Sold my and my gift box as well.
for long term holders, the current I Bond fixed rate is 1.3% Historically attractive. Vanguard Money market is also historically attractive, but obviously has reinvestment risk.
Why would you do that.? You lose 3 months of interest for nothing.
you do, but the interest for the last three months was under 4% annual with a fixed rate of 0.0 for the life of the bond. Most of the I bonds issued the last decade are at 0.0%. There is a good case to be made for redeeming some or all of them depending on individual circumstances.
Long term buy and hold investors would find the current fixed rate on the I bonds very attractive. In addition, taxes on the interest gains of the I bonds can be deferred until it is sold, unlike the money market funds
I’ve had my ibonds for 15 months. For now I’m sitting on it but will definitely sell if the rate goes down much more. I can’t imagine buying at this point.
How is that appealing? My savings account yields 4.5%, is immediately available, and doesn’t penalize me 3 months interest for selling.
the 1.3% is the REAL rate which is fixed. The variable rate is based on one of the CPI metrics.
Yeah I know. That’s a terrible return.
In a low inflation market, yes, it would be a terrible return compared to the stock market. But with 1.3% fixed rate, the yield on this bond is CPI + 1.3%, so if the inflation is high again and the variable rate goes up, I get the variable rate + 1.3%. So it will protect me against inflation. For example, when the variable rate was 9% last year, people that bought the ibond when the fixed rate was 2% was getting 11%.
The fixed rate was 2% in 2002, so they got terrible returns for 9 years while waiting to get decent returns for a year or two. The average return over time was terrible, even with a ‘high’ fixed rate.
All true statements, but hindsight is always 20/20. You don't know what the future holds. Ibond remains zero risk investment vehicle where you will never lose money, so it adds to diversification. It should be a small part of your portfolio if you decide to buy some.
tipswatch.com
you can get them converted to electronic via a conversion linked account in Treasury direct. I did the paper Bond thing for a few years. Gave it up as it was a bit of a pain. I did send them to The Treasury and got them converted. They are tax deferred. Not tax free. Just like 401k and 403b and 457 withdrawals.Long-time I Bond investors face a tax time bomb
By David Enna, Tipswatch.com U.S. Series I Savings Bonds are a unique investment because all interest is rolled into principal until redemption, and in most cases, all the compounded earnings are t…
FYI. A warning for those thinking of purchasing paper I-bonds
"My bank (Wells Fargo in Charlotte) still redeems paper savings bonds, but some banks no longer offer that service. TreasuryDirect says, “Banks vary in how much they will cash at one time – or if they cash savings bonds at all.” From a recent New York Times (When Did Cashing Savings Bonds Become So Impossible?) article:
Hoping to cash in a paper savings bond that’s been lying around for a few decades? Set aside a lot of time for disappointment. …
The process is only getting harder. In May, the nation’s largest bank, JPMorgan Chase, began imposing a $500 limit on each savings bond cashed for longtime depositors — that’s total redemption value, so including any interest owed. Wells Fargo and Citi place a $1,000 limit on new customers. U.S. Bank has
a five-year waiting period before it will cash a bond for a new customer."
Not based on the last decade of IBond returns. Take a look how things like total bond market or long term bonds have fared recently.
No, but you take your chips off the table when you have won the game. Right now TIPs are very reasonable. I have been converting nominals to them over the last six months an extending maturities. I am 60+. If I were 40 ish. Not so much
I also sent for conversion. Had me a bit worried as the process took around 9 months if I remember correctly.
Lots of interest in Bonds the last few years. Also with banks not doing the paper thing, even more work for the Treasury.
Ibonds= 1.3% fixed rate + rate of inflation
Yup.
. Good Luck.
"old." Can you define that number? I think once you reach let's say $5 million there is room for 20% in fixed income like CDs, Tips, ibonds or bonds at today's rates. I can fully understand that those under the age of 45 want the growth of equities and are willing to stomach the volatility. But, I think a 100% equity portfolio is unnecessary and even foolish as you head into your "older" years like past age 55. However, if you find yourself simply unable to retire by age 65 with a 20% fixed income portion then you have significant financial issues and retirement s likely off the table until much, much later.
So a 100% equity based portfolio for life? Typically, that is for people who don't have enough in savings to last their lifetime.
The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500® generated an annualized total return of -0.9% over the period. This was only the second time that the market actually had a negative total return over a decade period. The other period was the Great Depression decade of the 1930s.
Exactly! They have to go out of their way to choose a period in which bonds beat stocks.
I have lived through several bear markets. I also lived through the 10 year period where stocks did very little in terms of returns. I disagree that having 20% of your portfolio in fixed income or bonds isn't a good idea. The bigger the portfolio the more important it is to have fixed income to serve as the ballast during storms. For example, a $5 million portfolio of 100% equities vs $4 million/$1 million. I would choose the latter every single time because I know how ugly things get when the bear sets in.
