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Reply to "How to buy I - Bonds "
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[quote=Anonymous][quote=Anonymous]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. [/quote] 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)[/quote]
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