Archive for the 'Savings Bonds' Category
So what’s the worst case scenario with I-Bonds if you cash out in a year? Well, that would mean deflation. Contrary to what some believe, the fixed rate is not the minimum you get. The minimum return is zero (see #5 of FAQ), meaning at least you don’t lose anything.
So 6 months at 6.73%, and then 6 months at 0.0% (3-month penalty of… well, nothing). Buying late in November, you’d actually be holding it for 11 months, working out to an annual rate of about 3.67%, not including tax benefits. Of course, deflation is very unlikely. But that’s still the worse case scenario (barring Armageddon).
Posted in Savings Bonds | 12 Comments »
The new fixed rate for I-type Savings Bonds was announced today, and it has decreased from 1.2% to 1.0%, matching the lowest historical fixed rate. This was within my prediction of 1.0 to 1.4%, but one has to wonder if all the mid-October buzz caused them to make the rate lower. Oh well, I bought $5,000 worth in October with the higher fixed rate, so I have until the end of this month to decide whether to buy more. No need to buy now, since they credit you interest for the whole month anways as long as you buy it within November.
If you do buy in November, it will earn 6.73% for 6 months, then 1.0% + a variable rate depending on future inflation adjusted every 6 months. You have to hold at least a year, and you lose the last 3 months interest if you redeem within 5 years.
Posted in Savings Bonds | 14 Comments »
One perk of U.S. Savings Bonds (USSB) and Treasury Bills is that they are exempt from state and local income taxes. For comparison, what would be useful is a quick way of comparing those tax-advantaged rates with the regular interest rates from a bank savings account or CD. So let’s do that. To start, we agree that we want find the equivalent bank rate that gives us the same after-tax return.
AfterTaxReturnBank = AfterTaxReturnUSSB
RateBank * (1 - Fed Tax Rate - State/Local Tax Rate) =
RateUSSB * (1 - Fed Tax Rate)
This gives us:
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Posted in Savings Bonds, Treasury Bills and Bonds | 26 Comments »
My $5,000 I-Bond online purchase looks like it went off today without a hitch at Treasury Direct. Well, almost. I didn’t pay attention to my BillPay along with my checking account balance and I ended up going below the $1,000 minimum on my Presidential checking account. Doh! At least it’s only a $5 low-balance fee and not a bounced check.
There was also a good question about partial redemptions of Savings Bonds - If you withdraw any of it early (less than 5 years), will you be paying a penalty on all future withdrawals, even if you wait more than 5 years? I e-mailed them (they don’t seem to have a phone number?), and the answer I got was no. Here’s my e-mail and their response:
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Posted in Savings Bonds | 3 Comments »
A relatively unpublicized new feature of buying your Savings Bonds online is the ability to cash out only part of your bonds, mentioned briefly here. I just noticed this recently, and explored it further in my account with my paper bonds that were recently converted to electronic format. Now that they are electronic - I can partially cash out those too! Apparently the only two restrictions are:
1) The minimum amount you can redeem is $25
2) The remaining value of the bond cannot be less than $25
Here is a screen shot of me trying to partially redeem my bonds:
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Posted in Savings Bonds | 10 Comments »
[Continued from Part 1.]
Previously I went over the return that I could expect from buying I-type Savings Bonds at the end of October. While the numbers for buying in October are pretty much set, predicting the rates for buying in November will require a lot of guessing and hand-waving.
Short answer: It’s a toss-up. I’m buying half now and half next month.
Long answer:
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Posted in Savings Bonds | 4 Comments »
Well, there goes another Saturday devoted to watching college football. Now back to the issue at hand - Should I buy I-Bonds now or later? I’m definitely buying some, since the higher rate, low risk, and 1-year minimum hold time matches my Mid-Term goal needs very well. As I and others have mentioned, as long as you buy sometime during the month, you get interest for the entire month. So if you buy at the very end of the month (I’ll call this ‘buying late’), you can view it as getting 12 months of interest in only 11 months. So, we should buy either at the end of October or the end of November. There is a difference, so let’s compare:
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Posted in Savings Bonds | 5 Comments »
For those that are unfamiliar with I-Bonds or just need a refresher, please check out my old post U.S. Savings Bonds: I-Bonds and EE-Bonds - Good investment?. Keep in mind that it was written 6 months ago, so “current” and “today” means March. Everything else should be good.
Best source for additional information: Gov’t Treasury sites here and here. I’ll try to answer comments too of course.
Posted in Savings Bonds | 1 Comment »
As promised last month in my How To Predict I-Bond Savings Bond Rates post, the CPI-U inflation data for September is out, and we can get busy predicting the new I-Bond rates that will be officially announced on November 1st, so we can make educated decisions on to buy now or later. Spoiler: it’s gonna be high, as in over 6% APR high. But, first the math:
The inflation-linked part of the I-Bond rate is based on the inflation change for the last six months as measured by the CPI-U:
March CPI-U = 193.3
September CPI-U = 198.8
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Posted in Savings Bonds | 12 Comments »
I’ve got some U.S. Savings Bonds from back when you could buy them with no fees with a credit card and earn cash-back rewards. Unfortunately that ended in 2003. But I still have these paper bonds worth over $5,000, just asking to be misplaced or stolen. And the Treasury has been teasing me with this page about their SmartExchange program to convert these bonds to online electronic format. It’s invitation only, and I’ve been waiting for one for almost a year now. Finally I found out how to get an invitation - just ask! (Seems like a recurring theme now)
Benefits of Electronic Bonds include:
» Cash them in online, instead of having to go to a bank
» Track their current value online
» You don’t have to worry about losing them
» You can make transfers online
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Posted in Savings Bonds | 7 Comments »
I-Bonds are currently paying 4.80% interest, which is pretty good. The rate changes every 6 months though, and I just spent the last hour trying to figure out how to predict it. As I’ve mentioned in an older savings bond post, I-Bonds pay a rate based on two parts, a fixed component good for the life of the bond and a variable component based on inflation that changes every November and May 1st.
It turns out you can actually predict the variable component of the rate before it is actually announced officially. Inflation in this case is measured by the CPI-U, which is released every month by the government here. For example, the inflation information for August 2005 was just released today. The rate in May is a measure of inflation from the previous October through March; the rate announced in November is a measure of inflation from the previous April through September. Here’s how to use this information to compute the I Bond rate:
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Posted in Savings Bonds | 8 Comments »
As of May 1st, the Treasury announced that I-Bonds bought from now until 10/05 will earn 4.8%. The fixed component is up from 1.0% to 1.2%, and the inflation-indexed component rises to 3.6%. (For more on how I-bonds work, please see this previous post). For me, my older I-bonds, with a fixed part of 1.1%, pay 4.7% now. Not too shabby, especially since you’re not paying state income tax on the interest.
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Posted in Savings Bonds | 3 Comments »
It looks like my post on EE Savings Bonds a few weeks ago is already obsolete, as the U.S Treasury Department announced yesterday that Series EE Savings Bonds issued on and after May 1, 2005, will earn fixed rates of interest for the lifetime of the bond. You’ll basically be buying a 30-year CD with no early withdrawal penalties after 5 years.
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(This post is continued from Part 1)
Okay, so we went over I-Bonds for a little bit, now let?s see what EE Bonds have to offer. Again, EE-Bonds share many characteristics with I-Bonds, which were outlined in my previous post. However, EE-Bonds are sold at half of face value ? a ?$50 EE Bond? costs $25. Whenever a contest offers you a ?$50 Savings Bond?, odds are it?s an EE-Bond.
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Posted in Savings Bonds | 5 Comments »
Right now, my portfolio is very cash heavy (almost 50k), as I saving for up a house in crazy-prices land. Accordingly, I am always on the looking for liquid investments that are safe and pay competitive interest rates. So I’m taking another look at U.S. Savings Bonds.
Let?s start with the two types of Savings Bonds that are available: EE and I Bonds. I’ll start with characteristics that are the same for both types, and then focus on I-bonds, leaving EE bonds for a later post.
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Posted in Savings Bonds | 13 Comments »
