Show HN: Earn 9.62% on US Treasury I Bonds on Yotta
My name is Adam, and I’m a co-founder at Yotta (YC S20), an app that uses behavioral psychology to help people save money by making saving exciting.
We built a feature on Yotta where you can earn 9.62% APY via US Treasury I Bonds. (https://www.withyotta.com/i-bonds)
This is an absurd yield for a security that is backed by the full faith and credit of the United States Government - the strongest guarantee you can get. For comparison, most high-yield savings accounts with FDIC coverage are paying ~2%.
The backstory:
I Bonds were established by the US Treasury in 1998 to provide returns linked to inflation to protect consumer purchasing power. The rate on I Bonds is determined from the last six months of CPI data and is adjusted twice per year. Inflation is typically around 2% per year, so I Bonds have never been relevant since the rate was never that attractive.
Inflation spiked in 2022 driving I Bonds reached a record high yield of 9.62% APY. If you buy them by October 31st, you lock in this rate for six months from the purchase date. In the last 12 months, around $27B has been deposited as a result of the insanely high yield. This compares to $348m in 2020. Note that you have to hold I Bonds for at least a year and you forgo 3 the last three months of earned interest if you redeem before five years. You can deposit a max of $10k into I Bonds per calendar year.
So if you can get 9.62% APY on a government backed security when savings accounts are yielding 2%, why doesn’t everyone have I Bonds?
A few reasons.
1. Most people have never heard of them.
2. People don’t want to tie up cash for a year in a CD-like product.
3. The only way to buy I Bonds has been on the world’s worst website, Treasury Direct. You have to fill out long forms, click on a virtual keyboard to type your password, can’t use the back button, and make one mistake and you get locked out of your account. The whole thing is a colossal pain in the ass.
To solve 1) and 3), we wrapped an easy-to-use UI to buy I Bonds within Yotta. Users opt into Yotta creating a Treasury Direct account on their behalf, and we automate the painful part - interacting with Treasury Direct on the backend. This enables us to provide a great customer experience, making it easy for people to get the 9.62%. If anyone wants to control their Treasury Direct directly without Yotta, they can request it, and we will transfer over their account to no longer be managed by Yotta.
Hope you guys check it out and can take advantage of the 9.62% rate before 10/31! Note that if you already have a Treasury Direct account, we are unable to support you for I Bonds unfortunately.
Happy to answer any questions and looking forward to any feedback.
P.S. We were featured in Bloomberg for the launch last week if you want to check that out https://www.bloomberg.com/news/articles/2022-09-28/buying-i-bonds-there-s-an-easier-way-to-earn-9-62-interest
139 comments
[ 2.9 ms ] story [ 235 ms ] thread$5K, not 10K.
>Is there a maximum amount I can buy?
> In a calendar year, one Social Security Number or one Employer Identification Number may buy:
> * up to $10,000 in electronic I bonds, and
> * up to $5,000 in paper I bonds (with your tax refund)
> For individual accounts, the limits apply to the Social Security Number of the first-named in the registration.
https://www.youtube.com/watch?v=KodqIPMbyUg
We'll just get direct access to our TD account. Doesn't sound like this would happen automatically though? So if you guys suddenly closed shop with no warning, what recourse do we have?
The UX is awesome and the layout is simple: no popups, interstitials or other BS. Even better, the page load times and responsiveness are significantly better than any other financial website a visit. I can check log in AND check my TreasuryDirect balance in about the same time it takes me to log into my Schwab brokerage account or load a thread on Reddit.
Their FAQs are also written in an easily understandable way, which is good because I Bonds and the other bonds they sell have some complicated nuances. They even update the FAQs regularly so that all their I Bond example calculations use the current semiannual interest rate.
One thing that would be cool about this Yotta offering is if they automate some of the I Bond annoyances (I needed a medallion stamp to open my account although not everyone is that unlucky), give a consolidated view of purchases and holdings across across multiple SSNs and EINs, and centralize that management.
Do you support cleanly setting up POD beneficiaries? Do I need to give you my spouses' SSN for that too? Or do they also need a Yotta account?
- The person must have a Social Security Number.
- The person must also meet any one of these three conditions:
Thank you for your transparency in advertising.
Can you partner with Stripe Atlas to help me spin up a trust or business entity and buy another $10k? I'll pay you a 5% commission.
I've heard TD will sometimes complain about a trust with your SSN as its TIN, but I've had no problems. After all, it is still a separate entity and that is the technical requirement.
Managing your own records and dealing with TD's horrible login process are the main hoops to creating multiple accounts. I appreciate the GreaseMonkey snippets for fixing their password input, that are listed elsewhere in this thread. But what would be really fantastic is if OP published their code for programmatically interacting with Treasury Direct.
If you create a TreasuryDirect account using my SSN, do you then require a durable power of attorney to manage it on my behalf, as laid out in 31 CFR § 363.33? Or are you simply logging in using "my" credentials and performing actions as if you were me? If the latter, are you at all worried about the Treasury Department cracking down on this?
I liked the description of the product when I first read it. I really did. But I'm losing confidence the more OP keeps pushing in the comments.
This might be a decent product, but I'm wary of someone who is pushing hard to let them create investment accounts on other platforms on our behalf. It just feels like the kind of thing that when it blows up in the future, hindsight will say, "Why did you let someone do that in the first place?"
YOLO is definitely an interesting approach for a financial company. Didn't people shit all over Plaid for taking this approach? Training people to give their financial credentials to 3rd parties is not the best.
Keep it up! You're acting for the good of the user, YOLO it.
https://www.law.cornell.edu/cfr/text/31/part-363/subpart-B
From a brief reading, having a third party access your TreasuryDirect account does seem problematic:
https://www.law.cornell.edu/cfr/text/31/363.22
https://www.law.cornell.edu/cfr/text/31/363.17
Can anyone tell me the ID of the bonds inside of TD which would be bought through Yotta?
TIPS currently have a nonzero real yield.
Why would I want to insert a middleman into a long term investment? If you all go sideways -- which is incredibly likely within the next 10 years -- then it'll be far more hassle than the up-front TD signup irritation.
2) Having your money all in one place. It's annoying to have money different places, so if you already have a Yotta account with us, it's one tap to do this. If you are starting from scratch, it's not as much of a no-brainer, but I still think it's much better than TD.
If we go sideways, we would just give everyone their TD account information directly, and you would take over your account.
With a bank, you (typically) have a brick-and-mortar building you can walk into to resolve edge case problems, and also FDIC insurance. For brokerages, you have SIPC for fraud and sloppy accounting, and usually have decent telephone support. TD has a phone number--that's it. Ever try calling it? It's a long hold time, and who knows if they can even handle these edge cases. Who would you sue if you lost your account or became a victim of fraud?
I think the UI-improvement over dealing with the treasury website is substantial. Good work on finding the opportunity and setting it up transparently via your already-existing buckets feature.
A note of appreciation, that's all.
I have always bought I-bonds direct so doesn't apply to me, but making that easier for the average person -- and more importantly, increasing awareness of their existence -- is a good thing. It's about accessibility for people still getting their financial footing.
Just getting the average person to save more is a good thing, and accessibility is key to that.
https://www.fdic.gov/resources/consumers/consumer-news/2022-...
I loved my Simple account, this looks like a great replacement for it.
Some info I found says:
Sounds like you'd have to hold them for at least 1.25 years then to get a year's worth of interest.It probably would not be worthwhile in the grand scheme of things to take $10,000 from some kind of actual investment account and move it over to these I bonds for a brief duration.
With reference to https://www.law.cornell.edu/cfr/text/31/363.17, what recourse would I have if I use your service and my TreasuryDirect account is compromised as a result?
Your other products include FDIC insurance via Evolve Bank & Trust. I can't imagine the FDIC would cover losses related to this product—i.e. funds are only FDIC-insured up until they're used to purchase an I-Bond. The FDIC recently sent a cease-and-desist to FTX in relation to a similar scheme (in FTX's case, funds are only FDIC-insured at Evolve up until they are used for cryptocurrency purchases); see https://news.ycombinator.com/item?id=32524527. In light of that action, what have you done to clarify the limits of the FDIC insurance to your customers and potential customers?
This implies the bonds are stored on their account, not the end users
The final data isn't available, but the upcoming rate is going to be way lower.
This is disclosed on the linked page (https://www.withyotta.com/i-bonds):
I-Bonds purchased now through the end of October will have a 9.62% Interest Rate guaranteed for 6 months. Future changes in rates are not disclosed by the US Treasury.
Let's say you buy today and hold for one year. You get 4.81% after 6 months and then like 1.5% for the next 6 months (you lose three months of interest when you sell if you aren't holding for 5 years). And then you have to pay federal taxes. Let's say 22%. On your 10,000 you net... $492. Not anything close to the eye popping 9.62% being touted.
The current rate of 9.62% is the lowest it's ever been, and its never changed drastically.
It's just FUD to claim that it'll drop to 3%.
Also, you're locked in, you can't touch the money for a year, and there's a penalty for withdraw before year 5. It's designed as a safe saving instrument, not a stock market replacement.
I, for one, am glad to have invested every year. It's a nice emergency fund.
Recommend doing the math yourself as a sanity check using the composite rate formula in conjunction with historical fixed and semiannual inflation rate tables. The implication is that either the composite rate formula or the historical composite rate table is in gross error, where the latter is much more likely given a naive understanding of what the instrument's intent is.
In my previous remark, turns out that the root of the error was in too quickly and incorrectly concluding (admittedly having never purchased these bonds before and only learning of them this year as we went into a bear market) that both the fixed and inflation rate components were subject to change every six months.
It wasn't until I saw your follow-up today and attempted to revisit details without bias that I noticed this linked chart[1] which made it immediately clear what critical bit of conditional detail I had missed, that is, the fixed rate component is determined at the time of initial bond purchase and persists unchanged for the life of the instrument...whoops!
To be fair, my original remark was in response to your assertion that "the current rate of 9.62% is the lowest it's ever been, and its never changed drastically." Even with my now corrected understanding, this assertion still doesn't stand in my mind given the linked table demonstrates that the prevailing 9.62% composite rate approaches historically high levels independent of original purchase date, and although variable returns ranging from 0% to 10+% depending on issue date is agreeably not drastic to someone as young as me, it's nevertheless pretty subjective, e.g. if you bought between 05/20-10/20, you'd have seen variable APY ranging from 1.06% to 9.62%, which is objectively pretty volatile.
[1] https://www.treasurydirect.gov/files/savings-bonds/i-bond-ra...