F---ing I-Bonds

[Anonymous]

Anonymous wrote:Holy sh#t.

So let me make sure I understand this:
-The rate is reset every 6 months. The rate from Nov 2021 to April 2022 is 7.12%
-You must hold the bond for at least 12 months.
-If you cash out before 5 years, you lose the last 3 months of interest earnings.
-No state taxes on the income, but you will owe federal taxes on income.
-$10K max per year in electronic bonds, $5K max in paper bonds.

What's the catch?

Good that on one hand there’s no tax until you redeem or matures. On the other hand, you cannot reinvest the dividends. This might matter more for longer term investors.

[Anonymous]

https://www.dcurbanmom.com/jforum/posts/list/1003614.page

[Anonymous]

Anonymous wrote:

Anonymous wrote:Holy sh#t.

So let me make sure I understand this:
-The rate is reset every 6 months. The rate from Nov 2021 to April 2022 is 7.12%
-You must hold the bond for at least 12 months.
-If you cash out before 5 years, you lose the last 3 months of interest earnings.
-No state taxes on the income, but you will owe federal taxes on income.
-$10K max per year in electronic bonds, $5K max in paper bonds.

What's the catch?

Good that on one hand there’s no tax until you redeem or matures. On the other hand, you cannot reinvest the dividends. This might matter more for longer term investors.

Perhaps I
'm not understanding your point, but, From the Treasury Direct website: "The interest is compounded semiannually. Every six months from the bond's issue date, all interest the bond has earned in previous months is in the bond's new principal value. Interest is earned on the new principal for the next six months. For example, in month seven, interest is earned on the original price plus six months of interest."

[Anonymous]

Anonymous wrote:Holy sh#t.

So let me make sure I understand this:
-The rate is reset every 6 months. The rate from Nov 2021 to April 2022 is 7.12%
-You must hold the bond for at least 12 months.
-If you cash out before 5 years, you lose the last 3 months of interest earnings.
-No state taxes on the income, but you will owe federal taxes on income.
-$10K max per year in electronic bonds, $5K max in paper bonds.

What's the catch?

No catch, other than the $10K limit

[Anonymous]

Anonymous wrote:

Anonymous wrote:Holy sh#t.

So let me make sure I understand this:
-The rate is reset every 6 months. The rate from Nov 2021 to April 2022 is 7.12%
-You must hold the bond for at least 12 months.
-If you cash out before 5 years, you lose the last 3 months of interest earnings.
-No state taxes on the income, but you will owe federal taxes on income.
-$10K max per year in electronic bonds, $5K max in paper bonds.

What's the catch?

No catch, other than the $10K limit

The 7.12% won't last the life of the bond--it is tied to inflation rate and is a combination of fixed rates and inflation rates and resets every 6 months. It's still a very good deal in an inflationary environment, especially one where monetary policy is working to keep other bond interest rates low.

[Anonymous]

The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

[Anonymous]

Anonymous wrote:The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

You forgot a very important word - "guaranteed" return.

No one is suggesting an I-bond be the primary vehicle for wealth creation. But they can be an incredibly helpful part of it.

[Anonymous]

Man, 2nd highest I bond rate ever seems like a bad bad thing.

[Anonymous]

Anonymous wrote:Man, 2nd highest I bond rate ever seems like a bad bad thing.

How so? What is the implication?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Man, 2nd highest I bond rate ever seems like a bad bad thing.

How so? What is the implication?

Because the rate is tied to inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Man, 2nd highest I bond rate ever seems like a bad bad thing.

How so? What is the implication?

Just that inflation is high. Of course ibonds haven’t been around that long and it’s not as if anyone is unaware of current inflation— the question is just how long it lasts and what is the alternative (for example a return of great recession).

[Anonymous]

Anonymous wrote:

Anonymous wrote:The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

You forgot a very important word - "guaranteed" return.

No one is suggesting an I-bond be the primary vehicle for wealth creation. But they can be an incredibly helpful part of it.

Yep, especially since most 2 parent 2 kid households could buy 80k in the next 6 months which would bring it up to 5.6k. But more importantly, that safe anchor frees up the ability to take risks elsewhere with investments.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

You forgot a very important word - "guaranteed" return.

No one is suggesting an I-bond be the primary vehicle for wealth creation. But they can be an incredibly helpful part of it.

Yep, especially since most 2 parent 2 kid households could buy 80k in the next 6 months which would bring it up to 5.6k. But more importantly, that safe anchor frees up the ability to take risks elsewhere with investments.

Most two parent two kids households have 80k spare to invest??? What planet are you living on???

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

You forgot a very important word - "guaranteed" return.

No one is suggesting an I-bond be the primary vehicle for wealth creation. But they can be an incredibly helpful part of it.

Yep, especially since most 2 parent 2 kid households could buy 80k in the next 6 months which would bring it up to 5.6k. But more importantly, that safe anchor frees up the ability to take risks elsewhere with investments.

Most two parent two kids households have 80k spare to invest??? What planet are you living on???

When I said "could" --I was meaning they could have that max allotment, not that they actually have the money to spare! Sorry for the confusion! That said, since it's guaranteed rate, the money could be a back-up emergency fund (you can't use it for a year so you wouldn't want it to be your whole e-fund--rather laddered in), a place for college savings to be put when your kids are getting closer to college age, where you put the money you're saving for a new car, household remodeling etc. It doesn't have to be entirely spare money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The catch is that these are measly returns. 7% on 10k? Sure, 700 is nice, but no one is going to be getting rich off these things.

You forgot a very important word - "guaranteed" return.

No one is suggesting an I-bond be the primary vehicle for wealth creation. But they can be an incredibly helpful part of it.

Yep, especially since most 2 parent 2 kid households could buy 80k in the next 6 months which would bring it up to 5.6k. But more importantly, that safe anchor frees up the ability to take risks elsewhere with investments.

Most two parent two kids households have 80k spare to invest??? What planet are you living on???

In this area, many do. Do you not have $80,000 in your savings or investment accounts ?