I Bond at 7%???

[suedavids]

Re: I Bond at 7%???

If you are buying on line, you have to open an account with treasury direct https://www.treasurydirect.gov/RS/BP...ation=rscreate. I do not buy on line. I buy paper bonds at a bank. You can buy direct and they hold them for you or they can send you paper.

To track your bonds, download "bond wizzard" and enter the numbers of your bonds. You can check the value through this program. It keeps a running tally.

Be careful when you cash these in. You need to wait until they payed. I think they pay quarterly so make sure you don't pull the money before they pay out.

The advantage of buying paper i-bonds is that you can register these I-bonds to a trust. Treasury direct does not offer the internet bonds to be designated in trust accounts.

There is a phone # on the site to call the federal reserve if you need help. I would suggest buying one small one first to make sure you are doing it correctly.

One additional thing. To buy ibonds go to www.savingforbonds.gov Always make sure the gov is in the address or it could be a scam.

[baselle]

Re: I Bond at 7%???

Few questions about I-Bonds, or maybe more specifically about purchasing them. I have set up an account at treasurydirect.gov, and in looking around, I believe that I want to purchase a "Series I Savings Bond." There's a Purchase Express box in which you just choose from the drop down menu the product you want to buy, and the amount. This seems a little too easy, so of course I became skeptical. Not of the website, but of my knowledge. So I suppose my first question is, is this what I'm looking for?

Next, I'm curious if you can monitor the interest, or if it just shows up after a year? And let's say I want to take the money out after a year (yep, I know about the penalty if taken before 5 years), is there a "sell" button, where it more or less just puts the money + interest back into the linked account?

I could of course just take the plunge and see some of this for myself, but I can just see after I do it, it'll give me some weird message like "Thanks for buying the no-interest 10 year minimum bond. Good luck."

Thanks in advance!

Ben

I buy my bonds online from treasury direct. (After handling zillions of pieces of dirty dusty newspaper, it's a treat to handle dirty dusty electrons).

It really is that simple to buy a bond one time on that date. Make sure you put in the amount you want in the box. You aren't constrained by denomination. If you want a little extra control, you can put money into the C of I account (earns no interest) and buy your bond via the C of I account. It takes a day or two for the money to leave your account and go into Treasury Direct.

If you want to make a payment schedule, you can, its a choice further down. I wouldn't schedule years' and years' worth, only a few months, because if you have to cancel one, you have to cancel the whole schedule. Ick.

I use the bond wizard as suedavids suggests - its great because you can see your portfolio in its entirety.

When you buy a bond, only the total amount bought appears at the top of your account when you first go into it. If you click on your holdings (like your I-bonds), then Select, it will list your holdings and what they are worth, which includes the interest. Now when you first buy a bond, the interest will *not* appear for three months. (The bond wizard does the same thing.) I think this is because they both track your interest including the 3 month penalty. It also means that after 4 yrs 11 months, you will see quite a little jump in the value of your bonds when they turn 5 yrs old.

Sell = redeem in bond land. There is also a little tour inside the site that should help you out. If you have a question, try emailing treasury direct inside your account. They were responsive and helpful for the couple of things I wanted to do.

[zabbkoff]

Re: I Bond at 7%???

Thanks suedavids and baselle! Your feedback is greatly appreciated. The bond wizard sounds great.

[genchan]

Re: I Bond at 7%???

What is the most important aspect of the i-bond? Is it the inflationary rate or the base rate?

[suedavids]

Re: I Bond at 7%???

What is the most important aspect of the i-bond? Is it the inflationary rate or the base rate?

The inflation rate fluxuates every 6 months and is reset by the gov. The base rate is determined by the actual date (within a given 6 month period) which you purchased. For instance, we are at 1% now. This does not change during the life of the bond.

If you look back over past discussions, I inserted (from the savingsbonds.gov site), the chart of past base rates.

[MTPockets]

Re: I Bond at 7%???

Is the interest added monthly, semi-annually or how is that figured? I'm just curious. It'll be another year or so before I'm in a position to purchase these, but I'm just trying to get an idea of how interest is added.

Thanks.

[suedavids]

Re: I Bond at 7%???

Is the interest added monthly, semi-annually or how is that figured? I'm just curious. It'll be another year or so before I'm in a position to purchase these, but I'm just trying to get an idea of how interest is added.

Thanks.

The base rate is refigured every 6 months along with the inflation rate. The amount to be paid totally during that 6 month period is posted. Interest is paid, I believe, Quarterly. Remember you can buy these for as little as $25. You could buy these little by little. I would suggest that you read all my past post to learn more and have links to various sites to increase your information base.

[suedavids]

Re: I Bond at 7%???

By the way, if you have a trust, you may purchase i-bonds in your trust. You can only do this with paper bonds and you must ask for a special paper application at the bank. They get this from the federal reserve. I asked the bank for an extra copy so I can have it copied and filled out when purchasing more.

[robby]

Re: I Bond at 7%???

Will ibonds keep their high interest the next update do you think?

[mgkimsal]

Savings bonds vs. CDs vs. HSBC/ING/ED/etc

I've been following a couple threads here recently about the 4-4.25% rates from HSBC/ING and others. I've been looking at savings bonds lately, and I bonds pay 6.73% right now, and have a reduced tax load (no state/local tax, I think). I've not seen much discussion on here about savings bonds in general. Are they not recommended because of the non-liquidness of them? Generally, like CDs, you need to hold them for a certain length of time, and there are penalties for cashing them in early.

Can anyone here give me a rundown of savings bonds vs CDs, with pros and cons?

Thanks!

[mgkimsal]

Re: Savings bonds vs. CDs vs. HSBC/ING/ED/etc

That'll teach me to post before doing a full search. I do see that some of this has been discussed recently, so my apologies. If anyone has more direct info on bonds here and could add to this thread, that would be appreciated, as I'm still a bit new to this.

[jeffrey]

Re: I Bond at 7%???

The Consumer Price Index came in at a -0.6% for the month of November - the biggest monthly decrease in 56 years - mainly due to a large drop in gasoline prices. Purchasing I-bonds during this current six month period is not a sound investment.

While there are still a few months left before the new I-Bond rate is announced, it is likely to be well below the current 6.73% rate. That coupled with the current I-bonds paying a base rate of just 1.0% (the lowest since it’s introduction) it makes little sense to purchase I-bonds at this time.

This will make for some interesting scenarios come next May. While there was a large decrease in CPI, the decrease was due to gasoline prices. The “core CPI,” which excludes food and energy prices, rose 0.2%, the same as the gain in October and in line with what most experts forecasted. This leads me to believe there won’t be a negative inflation rate over this six month period (especially since gas prices seem to be on the rise again), but inflation will likely come in quite flat (barring some unexpected event) this period.

For those who purchased in November, it will likely mean a second 6 months of interest that will negate a large part of the 6.73% they are currently earning. For those that wait, however, the lack of inflation may force I-bonds to significantly raise the base % to keep them competitive. This may make the May 2006 I-bonds a hidden opportunity to purchase (the rate won’t look outstanding, but the base rate will be high which could make them quite valuable if inflation increases after that).

[robby]

Re: I Bond at 7%???

Can someone tell me how they calculate the rate each time? Is it possible to do it on our own or do we have to wait until they announce the new rate?

[baselle]

Re: I Bond at 7%???

The Consumer Price Index came in at a -0.6% for the month of November - the biggest monthly decrease in 56 years - mainly due to a large drop in gasoline prices. Purchasing I-bonds during this current six month period is not a sound investment.

That's a little strong. Like any other investment, these things are hard to time and should be a piece of your total portfolio, and really aren't for those who are chasing interest. Its a little like saying that if your favorite mutual fund is doing badly, its not a sound investment.

I have at least a year and a half of I-bonds under my belt. It means that all of my bonds will eventually get 6 months of a high(er) interest rate. Those 6 months are icing to me. The cake is that even at their lowest rate, I-bonds were still earning 1% above Emigrant Direct, with tax deferred interest, backed by the full faith of US gov (FDIC will fail before the US gov will).

In addition, the variable rate is calculated on the CPI-U for six months. I seem to remember that May, June and July 2005 CPIs weren't particularly high. It was August and September that really pumped the calculation up.

Not to say that I didn't miss the boat. I'm very disappointed that the fixed rate dropped. Imagine how you'd be set up these next six months if you bought some of these puppies when the fixed rate was 3.5%!

In general, the strategy for savings bonds: if you believe that inflation is going to be flat or negative (deflation), the fixed rate EE is the way to go; if you believe that we are going to undergo rising inflation or even hyperinflation, I-bonds are the way to go.

[meaghanchan]

Re: I Bond at 7%???

This may make the May 2006 I-bonds a hidden opportunity to purchase (the rate won’t look outstanding, but the base rate will be high which could make them quite valuable if inflation increases after that).

Right. And if anyone is buying I-Bonds not to beat the interest at a bank, but to hold as a long-term investment in their portfolio (as part of the 'bond' component in a stock/bond retirement portfolio), it's the base rate you should care about.

In the late 90s, the base rate was around 3%, though they were only paying about 4%-5% because the CPI stayed fairly low. If you looked at the total interest rate, they weren't great investments, and there would have been lots of places to earn better interest. But the people who held on to those 3% base rate I-Bonds are getting about 10% now on their investment (3%+ 6.7ish% inflation rate) for the next 6 months. How great is that, for a virtually no-risk investment?

My plan, personally, is to buy I-Bonds once a quarter when I rebalance my portfolio, to have them fill out my 20% bond allocation. I'll buy them regardless of base rate, and regardless of inflation rate. I belive that base rates will go up in the future, and if I ever need to sell some, I'll have plenty with really low rates.