How to buy I - Bonds

[Anonymous]

You move your emergency fund there.
I've started in Feb 2020 - just parked extra $10k in Ibonds in addition to my regular amount saved on HYS account. This year, am moving another. $10k in January, so I'll have $20k there, $10k of it would become liquid in Feb 2022. At that point, I'll do sometime else with $10k on my savings. Rinse and repeat until all of the emergency fund is there

[Anonymous]

Anonymous wrote:You move your emergency fund there.
I've started in Feb 2020 - just parked extra $10k in Ibonds in addition to my regular amount saved on HYS account. This year, am moving another. $10k in January, so I'll have $20k there, $10k of it would become liquid in Feb 2022. At that point, I'll do sometime else with $10k on my savings. Rinse and repeat until all of the emergency fund is there

Yeah, eventually you can set it up like a laddered CD.

[Anonymous]

Anonymous wrote:So say I have 25k in my emergency fun that’s liquid.

In December I buy 10K of bonds at 7.12% interest. So I make about $712 next year.

But I can’t sell the bonds for a year, so if I lost my job in January, that 10K is untouchable for the first year.

The gains are also taxed at ordinary income. So at 30% interest, I’m really only earning less than $500.

Tell me if I’m missing something, but for me it’s not with having access to that $10k next year as emergency fund, just to get a $500 gain.

This is the only “risk” relating to I bonds. You shouldn’t put money in there that you need to keep liquid over the next 12 months. The money you put in earns the 7.12 percent for 6 months, I believe, then can reset higher if the inflation rate increases. So it could be more than 7.12 percent in the future.

[Anonymous]

Are gains taxed at ordinary income?

[Anonymous]

The gains are only taxed when you sell. If used for higher education and you meet income criteria, no tax.

[Anonymous]

Anonymous wrote:So say I have 25k in my emergency fun that’s liquid.

In December I buy 10K of bonds at 7.12% interest. So I make about $712 next year.

But I can’t sell the bonds for a year, so if I lost my job in January, that 10K is untouchable for the first year.

The gains are also taxed at ordinary income. So at 30% interest, I’m really only earning less than $500.

Tell me if I’m missing something, but for me it’s not with having access to that $10k next year as emergency fund, just to get a $500 gain.

You do not pay the tax until you cash the bond so you earn more interest on the full 712 until you cash. The tax free compounding is another perk. Also if you use the $$ for college you can avoid the tax entirely (up to certain income levels)

[Anonymous]

Is there a way to sell the bond in less than a year if I want to?

Otherwise I don’t want it for my emergency fund.

[Anonymous]

Anonymous wrote:Is there a way to sell the bond in less than a year if I want to?

Otherwise I don’t want it for my emergency fund.

No

[Anonymous]

Anonymous wrote:Is there a way to sell the bond in less than a year if I want to?

Otherwise I don’t want it for my emergency fund.

No, there are no ways to withdraw first year

Then it's just not for you - your emergency fund is just not large enough

[Anonymous]

Anonymous wrote:The gains are only taxed when you sell. If used for higher education and you meet income criteria, no tax.

I am trying to understand how I bonds are taxed. I read information on treasury web site and still not quite clear on the options. Basically I can pay tax annually, or at maturity, or at any point I decide to cash them out. What if I bought ibond in a year when I have no other taxable income? Would it be smart to report ibond gains and pay the minimum bracket rate? Lost here

[Anonymous]

Anonymous wrote:

Anonymous wrote:The gains are only taxed when you sell. If used for higher education and you meet income criteria, no tax.

I am trying to understand how I bonds are taxed. I read information on treasury web site and still not quite clear on the options. Basically I can pay tax annually, or at maturity, or at any point I decide to cash them out. What if I bought ibond in a year when I have no other taxable income? Would it be smart to report ibond gains and pay the minimum bracket rate? Lost here

You pay tax on interest annually, at maturity or in the year you cash out. If you choose to pay tax on interest in year 1, you are locked into that particular method recognizing revenue and paying tax. i.e. pay taxes on it every year.

[Anonymous]

Reminder that the interest is taxed federally, but not in most states.

[Anonymous]

Anonymous wrote:Reminder that the interest is taxed federally, but not in most states.

I thought no states tax interest from i bond

[Anonymous]

Pretty sure states aren’t allowed to tax interest on ibonds

[Anonymous]

So I bought some bonds (both EE and I) for my kids like 10 years ago. I have the paper certificates. I just went to TreasuryDirect to buy some more I Bonds. Although I have some bonds and I remember using Treasury Direct, there was no account for me so I created a new account for myself. I bought an I bond with some of the money in my emergency fund. Pretty straight forward. Now I want to buy one for each of my kids. I quickly got very lost on that website. I created two "linked minor accounts". But I'm not sure if these should be "gifts". I was trying to do that but it asking me to add a registrant. I wasn't sure if they wanted me to add one of my kids. It was asking for primary, secondary, sole owner. Confusing. I have no idea how to buy an I bond for my kid. If anyone does this, can you share some details? Thanks