Re: I Bond at 7%???
Ah, more I-bond experts. Nice not being the only one.
Cleanup points on this discussion: If you are (were) living in an area officially declared a federal disaster area, you can redeem savings bonds younger than 1 year. That's the only exception.
Savings bonds are issued once a month, and the interest is applied once a month. If you buy a bond in the next week or so, its issue date will be 10/2005, you can redeem it on 10/2006 (effectively shaving off a month of penalty because you bought it late in October), you can redeem it on 10/2011 without penalty, and its maturity date is 10/2035, when it stops earning interest and you pay taxes on the interest it has accrued. (Maturity is not a goal, its a limit.). Interest is applied on the first of the month, so on Nov 1 your 10/2005 bond's interest rate will change to the higher rate, and will keep that total interest rate for 6 months when it changes to a new one.
So should you buy a bond now for 10/2005 or wait until the end of November for an 11/2005 bond? Well it depends. I-bond rates have two components - the variable rate based on the inflation rate calculated from CPI-U (changes every six months), and a fixed rate set by the Treasury Dept (the thought is that it is based on the TIPS fixed rate).
Your fixed rate stays the same through the life of the bond but frankly is what makes your bond more or less valauble. Right now the fixed rate is 1.2%, which is on the low end of what it has been. If November's fixed rate is higher than 1.2%, then November's the bond to buy. If its the same, it doesn't much matter.
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