Buy I Bonds Now or Wait?

[james.hendrickson]

QMM - two thoughts.

First, inflation usually takes a while to tame. I had lunch with an economist last week - who was of the opinion that it would take a least a year of rate increases to tame inflation...so based on this is likely that the I-Bond rate will likely remain high in the next couple of months.

Second, current world events are supportive of higher inflation numbers - for example, the Russian invasion of Ukraine has limited supply of grain, and sanctions on Russia have limited supplies of fertilizer, so the cost of food production is likely to remain high in the short to immediate term.

[sblatner]

With I bonds, you get each interest rate for six months. If you bought in April, you would get the 7% interest rate for six months and then the 9% interest rate for six months in October guaranteed. Then it would reset again in April 2023. Your average interest rate is 8%.

If you buy $5000 now and $5000 in October, you get 9% on the $5000 now and then whatever the new rate is in October on both the $5k now and the new $5k that you buy in October. Who knows what that interest rate will be.

You should buy $10k now if you can afford it and lock in the 9% for six months.

[QuarterMillionMan]

I have another question, let's say inflation has peaked and I buy the $10,000 max today with 9% interest for 6 months, when the interest rate re-adjusts after October could the interest rate drop to let's say 6% or something lower or in the extreme case inflation returns to normal will it go back to 1% or whatever it was before?

[james.hendrickson]

I have another question, let's say inflation has peaked and I buy the $10,000 max today with 9% interest for 6 months, when the interest rate re-adjusts after October could the interest rate drop to let's say 6% or something lower or in the extreme case inflation returns to normal will it go back to 1% or whatever it was before?

QMM - yeah if inflation follows historical trends, the bond's coupon rates will eventually decline. I bonds are supposed to prevent your cash from eroding due to inflation.

If you want a high rate for the long term, you could always wait until the overall rate of interest is high and then buy a 30 year treasury bond.

[QuarterMillionMan]

I signed up and bought $10,000 today, thanks guys, sweet 9% is amazing.

[QuarterMillionMan]

On the interweb (old skool phrase), anyone can say anything and not back up their claims, talk is cheap. Here's my proof.

[james.hendrickson]

on the interweb (old skool phrase), anyone can say anything and not back up their claims, talk is cheap. Here's my proof.

i love it

[scfr]

Still planning to buy around the 20th. Might wind up wishing I'd bought last month but my time machine is in the shop so I'm sticking with the plan. I still believe that either way (bought last month or buy this month) is a good move.

[rennigade]

I'm still in the camp of skipping ibonds and buying stocks or index funds. The couple hundred in interest on $10k is peanuts.

[QuarterMillionMan]

I'm still in the camp of skipping ibonds and buying stocks or index funds. The couple hundred in interest on $10k is peanuts.

Thinking that equities only goes up could prove disastrous but to each their own.

[james.hendrickson]

True the interest on the bonds isn't much...but you also get the benefits of stability and diversification by adding bonds.

[LivingAlmostLarge]

I'm still in the camp of skipping ibonds and buying stocks or index funds. The couple hundred in interest on $10k is peanuts.

Yes and no. Depends if you have been adding and building a ladder for say 30 years...that would be $300k in bonds. Right now DH and I have been buying ibonds since 2017. I just thought because of Kork mentioning it was his EF that I would start to do it. So I started tossing $10k annual for each of us. Realizing that our Cash EF I began to drain down and now I keep it at a very minimal 3 months in cash. I also now have $120k in i bonds for 2 of us. So technically our EF is $150k. But the ibonds are harder to tap. So I figure well it'll earn me more than the savings account.

[james.hendrickson]

All, I pulled the trigger on some I-bonds yesterday myself.

Not as much as QMM's purchase, but at least I'm getting 9.6% and some inflation protection, which is better than my bank account - which was paying nothing.

[QuarterMillionMan]

Why $10,000 max? They should allow $1 million or more. I would invest $500,000.

[kork13]

It would be nice if they'd increase the limit, at least to some extent. It seems that the $10k limit has been in place since 2012, up from $5k set in 2008, and down from what appears to be a $30k combined max between both EE & I bonds from 2003-2007.

https://treasurydirect.gov/news/pressroom/pressroom_purlim0112.htm#:~:text=January%204%2C%20 2012,at%20www.treasurydirect.gov.