Getting Ready to Buy I-Bonds

I’ve been talking a lot about I-Bonds, mostly because, for me, it’s the equivalent of a 14-month Bank CD returning 5.83% APY. You won’t see an interest rate that high anywhere else. I’ll need this money in a year and a half, so a 14-month time frame is perfect. I wouldn’t put my Emergency Savings there, unless you ladder them. For example, I have a $5,000 I-Bond bought in 2003 that I can cash out whenever if needed (but I won’t since it’ll be earning 6.82% starting in December!). Anyhow, I have:

1) Transferred money from Presidential Savings to Checking.
2) Set up my TreasuryDirect.gov Account.
3) Don’t want to cut it too close, so I’m scheduling a buy order for $5,000 in I-Bonds on 10/24, Monday. (Gonna buy more in November.)

Comments

  1. Anonymous says:

    Does the treasurydirect site keep track of all the tax implications? I know you can defer taxes until you cash the bonds, but the only thing that has been holding me back is that I don’t understand how this would affect my tax filing (if at all). Is it easier to take them to my bank in 15 months and have them cashed at the bank, and then the bank would send me the 1099 form?

  2. How do you buy bonds through TreasuryDirect.gov? Can you use credit cards? Also, why don’t you wait until November before you buy? Odds are both the variable and the fixed will be going up.

    Keep up the good work.

  3. One recommendation. When buying your 5000 dollars worth of I-Bonds, don’t buy one bond for $5000, buy 10 for $500. Your return is the same, but if, after a year, you need some money, you don’t need to cash out the entire bond, just as much as you need rounded to 500.

  4. Ken @ bankdeals says:

    Unfortunately, you can no longer buy savings bonds with credit cards. They ended that program in 2003. It was great getting cash back rewards with I-bond purchases.

    TreasuryDirect is set up a lot like an online bank. You basically link it with a checking account.

  5. savvy saver says:

    I have about 1/3 of our wedding gift money in i-bonds, and I plan to put the 2/3 after the new rates take effect. I’m buying in $200 increments in order to minimize the downside to cashing out if we only need a small amount.

  6. What is the difference between buying bonds via TreasuryDirect.gov and your brokerage? What are the pros and cons of every way?

  7. Alan Yeung says:

    Most believe that the fixed rate will drop in November, so I’ll simply put my short-term, non-emergency fund money there next week.

    It’s really cool that it has a higher ROI than MMA/1-year CD and more flexible than a 5-year CD!

  8. Actually, you can do partial redemptions when you buy them online, supposedly. I’ll report back with a good link later.

  9. Link showing option of partial redemptions. I’m not sure how it works exactly, though.

  10. Anonymous says:

    Why did you transfer into checking? Couldn’t you go directly from an ING direct savings to treasurydirect without the in between step?

  11. If you are undecided about whether to buy in October or November, here’s two links for you:
    http://savings-bonds-alert.blo.....could.html
    http://www.bankrate.com/brm/ne.....1019a1.asp
    More decided? I hope you are.

  12. Vlad – I don’t know of any brokerage’s that sell savings bonds. Do you?

    See this post for most info on partial redemptions.

    As for tax implications, I think it is up you to report them, I am just going report it when I cash them. I’ve never cashed them, so I don’t know if they give out 1099s, but I’ve never heard of them giving them out. I’m sure the IRS knows somehow ;)

  13. Anon – it was just personal preference. I already had my checking account linked up. You can do it your way too.

  14. Matt Hartrich says:

    Aren’t you penalized if you cash in the I-Bond before 3 years? Or am I wrong?

  15. Since I don’t know much about I-Bonds, could you please explain why one would buy them now rather than waiting until November? Would you be getting a different rate?

    Ty

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