Ask HN: Have you bought I bonds yet? Why not?
The U.S. Treasury sells I bonds (inflation-linked bonds different from TIPS) which currently yield 9.62% and reset semi-annually with little (but not zero) cost of early sale. You can learn more about them here: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm
If you have not bought I bonds yet, why not?
106 comments
[ 4.9 ms ] story [ 175 ms ] threadIt also maxes at $10k a year, so you're not likely to be bankrupting yourself.
I guess this is obscure security for avoiding keyloggers? You can use your browser's developer tools to inspect the element and fill in the input value.
There are probably better ways to use $10,000 if that is all you have and you are interested in growing money - online courses come to mind.
But the reality is that 10% on 10k isn't a terribly large amount of money at the end of the day.
Maybe the stock market makes a huge come back but a lot of things are pointing against that happening in the next year. The Fed & inflation, baby boomer retirements causing stocks to get sold & less risk assets bought, that whole Europe thing going on.
Seems silly to me not to use I-bonds even if the cap is relatively low, sure wish I could (not American).
The rest I invest in equities, which assuming the US has a functioning society in 5, 10, or 20+ years, will be worth far more.
First, this is ridiculous. It was pretty easy to set up. Yeah, the virtual keyboard is weird and there's some waiting with the verification, but it's trivial effort.
"I also want my cash to be accessible within a few days"
Now we're comparing apples to oranges. If you need the cash in a few days (kind of odd/rare to begin with), then you want a saving account not an investment. That said, withdrawing your I bond capital does not take months or years (withdraw anytime with only a loss in interest if less than a year).
"The rest I invest in equities, which assuming the US has a functioning society in 5, 10, or 20+ years, will be worth far more."
Depends on the equities and your definition of a functioning society. It's more likely to be flat, at least in real terms, over the next decade.
I am under the assumption that the US’s leaders have every incentive to keep broad market equity values going up, even if it means the USD loses purchasing power. There are a ton of leaders with equity ownership that want to see it go up, as well as political support from constituents with IRA/401k/etc, as well as the innumerable underfunded defined benefit pension plans across the country that rely on broad market equity values to keep rising to meet their projected expenses.
For that reason, I consider an SP500 ETF like VOO or even VTI to be relatively safe and track inflation over the long term.
Only a raging bull market like the one we've gotten out of makes a 10% government backed rate of return sound bad.
My philosophy is I keep a certain amount of physical cash (in case electronic payments go down), I keep digital cash (in case my income gets disrupted), and the rest is invested. I already have the digital cash in an FDIC insured savings account earning 2.4%, and I do not need to worry about splitting it up into per year amounts or when I can and cannot withdraw it and how much.
It is more of a simplicity thing I guess for me, and the abnormal inflation calculations which lead to the last 18 months of exceptional i bond returns probably will not last.
So you're looking at getting $600 - $800 to tie up $10,000 for a year, and you have to go through hoops and a cumbersome website to do it.
It's a better deal than other fixed income investments right now, but with an after-tax return that's guaranteed to be worse than inflation, it's hard to get excited about it.
What is nice about a position of that size is that that amount is in the ballpark of a typical families expenditures in a year (ignoring the occasional big ticket items like a car), which means you have essentially hedged away your exposure to inflation.
So yeah, $10k is not a lot, but that is an annual limit, not a lifetime limit. And a good way to hedge inflation is to build an I-Bond allocation that is equivalent to your annual expenses which for most households should only take a few years to get to. And an added bonus is that selling your I-Bonds early has fairly minimal penalties and can be sold at face value (i.e. not subject to market swings) so your I-Bond allocation can double as an emergency fund.
You can still get them if you get them as part of your tax return. Overpay estimated tax or increase your withholding.
10. Will I get actual paper bond certificates? Yes. Savings bonds purchased with a tax refund will be issued as paper bond certificates in your name. If you are married and filed a joint return, the savings bonds will be issued in your name and your spouse's name. If you purchase savings bonds for someone else, the bonds will be issued in the name(s) that you listed on Form 8888.
https://thefinancebuff.com/overpay-taxes-buy-i-bonds-better-...
>The $5,000 maximum is per tax return, not per person. If you’re married filing jointly, you still can buy only a maximum of $5,000 for both of you combined, not $5,000 for each of you.
Merely?
What are some other ways to keep up with inflation with near zero risk?
True in the normal case, when inflation changes slowly, but because the I-Bond rate is computed retroactively, it's a better deal than normal when inflation suddenly increases.
Well I do my banking with online banks so I have no access to a brick and mortar branch nor do I really have the time or inclination to try to talk to somewhere there and get what they're asking for.
I actually needed one earlier this year. My bank no longer had a special signature person at the branch so they sent it to special signature central--which somehow didn't have the info they needed even though the bank branch sent it to them. Ended up just doing the longer drive to my broker and handling the transaction there.
> The Account Authorization (FS Form 5444) submitted is unacceptable as the form was not properly certified. Therefore, we must ask that you submit a new form with your signature properly certified.
> Please note that the form's instructions to the certifying officer state, "Acceptable certifications include the financial institution's official seal or stamp (such as corporate seal, signature guarantee stamp, or medallion stamp)." Notary public stamps are acceptable. Please have the bank place their official seal on the form to certify your signature. If the financial institution does not have an official seal or stamp to use when they certify a signature, they may use the savings bond paid stamp that they normally use when cashing savings bonds for a bond owner. We may accept:
> Signature/Endorsement Guarantee Stamp
> Medallion Stamp
> Official Bank Seal/Stamp
> Corporate Seal
> Consular Seal
> A commissioned or warrant officer of the United States Armed Forces may certify the signature.
> Any stamp or seal must be visible.
> The bank certifying officer should include his/her phone number by the certification.
> If none of the options listed above are available, we may give consideration when a bank officer uses notary certification when it is accompanied by the signature of the employee and the name/address of the bank is provided. The certification must clearly shows the certifying officer is a bank employee.
Form: https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
With interest rates climbing, I do believe there's a chance of deflation risk, which would set the I-bonds to 0% in the next interest rate. That is to say, I-bonds are variable rate against inflation. US Treasury bonds are fixed rate. You get exactly the rate that's on the tin.
I think that I-bonds are more difficult to understand and calculate in light of this. Its easier and simpler in my opinion, to simply invest into 1M or 3M treasuries while waiting for the interest rates to climb up.
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Its a hard balancing act for sure. I-Bonds (and their closely related TIPS brothers) are a play on inflation. Which means you need to understand one more thing in the market.
At least I-bonds are capped at 0% losses. TIPS may lose value in deflation
And as others have said, this is comparing to 0%. If you look around you can find everyday banks giving "whole digits" on savings account for at least these small amounts, so it's more like $700 compared to baseline cash.
I'd maybe be interested if it 10x'd the limit.
When you buy them, you lock in the current rate for 6 months from the date you purchase & then you get the next rate for 6 months after that. So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. You'll then get the next rate which is most likely 3% for 6 months (often quoted as 6% annually). This site does an amazing job tracking what the future rate will be - https://tipswatch.com/tracking-inflation-and-i-bonds/
They will announce the final next 6 months rate in October. You can buy then (around the 15th) if you want. If you buy after November 1, you won't get the current 4.81% (aka 9.62%). But as stated, the October rate is pretty well calculated. Only 1 more inflation report will adjust it slightly. See the Tipswatch site I linked to for info on how & when it's calculated.
Each person can buy $10,000. If you got a tax rebate you can buy up to $5,000 with that. If you have a company, the company can buy $10,000.
Must be a US Citizen.
Someone who works at the US Treasury thought it was a good idea to make you type a password with a "virtual keyboard" using your mouse. So you might want to create a script in your password manager to enter in the console like this:
var x = PASSWORD_AS_STRING; for(var i = 0; i < x.length; i++){ PasswordVK(x[i]) }
Side note, my 70yr old Mom thought this was an easy process. I felt like an idiot.
Which is less than the 3.9% you get from a 6M treasury right now. If i-bonds really only get 6% in the next rate, you've lost money compared to 6M or 1Y treasury bonds.
It's also possible that in November they add something more than 0 to the fixed rate of the I Bond. Buying now though you unfortunately would not get that.
So I-bonds will still beat the 6M treasury bond unless the rates on the latter keep going up.
Thanks for annualizing (or in this case, 6Month-izing) the rates for an actual apples-to-apples comparison.
That doesn't seem correct.
If I have $10k, and it earns an annual rate of 5%, for 6 months, I would get $250. That's not the same as saying I'm earning a 2.5% rate.
You're earning 5%, but only for 6 months.
If you were earning 2.5%, for 6 months, you'd only get $125.
> [4.81% interest on your money after 6 months from the date of purchase]
This is a single concept. The quantity of money earned (4.81%) and the time period over which it is earned (6 months from the date of purchase) are both specified.
In your message -
> it earns an annual rate of 5%, for 6 months
You change the rate to annual here..
> You're earning 5%,
Here you leave the time period over which the 5% is earned implicit (1 year)
> If you were earning 2.5%, for 6 months, you'd only get $125.
And once again here you drop the "per year"
Conventionally, finance uses rates of return on an annual basis -- but it's not unreasonable to use another basis so long as that's specified clearly (as in the OP). This helps because the OP is trying to help people understand the dollar-magnitude of returns they are locking in (X% per year, but for half the time -- aka half the sticker price return) and what is variable in the future.
Do not buy an I-bond if you need the cash or anticipate needing the cash in the near future. Also, do not treat I-bonds like investments. If you have a long time horizon and you want an investment return, you should just invest the money.
If your goal is to time the market and wait for a buying opportunity (why?) then you'd be better off just keeping your cash in a regular treasury. Even parking your money in a 1 year treasury will yield you close to 5% right now (again, not inflation-indexed), but you'll still be liquid:
https://www.cnbc.com/quotes/US1Y
If that is still too high a market risk for you, even a 3-month bill is yielding over 3%:
https://www.cnbc.com/quotes/US3M
I-bonds are a great place to put cash for things like emergency funds, assuming you keep the 1-year lockup in mind. Beyond that, they have fairly limited utility.
For those people, I heartily recommend I-bonds.
I-bonds are really only optimal if you plan on keeping medium-sized chunks of cash around in cold storage for time periods of longer than a year.
>I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them.
Yes and no, I-bonds use a trailing inflation definition so you receive a real advantaged proportionally to the difference in current and past inflation rates; this is of course speculative.
In other words, time it correctly and your money is only locked up for 11 months + a few days. And since interest accrues on the 1st of the month, this also helps the interest rate math slightly.
Just don't go too close to end-of-month, since (iirc) it takes a few days for the transfer/purchase to go through online, and you don't want to get bumped to the next month.
That is incorrect. As long as you are a US resident for tax purposes you can purchase them.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
https://www.irs.gov/individuals/international-taxpayers/intr...
Another thing to note, if you're particularly trying to load up, is you can buy I-bonds as a 'gift', separate of your individual limit. Specifically you and your spouse can buy $10k each directly, plus each buy $10k as a gift to the other (thus $40k total). You can actually buy >$10k as a gift for someone, but you can't transfer beyond $10k a year to that person, effectively increasing the minimum hold period.
Also a general note - you can enter your payment account electronically, but ever changing it requires mailing a form! So choose wisely.
Though, here is a Bogleheads thread where people suggest buying gift bonds even beyond 10k as you mention, to get higher interest rates now, storing them in the TreasuryDirect "gift box" until a year where the recipient comes in under the limit and they can be transferred.
https://www.bogleheads.org/forum/viewtopic.php?t=306297
edit, adding:
https://thefinancebuff.com/buy-i-bonds-as-gift.html#htoc-pur...
In the 1 year hold case (buying direct + gifts for 1 year only) you can transfer and immediately sell the gifts alongside the original bonds, in the new year.
Like it's a theoretically optimal way to invest $10k that won't be needed in the short term, but it's also just a few hundred dollars more than I get from a money market account which has far fewer restrictions. Plus another account to deal with.
If I could add it to a portfolio in an existing investment account, I'd do it.
wow 1k Zzzzzzzzzz