Opinions on I- Bonds?

[tamip]

I just heard about I-Bonds. I think it sounds like a good idea, just wanted to know if anyone hear knows anything about them?

Thanks!
Tami

[sweeps]

Nothing wrong with I-Bonds -- they're currently paying around 6.7%. But I think the current consensus is to put your money in a savings account (HSBC @ 4.8% until April) and see what happens to the CPI in May, as the I-Bond yield could drop dramatically for the next 6 months.

Someone please correct me if I'm wrong...

[jeffrey]

Yes, you want to wait until they announce the new rates. Rates on I-Bonds are only good for 6 months so while the current rate looks great, the following six months aren't shaping up to be very good (it goes by the consume price index which had been below 1%). Wait and see - they will announce the new rates before they switch them so you can calculate whether it's better to buy in late April or after the change in May.

[kashi]

If you buy an I bond now, you will receive the current rate for the next six months. In August, the bond will begin earning the rate announced in May 2006. Who knows what the May rate will be, though! Right now the fixed rate for I bonds is only 1%.

good info. I was just researching these yesterday. Seems like a pretty solid plan for those who are saving for thier tuition (esp. childrens tuition)

[gavinmccallister]

I talked with a friend at work and he said that if you close out an I-Bond before the end of the term you have to pay a penalty on top of the 3-months of interest that you will lose. Is this true?

[sweeps]

Originally Posted by gavinmccallister

I talked with a friend at work and he said that if you close out an I-Bond before the end of the term you have to pay a penalty on top of the 3-months of interest that you will lose. Is this true?

You forfeit 3 months of interest if you redeem the bond within 5 years. I'm not aware of any additional penalty.

You cannot redeem an I-Bond at all within the first 12 months.

[kashi]

There is no extra penalty, just the three months of interest that you lose if you cash it before it is five years old.

cash4life - if you plan to use them for education purposes, and you want them to be tax-free, you have to register them in your name (or in the name of whoever claims the child on taxes). The child can only be listed as a beneficiary. More info on that here and here.