I-bond manifesto

[Anonymous]

Anonymous wrote:So, I bought it in January of 2021, I guess I made a mistake? When would be the best month to buy for 2022?

It looks like the best time to invest is at the beginning of the rate reset cycle (November and May) so you get the full benefit of the new interest rate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So, I bought it in January of 2021, I guess I made a mistake? When would be the best month to buy for 2022?

It looks like the best time to invest is at the beginning of the rate reset cycle (November and May) so you get the full benefit of the new interest rate.

There really isn't any reason to wait. If you buy now you get 6 months of 3.54%, then 6 months at 7.5%, and 6 months of the next rate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So, I bought it in January of 2021, I guess I made a mistake? When would be the best month to buy for 2022?

It looks like the best time to invest is at the beginning of the rate reset cycle (November and May) so you get the full benefit of the new interest rate.

There really isn't any reason to wait. If you buy now you get 6 months of 3.54%, then 6 months at 7.5%, and 6 months of the next rate.

Sure. But since Nov 1 is just 2 weeks away, wouldn't it make sense to just wait to invest and get the 7.5% immediately?

[Anonymous]

Anonymous wrote:you can get another 5k (total of 15k) using fed tax return.

How do you do that? Send a check to IRS to overpay taxes by $5000 so you can get a $5000 refund in i bonds? Is there a a line to request it on the 1040?

[Anonymous]

Anonymous wrote:

Anonymous wrote:you can get another 5k (total of 15k) using fed tax return.

How do you do that? Send a check to IRS to overpay taxes by $5000 so you can get a $5000 refund in i bonds? Is there a a line to request it on the 1040?

Looks like that's how you do it.. See here for a discussion - https://www.bogleheads.org/forum/viewtopic.php?t=355372

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

This sounds overly complicated and unnecessary. You would be way better off just investing in a stock index. There isn't really anything that special about ibonds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

This sounds overly complicated and unnecessary. You would be way better off just investing in a stock index. There isn't really anything that special about ibonds.

Thanks! We already do that. We are almost 100% in stocks right now and want to diversify into fixed income as we get older.

[Anonymous]

I don't like the strategy of overpaying the IRS. They're bad enough at getting paperwork processed and refunds sent that it adds a layer of risk to a part of the portfolio that should be almost riskless.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

If you are holding for 30 years then wouldn't EE bonds be better since they are guaranteed to double after 20 years?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

If you are holding for 30 years then wouldn't EE bonds be better since they are guaranteed to double after 20 years?

The EE's doubling is only as to its nominal return. I Bond's appeal is that it guarantees an inflation-adjusted real return.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

This sounds overly complicated and unnecessary. You would be way better off just investing in a stock index. There isn't really anything that special about ibonds.

Thanks! We already do that. We are almost 100% in stocks right now and want to diversify into fixed income as we get older.

Ah ok, that makes sense. The vast majority of people go with total bond and keep their bonds in a tax deferred account. I would check out bogleheads as I'm sure the topic has been discussed many times.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we invest in these bonds in kids' names? Will that constitute a gift? We already contribute to their 529 (30K/yr per kid) to stay within the gift tax limits.

Yes, it is a gift just like your 529 contributions and any other money you transfer to their name.

We have zero iBonds right now and want to build it up. How about this strategy? This is assuming that interest rates are rising and ibond investments make sense. We will allow the interest to compound for 30 years and let the inheritors deal with the tax liability.

Year 1 (right now) - We invest 40K (20K for us, 20K for our 2 kids). We declare the 20K portion by filing form 709 (since we also contribute 30K to their 401k).
Year 2 and beyond.
- Repeat. 40K (20+20).
- The kids also gift back the 20K from year 1 to us. Since these are minors, we will be the ones transferring the money back to ourselves.
- Overpay 5K to the IRS when filing taxes and get the refund as ibonds.

We repeat this each year and build up a 40K/yr portfolio. We don't want to leave the money in our kids' names for a variety of reasons and would rather not dwell on that..

Will this work? Can anyone think of any issues with this approach?

If you are holding for 30 years then wouldn't EE bonds be better since they are guaranteed to double after 20 years?

The EE's doubling is only as to its nominal return. I Bond's appeal is that it guarantees an inflation-adjusted real return.

Yes but how confident are you that inflation will average over 3.5% a year? If it doesn’t the EE will be better.

Also, if you want to put $40k a year into bonds it’s much better to just buy $20k a year each of ibonds and ee bonds. Savings bonds are registered securities and it’s not easy to change the registration so if you really want to pursue your scheme you should look into the rules/process more closely.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So, I bought it in January of 2021, I guess I made a mistake? When would be the best month to buy for 2022?

It looks like the best time to invest is at the beginning of the rate reset cycle (November and May) so you get the full benefit of the new interest rate.

There really isn't any reason to wait. If you buy now you get 6 months of 3.54%, then 6 months at 7.5%, and 6 months of the next rate.

Sure. But since Nov 1 is just 2 weeks away, wouldn't it make sense to just wait to invest and get the 7.5% immediately?

Can someone in the know please respond to this question? I’m thinking November 1 makes more sense too.

[Anonymous]

Check out what this guys says about buy now or wait. Makes sense to me. I already bought back in May so I can’t buy again until January.

https://tipswatch.com/2021/10/14/i-bond-dilemma-buy-in-october-or-wait-until-november/