I believe the income cap is at $80,000 or below. Check it out at the below website.
Amounts you can buy:
You are allowed to buy $30,000 paper i-bonds and $30,000 electronic i-bonds per year per person. Go to
www.savingsbonds.gov to learn about and purchase electronic i-bonds. They can also be purchased at your bank. Do not pay anyone to buy these for you!!!! There are no fees for purchase!! These can be purchased in small denominations (I believe $25)all the way up to large denominations (like $5,000). THis makes it very flexable and wonderful as you can buy little by little or in one large lump.
Employers
Employers often offer the ability to purchase i-bonds through a paycheck deduction. I am participating in this at my work.
closing
We have owned i-bonds for several years now. Honestly, we've made more money in stocks but for a secure saving vehical, these can't be beat. I am planning on purchasing some for myself and my husband on Nov. 1st when the new rates come out.
It is important to balance your portfolio risk. This is a wonderful savings bond that is very safe. They may also be safer than many other bonds Often bonds are linked to the interest rates. As rates go up, bond prices (even what you payed for them) can go down. You can actually loose on these. That is NOT how these bonds work. You will not loose your priciple and you will earn interest. How sweet it is!!!