i bond

[irondiezl3]

ive done sme reserch on ibonds still a little confused. whats the difference between a ibond and a savings bond? can you add money to it like a savings? do the interest rates change or r they fixed like a cd rate?

[Broken Arrow]

Have you looked at the page from TreasuryDirect yet?

I know there are people who are much more familiar with it than I am, but suffice to say, you are paid a combined interest of both the inflationary rate (which is recalculated semi-annually) as well as a fixed interest rate (which is fixed at the time of purchase).

Anybody know what happens when you attempt to cash these things in a deflationary environment? Do you just kind of lose out and get nothing except the fixed interest rate?

[simpletron]

if you will hold the bonds for less than 20 years, I would buy the I-bonds over savings bonds because I doubt the annual inflation rate will fall below .6%(the difference in the fixed rates of i-bonds to savings bonds) for more than a year, let alone average that over the life of the bond. for over 20 years, the guaranteed doubling of the savings bond get in the way of an easy answer.

Anybody know what happens when you attempt to cash these things in a deflationary environment? Do you just kind of lose out and get nothing except the fixed interest rate?

that is correct you would only get the fixed part and the inflation part would be set to zero even if the true inflation rate is negative. this is because the government wants it to be impossible for the bonds to lose value. but remember your real purchasing power is increasing faster that normal because you are earning the fixed rate plus the absolute value of the inflation rate above the inflation rate during a deflationary environment.

[EEinNJ]

The Treasury site explains it. For I bonds, in a nutshell, there's a base rate and an inflation based rate, it gets adjusted twice a year. There's an interest penalty if you cash them in early. They are sold at face value (I think E bonds you pay half of face). There is a Savings Bond Wizard program for keeping track, very handy. I've bought both kinds over the years, and I bonds have been among my best performing investments, at least lately. And, they are exempt from state taxes