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I Bonds or iBondsCheck our attached discussion forum for the current rate for iBonds
I Bonds are a 100% safe way to defer taxes while getting inflation protected return for up to 30 years. Currently Series I bonds are paying 6.83% Interest!
I Bonds or ibonds [3/10/06]New Article Replaces this one. Please read: Discuss and read more about "I Bonds" with others here. WHAT ARE I BONDS?I Bonds are also known as "Series I Savings Bonds." I Bonds are 100% guaranteed by the U.S. Federal Government. Their key feature is inflation protection, hence the "I" in "I Bond." The interest paid on has two components. The first is the fixed rate that is set once every six months and stays with the bonds purchased during that six-month window until the bond is cashed. The second component is pegged to the Consumer Price Index (CPI) and is adjusted on May 1st and November 1st every year. Your total interest is the sum of these two components. If inflation goes up, then your rate of return goes up to keep pace with inflation. Likewise, if inflation goes to zero, then you are left with the base rate which is currently 1.0%. DISCLAIMER: I have been recommending I Bonds (or ibonds) in my newsletter portfolio since August of 2003. In my March 2006 newsletter I wrote of I Bonds:
I also have my own money invested in I Bonds. With my disclaimer out of the way.... WHY I LIKE I BONDS:
LINKS FOR MORE INFORMATION
KIRK'S INVESTMENT NEWSLETTERMy newsletter offers quite a bit of useful information including two recommended core portfolios composed of index funds or ETFs, tables, discussion of interest rates, The Fed Model, etc. that many say are worth the price of the subscription before accounting for the fantastic returns in my explore portfolio. DISCLAIMER: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk. Individuals should consult with their own advisors for specific investment advice.
The copyright of the article I Bonds or iBonds in Investment is owned by Kirk Lindstrom. Permission to republish I Bonds or iBonds in print or online must be granted by the author in writing.
Comments
Mar 23, 2006 6:05 PM
Sau Lam :
I just read Money Magazine which recommends against buying I-Bond. It quoted one expert saying the yield of I-Bond may go to 1% in May.
What is your outlook for the fixed rate and the variable rate come May? Mar 24, 2006 2:19 AM
BiJian Feng :
The fixed rate on the I-bond is already 1%. I believe the variable rate will decrease and the fixed rate will increase come May.
Mar 24, 2006 8:22 AM
allancoleman :
Bob Brinker seemed to hint to a caller last weekend that he should buy I bonds sooner rather than later . course no one knows what the Tres is going to do , but Bob thought it was possible that the fixed rate portion could be lowered for future purchases of I bonds and that the variable rate would fall too with the increases in the CPI caused by the energy bubble moving through the economy . and that future CPI rates might fall thus causing the overall I bond rates to fall .
we'll all know in may who is right . but Bob thought sooner rather than later might be wise . i'm sure Bob will discuss this again more than once on his next appearance on his show as I bond questions are frequent on Bob's shows . Mar 24, 2006 9:05 AM
runner26 :
My thoughts are that since the inflation portion (CPI-U) may drop to zero due to spike prior to the last reset, there would be a likely increase in the fixed offering to attract buyers. Would anyone rush out to buy I-bonds at 1%?
I'm perplexed about Bob's recommendation to buy now before the reset given that outlook. His recommendation to buy before the last reset though was spot on. This gave a higher base rate of 1.1% and a full year of higher rates. Mar 24, 2006 9:44 AM
John King :
Somehow I'm thinking the fixed rate will stay 1% as those who set the rate will want to try to keep folks from loading up on the bonds. Last time I predicted an increase and was wrong so this time I'll predict that they stay where they are rather than go up. Maybe I'll be better this time?
The inflation component this time should be rather small I'd think so the yield may total only 3-4%. Link to past rates for those curious: http://www.publicdebt.treas.gov/sav/sbirate2.htm Regards, JB Mar 26, 2006 1:55 PM
Jim Johnnes :
Kirk,
Even is what you say is true, the average annual percentage return for the first year will be 3.865%(calculated as follows: 6.73% + 1% = 7.73%)/2, correct? I suppose this is not very attractive, considering 6-month T-bills recent yields were about 4.8%, the 3-month at 4.6%, and the 28-day close to 4.5%. Does one add the 1%, or would the yield actually be 0% for the second 6 months? I interpret it to be 1% plus the change in the index, which would be a total rate 1% under you scenario. So, the 6.73% rate turned out to be a teaser. There is still some advantage to the income deferral, though I'm not sure it overcomes the lower yield vis-a-vis T-bills. Mar 28, 2006 9:32 AM
axolotl :
In my state, state income tax is 7% which is worth about 0.25% yield due to Fed bonds being free of state tax. Plus, you have to back up 4 months for the comparable yields on CDs etc. These I bonds may be for longer term protection and there was a possibility that oil moved to $80 or $90 barrel.
Mar 28, 2006 10:46 AM
runner26 :
I belive that this is the way the rates are set:
I bond rates change on May 1 based on the CPI-U change from Sept. through March, and again on November 1 based on the CPI-U change from March through Sept. The following calculation is used: Composite rate = [Fixed rate + (2 x Infl. rate) + (Fixed rate x Infl. rate)] ------------ Recent CPI-U data is as follows: Data extracted on: March 28, 2006 (1:10:59 PM) Consumer Price Index - All Urban Consumers Series Id: CUUR0000SA0 Not Seasonally Adjusted Area: U.S. city average Item: All itemsBase Period: 1982-84=100 2005 Jan 190.7 .... Feb 191.8 .... Mar 193.3 .... Apr 194.6 .... May 194.4 .... Jun 194.5 .... Jul 195.4 .... Aug 196.4 .... Sep 198.8 .... Oct 199.2 .... Nov 197.6 .... Dec 196.8 2006 Jan 198.3 .... Feb 198.7 ------------ For example for the last reset in November 2005, the CPI-U changed from 193.3 in March 2005 to 198.8 in September 2005. (198.8 - 193.3)/193.3 gives a semiannual inflation rate of 2.85%. Using the above formula for the Nov. 2005 I-bonds which had a fixed rate of 1% gave the new rate rate = .01 + (2*.0285) + (.01*.0285) rate = .01 + (.057) + (.000285) rate = .0673 or 6.73% Thus for the May 2006 reset, the CPI-U for Sept. 2005 is the starting point, which is 198.8. March 2006 will determine the end point, and that should be posted after mid April, but as of Feb. 2006 it is 198.7 which is a small decline. Mark Mar 28, 2006 12:13 PM
thruhiker :
I have 2 blocks of I-bonds I bought back in 2000 with fixed rates of 3.6% and 3.4%. I guess those bonds are earning 9% or so now. Not bad.
In my opinion, a risk free quaranteed return (i.e. the fixed rate) is 2%. I won't be buying any more bonds at the current levels. Mar 28, 2006 12:19 PM
allancoleman :
that's exactly why i haven't bought any either . i'd rather sit in the ever higher money markets while i await a drop in fixed income mutual fund n.a.v.'s to get not only the present yield , but also the future appreciation of n.a.v.
Mar 28, 2006 1:27 PM
runner26 :
<i>I guess those bonds are earning 9% or so now.</i>
You are indeed in an envious position. COMPOSITE EARNINGS RATES FOR PERIODS THAT BEGIN NOV 2005 THROUGH APR 2006 ----------------------------------------------------------- | Issue | Fixed | Semiannual | Composite | | Dates | Rate |Inflation Rate| Rate | ----------------------------------------------------------- | Nov 2005 - Apr 2006 | 1.00% | 2.85% | 6.73% | | May 2005 - Oct 2005 | 1.20% | 2.85% | 6.93% | | Nov 2004 - Apr 2005 | 1.00% | 2.85% | 6.73% | | May 2004 - Oct 2004 | 1.00% | 2.85% | 6.73% | | Nov 2003 - Apr 2004 | 1.10% | 2.85% | 6.83% | | May 2003 - Oct 2003 | 1.10% | 2.85% | 6.83% | | Nov 2002 - Apr 2003 | 1.60% | 2.85% | 7.35% | | May 2002 - Oct 2002 | 2.00% | 2.85% | 7.76% | | Nov 2001 - Apr 2002 | 2.00% | 2.85% | 7.76% | | May 2001 - Oct 2001 | 3.00% | 2.85% | 8.79% | | Nov 2000 - Apr 2001 | 3.40% | 2.85% | 9.20% | | May 2000 - Oct 2000 | 3.60% | 2.85% | 9.40% | | Nov 1999 - Apr 2000 | 3.40% | 2.85% | 9.20% | | May 1999 - Oct 1999 | 3.30% | 2.85% | 9.09% | | Nov 1998 - Apr 1999 | 3.30% | 2.85% | 9.09% | | Sep 1998 - Oct 1998 | 3.40% | 2.85% | 9.20% | At this time I prefer the 6-month T-bill for safe money which has been about 4.8% in recent weeks. Mar 29, 2006 9:59 AM
axolotl :
There was also a little tiny advantage in that you could wait to the end of the month and buy and the interest would be calculated from the 1st maeaning that you collected the little money market rate during that month. Hopefully, the Fed is going to 5% in May and PAUSE.
Apr 3, 2006 3:12 PM
Sau Lam :
If we do bail out, perhaps the best time to do it is early August. The 3 month interest penalty is the last three months' interest. If the rate indeed drops to 1 or 2%, you are not giving up much except opportunity cost for the three months.
Apr 3, 2006 7:01 PM
runner26 :
Agree with 3 months after the May reset if it turns out to be dismal. But not necessarily in August. It depends on the purchase date of the specific bond. Remember it is reset every 6 months from YOUR purchase date. So if you purchased a year earlier in September, you continue to earn the high interest through August and the May reset price runs Sept. through March. You couldn't sell the three low interest months until December 1. By then you might see what is could happen for the next reset and change your mind.
Apr 5, 2006 2:29 PM
Sau Lam :
Good point.
Apr 19, 2006 11:29 AM
runner26 :
A jump in the March CPI will keep I bond rates from being totally dismal, but won't be anything to write home about.
I bond rates change on May 1 based on the CPI-U change from Sept. through March, and again on November 1 based on the CPI-U change from March through Sept. The following calculation is used: Composite rate = [Fixed rate + (2 x Infl. rate) + (Fixed rate x Infl. rate)] ------------ September Consumer Price Index - All Urban Consumers was 198.8. March is 199.8 (199.8 – 198.8)/198.8 gives a semiannual inflation rate of .503% Using the above formula for the Nov. 2005 I-bonds which had a fixed rate of 1% gives the new rate of 2% (depending on how the treasury rounds/truncates). rate = .01 + (2*.005) + (.01*.005) rate = .01 + (.01) + (.00005) rate = .02 or 2% Mark Apr 19, 2006 4:17 PM
Sau Lam :
It looks like the inflation from Oct to March is 0.7%:
Oct 0.3 Nov -0.7 Dec -0.1 Jan 0.7 Feb .1 March .4 Total: 0.7 Using the formula given on the I-Bond site: 0.01+2X0.007+(0.01X0.007) =0.01+0.014+0.00007 =0.02407 So it looks like the new inflation adjustmetn and the 1% fixed rate will equal to 2.41% Apr 19, 2006 5:54 PM
runner26 :
You are incorrect. You cannot use those numbers. You must use Consumer Price Index - All Urban Consumers numbers. Sept. was 198.8. March is 199.8
Go here: http://www.bls.gov/news.release/cpi.toc.htm scroll down and Click on "All Urban Consumers (Current Series) " select the first box: U.S. All items, 1982-84=100 - CUUR0000SA0 scroll down and Click on Retrieve Data. The page returned is the data to use. You are looking at rounded averages by month, not the difference for the 6 month period. That will through you way off. Mark Apr 19, 2006 6:48 PM
runner26 :
hmm, above link didn't get pasted correctly, here is another try:
http://www.bls.gov/cpi/home.htm Apr 19, 2006 7:06 PM
Sau Lam :
Based on your calculation ,what should the inflation factor be?
Apr 19, 2006 7:09 PM
runner26 :
<b>Based on your calculation ,what should the inflation factor be? </b>
1% Apr 21, 2006 7:25 PM
runner26 :
For those of you not too sophisticated in math, the Treasury Savings Bond Calculator is located at:
http://wwws.publicdebt.treas.gov/BC/SBCPrice Enter the bond/note type, amount and issue date, and it will give the current value, interest rate, etc. Mark Apr 24, 2006 7:44 PM
runner26 :
<b>Did I miss anything in this summary of your calculations?</b>
Kirk, I think that's got it! I found Brinker's fluctuations interesting this weekend. I hope he goes back and listens to his own comments. To the first caller, he said accurately that the new inflation set would be 1% and the new yield on current bonds would be 2%. Second caller he recommended purchasing before May 1 to get the current 6.73% and then on the reset, he said the rate would be lower, perhaps 2 to 3 (or 3 1/2%), I don't remember his exact words, but they were contradictory of his earlier statement. And then later in the show, returned to the 2%, saying before May 1 to get 6.73 and 2 for an average of 4.36 for the year. At which point they could be sold for the 3-month penalty. (Which of course would reduce the effective yield further.) With 6-month T-bills yielding around 4.9%, I don't see how this makes sense. Bob speculated that the fixed portion might move up to 1 1/2 percent at the May reset, but still favored purchasing now. Mark Apr 25, 2006 5:55 AM
grgrym :
I am a retired school teacher seeking to maximize my savings with no risk. Currently, I am investing in I Bonds. I am moving from CD's. I would appreciate all tips you may have. thanks
Apr 26, 2006 6:32 AM
grgrym :
Kirk, what do you think of Mr. Savage's article? Follow this link: http://www.suntimes.com/output/business/cst-fin-terry26.html
Apr 26, 2006 7:35 AM
grgrym :
Do you agree that ibond rates will fall to 2% for the next six months, as asserted my Ms Savage, to wit:TERRY SAVAGE SUN-TIMES COLUMNIST
"Savings bonds rates are about to take a sharp drop. If you buy a Series I bond before Monday, you'll earn 6.73 percent annual interest for the next six months. But if you buy a Series I bond after May 1, it's likely that you'll earn only about 2 percent for the coming six months! (The final determination on the new Series I bond rate will be made by the Treasury department on Monday.) The government looks at its nonseasonally adjusted Consumer Price Index twice during the year -- at the end of September, and again at the end of March. A huge jump in the rate of change in the index led to the new rate of 6.73 percent that was established Nov. 1, 2005. But at the end of March, the index stood at 199.8 -- up only 1 point from the previous 198.8. So, based on the government's calculation, it appears that the "semiannual inflation factor" will be only 1 percent starting May 1. Add that 1 percent to the base rate of 1 percent, and it looks like Series I-bonds will pay only about 2 percent starting May 1 and for the following six months. One more important note: If you buy I-bonds today, at the current 6.73 percent rate, you'll keep earning that rate for the next six months. Then the rate on your bonds will drop to the expected 2 percent rate for the following six months. In fact, if current rising energy prices contribute to another big jump when rates are re-set on Nov. 1, 2006 -- you'll still be stuck earning that low 2 percent for the full six months." Apr 27, 2006 4:07 PM
James :
I think these urgent calls to buy I Bonds before the rate drop are ridiculous... Rather than repost a long screed here, i"ve blogged it <a href="http://bbaadd.com/blog/2006/04/finance-you-can-panic-now-or-panic.html">here, at bbaadd.com</a>. Have a look, let me know what you think.
Bottom line: there are other financial products, including government products, that pay as well or BETTER compared to I Bonds over the coming year, and they have fewer restrictions too. Apr 28, 2006 7:08 AM
Lcha :
Question: Suppose you have held your i-bonds for more than a year but less than 5 years and you DID want to sell out. You lose 3 months interest. I assume it is the LAST 3 months interest. And the last 3 months interest has been very strong. So, wouldn't you want to hold the i-bonds you want to sell at least another 3 months after the rate decreases? That way the 3 months interest you lose in reduced.
Am I off base here? Apr 28, 2006 3:24 PM
James :
The interest that's taken as a penalty is definitely "the last 3 months' interest". It's really a matter of how much interest your particular bond is earning, and how much you can make elsewhere, when (and if) it makes sense to cash out.
I Bond values increase at the first of the month, so a key date for some people who want to cash out before the end of the 5th year is the first business day of the 4th month following a rate drop (not the last day of the 3rd month!) All extant I Bonds will be affected by this... and some bonds issued in the past five years have much higher base rates, so they'd have to be held longer and earn more to justify moving out early. It's really just a matter of what action produces the most money by Nov. 1, but that depends on what you're holding. Treasury FAQ on early redemption: <a href="http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_i_faq.htm#cash">http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_i_faq.htm#cash</a> May 5, 2006 9:53 AM
Bryan :
I'm thinking a 1.4% fixed rate is looking pretty good. Does anyone really think inflation is going to hold steady goin forward?
Also remember I-bonds are free from state tax -- an important consideration for those of us in Cali. Thoughts? On a similar note -- I just discovered that metal ETFs, GLD and SLV are short term taxed like everything else but they are taxed long term as collectables - at 28%! Aug 16, 2006 9:05 AM
runner26 :
<p></p>Four of the six months have passed leading up to the I-Bond variable rate reset. I took a look at where we stand so far. During the four months of March to July (November reset will include the months March to September), the CPI-U has risen from 199.8 to 203.5 or 1.853%. So if the reset were to be held today (which it is not) the new rates would be approx. as follows for the various recent base rates:
Base----Rate 1.0%----4.72% 1.1%----4.82% 1.2%----4.93% 1.4%----5.13% With still 2 months to go, these number will move up or down depending on the August and September inflation data. Aug 27, 2006 4:08 PM
cr :
Does cashing ibonds make sense if your in a low tax bracket? Maybe buy GNMA fund or a CD or both. Already cashed some low base rate bonds and bought GNMA fund. Now trying to decide if I should liquidate 2 and 3% base rate bonds and buy treasuries/CDs or GNMA fund.
Aug 27, 2006 4:28 PM
allancoleman :
hello somedude3 ,
not sure i have a specific recommendation or answer for you although i do like GNMAs , but some things to consider in your decision is that some think the economy could be headed down in the future and thus the Fed could have to lower the Fed funds rate at some time in the future . IF the Fed lowers rates , money markets and CDs will go down in the future and the nav of GNMAs will go up thus giving you not only their yield but also appreciation of your principal . please go to the Vanguard web site and check their recommendations on what kind of investors should buy GNMAs . Aug 27, 2006 4:38 PM
cr :
Have half position in GNMA at 9.98 a share. Trying to decide if 2% and 3% base rate ibonds should be kept? Taxes aren't a big issue. The ibonds have been good for the last 5 years. Not so sure the next 5 years will be.
Aug 27, 2006 4:46 PM
allancoleman :
i don't have an objective opinion of ibonds because i don't particularly care for them and the base rates aren't high enough for my tastes .
i can say , in my opinion , your purchase at $9.98 is a good price for your GNMAs . i did make one single purchase at a better price of $9.93 a share , but i'd be tickled to death if i could get more at your price . as far as how inflation and ibonds will do over the next five years or beyond , i wouldn't even try to attempt a prediction that far out . i'm not sure how the next five years will be either . :) although most advisors are predicting that fixed income investments will do well in the future . Aug 27, 2006 5:05 PM
cr :
Five years is along time. Crystal ball gets hazy quick. I think I"ll keep the 3% base rate bonds and keep scaling in to GNMA fund with the 2% base rate and lower bonds.
Aug 27, 2006 5:33 PM
allancoleman :
i like your idea of ' scaling ' into the GNMAs . i'm hoping to do the same in the future if / when bond yields spike up on any given day / week according to the will of the bond market traders . i'm even willing to buy them at the present price of $10.15 a share nav if i have to . i just believe that i might be able to get'em lower . and i'm sitting in a excellent stable value fund paying well over 5% , almost 6% , while i wait . :)
and getting rid of your lower paying base rate bonds sounds good to me too , although ' runner26 ' has an excellent point too . Aug 27, 2006 5:34 PM
runner26 :
<b>Now trying to decide if I should liquidate 2 and 3% base rate bonds and buy treasuries/CDs or GNMA fund.</b>
Why did you buy I-bonds? If it was for inflation protection and tax deferral, which is generally why you buy these, nothing has changed there (unless you believe inflation has evaporated, I'm not sure since rents and energy are included in the calculation of CPI-U). If I had 2 or 3%, I'd be inclined to keep them, at least till 5 years passed. I have some 1%, which are more iffy, but still haven't sold those until I get a better idea of the next inflation reset. Aug 27, 2006 5:50 PM
cr :
I bought them because at the time they were paying great rates. The inflation protection and tax deferral were a smaller factor. The rates for the next six months are going to be below 3%. If rates continue to trend lower GNMA will make $$$.
Aug 27, 2006 6:13 PM
runner26 :
<b>The rates for the next six months are going to be below 3%. </b>
How so? If your base is 2 and 3%, that is added to the inflation rate. After 4 months, that is looking about 3.73 or .74 for those bonds, with still 2 months to go (may be up or down). So a 2% base would calculate to 5.73, and a 3% base 6.73. There are only a few CD's close to that, and you will take a 3 month penality and pay taxes to get it, reducing the amount you have to invest. The best CD I know of at the moment is a 5.90% yield for 17 months at Golden 1 Credit Union, but you must live in California. You should do all the math to be sure that is what you want to do. Aug 27, 2006 6:36 PM
cr :
I purchased ibonds in 04/2003 with a 1.6% base rate. currently earning 7.35%. Due to change in October right? What rate do you think they will be then?
Aug 27, 2006 7:51 PM
runner26 :
On 10/01, that I-bond will go to 2.61 for the next 6-months. If you sell it on 10/01, you will forfit the 7.35% that you earned the prior 3-months. If you wait 3-months, you would forfit 3-months at 2.61%. No easy decisions.
Aug 27, 2006 7:57 PM
cr :
I bought the bonds on the last day of the month. I'll sell on the first of the month. Seems to me I only really forfiet one months worth of interest. At least thats the way I look at it.
Aug 27, 2006 8:18 PM
runner26 :
2 months loss by my math. I don't believe they pay you anything for September unless it is held for the entire month, but yes they paid you for the entire month when you purchased, even though you purchase at the end. You are correct that it makes up for some of the loss. I do that also.
If you do buy GNMA's and interest rates rise, which I must say it is looking less like it would be the case, you would have a double hit, no I-bond to rise with the rates, and a loss in NAV from rising rates on the GNMA side. On the flip side, if rates drop, you have dumped the I-bonds which will perform less well and get a boost from the rising NAV's in the GNMA. Good luck with you chioce. Aug 27, 2006 8:23 PM
cr :
I believe you get the full month of interest by owning them on the first of the month. I'm pretty sure about that but Verify with the fed branch in Kansas City.
Aug 27, 2006 10:10 PM
allancoleman :
Hi runner ,
sure hope you're wrong about about the " interest rate raise , which i must say is looking less like it would be the case " . :) . but unfortunately it is looking like you might be right . :( oh well , we should only have the next couple of Fed meetings to settle the indecision on their part . either the economy gos down the tubes and they lower rates or the economy takes off and they have to raise rates to slow it down . if the Fed decides to lower rates , i'll have to decide if i'm going to buy my GNMAs at that nav price at that time or not . one thing i noticed about the email exchange on the ibonds versus the gnmas was that i'm not sure it'll be worth anybodies while to give up interest gained if you sell any asset . from what i can read , either one of them'll probably be good in the future . and it probably wouldn't be bad to have a mix of both . ? ? Aug 28, 2006 9:12 AM
runner26 :
<b>I believe you get the full month of interest by owning them on the first of the month.</b>
Well, interest posts on the first of the month for I-bonds, that is why you got it when you purchased on the last day, on the first, you got the prior months interest. On the first of September, the interest posted is for that earned in 'August'. BTW, the three months interest that is lost is the LAST 3 months earned, which in your case is the 7.35%. Ouch. I'd rather loose at a 2.61% rate, but each to their own. <b>allancoleman wrote it probably wouldn't be bad to have a mix of both </b> Yes, I like hedging and have both. I sure wish I had some of somedude3's 2 and 3% base rates. With my 9.3% California Tax Bracket, that would be sweet indeed, compared to current CD's and Treasuries. Aug 28, 2006 9:35 AM
cr :
You got me thinkin. But I don't live in California. I'm on the east side of Washington state. I'm glade for that most of the time. Great weather, no traffic problems no income tax and inexpensive real estate. If you saw my tax bill you'd pass out. Your tax checks are probably gonna be quite a bit bigger than mine. Cali is nice, but the price of admition is to high for me. I've got GNMA/ibonds. Maybe I'll buy a twelve month CD at 5.5% to round things off. Spread the risk as they say.
Aug 28, 2006 8:17 PM
peter norwest :
Great weather?? Hmm when I was there it rained alot. There is no traffic because everyone drives at the same speed (55). I have never seen a well coordinated driving speed. :)
Hey its very green though Aug 28, 2006 9:56 PM
cr :
You've never been to the S.E. side of the state. It's totaly different. Desert climate. Seven inches of rain a year. Some of the best snow sking and wind surfing is an hour away.
Aug 28, 2006 10:06 PM
allancoleman :
i've been to pretty much all of eastern Washington state when i used to live in Southeast Alaska for 11 years and made many a trip driving through that area . and the weather is dry as you've said and the area is nowhere as crowded as it is on the western side . plus it's still one of the taxfree states still left . that and they practicly give electricity away in that area . pretty cheap because of the big hydro dams .
if i decide to leave Alaska and don't want to live in Hawaii full time , eastern Washington state is on the top of my list . guy could really ' lose ' himself out there . Aug 29, 2006 2:54 AM
cr :
Yeah, the average utility bill on my 3000 plus sq. ft. house is about 60 bucks a month. The local utilities have and will continue to lower rates. The west side of the state is a zoo. Luckily the cascade range keeps the bad weather and the crowds over there.
Aug 29, 2006 6:42 AM
peter norwest :
Thanks for that!!! I think I will put that in my list as a future retirement if people don't start moving there.
Yeah, the average utility bill on my 3000 plus sq. ft. house is about 60 bucks a month. The local utilities have and will continue to lower rates Dang I already love the place. :) Aug 29, 2006 6:47 AM
peter norwest :
if i decide to leave Alaska and don't want to live in Hawaii full time , eastern Washington state is on the top of my list . guy could really ' lose ' himself out there .
Hello neighbor Aug 30, 2006 8:44 AM
cr :
So Kirk whats your opinion on cashing ibonds?
Aug 30, 2006 12:47 PM
:
Southeastern Washington; little rain, little traffic, low utilities, no state income tax, wow it sounds like paradise to me. In southern CA this year we've been paying $600 per mos for electricity! Traffic is HORRIBLE, State and Local government sucks, uncontrolled illegal immigration causing huge problems; yuk. I have never been more in the mood to move. But Washington sounds like a million miles away.
Aug 30, 2006 1:15 PM
cr :
You could probably live on half of what your living on now and improve your standard of living. I've lived in Cali before. To much of a carnaval for this country boy. My house payment is a little more than your electric bill. My house is brand new.
Aug 30, 2006 1:26 PM
cr :
Yeah, I sold some ibonds last month and the month before and put it in GNMA fund. Been really enjoying the bond rally. Just wondering what you thought. Not trying to get any free info. Thanks.
Aug 30, 2006 1:55 PM
cr :
I don't hear any trains at my house. Nice and quiet. Probably can't hear the trains in Cali over the freeway traffic. We are considered savages by some though. The mighty columbia and snake rivers are right out my door. Boating and biking with no one around. Haven't been bored yet. They also make the most sought after wines in the new world here.
Aug 30, 2006 2:00 PM
Moonlight :
Question I just used the I bond calculator after following some of you liqudating some with lower rates. I have some as high as 8.79% some at 7.35% and then the lowly 2.11% and even lower 2.01% Are those interest rate numbers the total of what you get or does the inflation rate tack onto that? If so I'll rush to liquidate the ones in the twooooo's I learn alot here, Thank you in advance.
Aug 30, 2006 2:07 PM
cr :
Thats the total. The CPI dropped to 1% for the previous 6 months prior to the recalculation on 05/01/06. Thats the way I understand it.
Aug 31, 2006 3:38 PM
:
No monster home; just 3200 sq ft. But I have a pool, two air conditioners, two refrigerators, freezer, etc. It costs me close to $600 the last two months for electricity. It's been HOT here July and August. You live much closer to the ocean while living in the inland empire, Corona, is like living in a desert.
I would like to buy a home close to ocean. If I had any juevos, I would do it. We’ve been here for over 30 years and pay very little taxes. But the neighborhood is rapidly changing demographically and will soon be 100% Hispanic. As Hispanic families move in we’ve had some unusual situations. Roosters and chickens were put in the back yard of a recently sold home waking up the neighborhood until animal control came and removed them. A home sold nearby where multiple families moved in, dug a new sewer line in the front yard, dry walled the inside of the garage, installed a new bathroom in it only to have the city cite them telling them that the area is zoned for single family use only and ordered them to restore the house to the original. Most of the families have been very nice but not being bi-lingual it is hard to establish close relationships. Times they are changing. Aug 31, 2006 7:30 PM
cr :
Sorry dude but your post has me in stiches. Call 911 I think I hurt myself.
Aug 31, 2006 7:31 PM
runner26 :
I made the mistake with my first house of loving it too much. It was a 1955 solidly built house that I restored with my own hands. Hardwood floors, plaster walls, etc. I loved it, it suited me perfectly, and I ignored the neighborhood as my neighbors died off and the families rented and sold off to less desirables. I finally was forced out when the bullets began to fly. I was lucky to unload it for what I paid for it 20 years earlier. It pains me to drive by and see what has become of it since I left 7 years ago.
As for retirement locations, I am looking to move from California to Oregon or Washington. Not Eastern WA, as I must have easy access to a big city. I love Portland, Oregon, but housing is pricey. Could end up nearby in Willsonville. I like Corvallis, Oregon a lot. I keep coming back to there. My only problem with Oregon is the 9% income tax, which starts at a very low-income level. Ouch! No sales tax doesn't cover for it. I keep looking at western Washington, but property seems expensive. No income tax is a big plus, since I will have a good retirement income, but don't know if it covers the price of the property. I was not inspired by Vancouver, Wa., across the river from Portland. The hunt goes on.... Sep 1, 2006 9:40 AM
:
We are making the same mistake that runner26 made. Our house was built in '61 with plaster walls, and with 1450 sq ft. We loved the neighborhood and the neighbors were fantastic so as we had children we added to the home until we reached 3200 sq ft. For years and years no homes sold in my neighborhood. More recently, people have expired or moved into retirement communities and with their movement began the demographically change of the neighborhood. It is surprising how fast it has accelerated in the last two years.
But we do have a deep attachment to the house where we raised 4 children and even had the pleasure of raising some grand children while their parents completed professional schools. With help, over the years we put up crown molding, copper plumbing, double pane windows, up graded floors and kitchens, etc. Most of it was done by my wife and me. Looking back upon it, we should have moved years ago but were held by ties to the neighborhood. Unfortunately, they are all senior citizens with pace makers! Now if I could some how "teleport" my house to another location.....I really do love my house and consider it perfect. At least runner26 saw the hand writing on the wall and left. Perhaps with a few bullets flying over head in my neighborhood will be my incentive to move. Sep 1, 2006 4:16 PM
allancoleman :
just a thought . instead of one perfect house in a single perfect location , think about TWO residences in two different locations that are perfect in winter and summer .
i have two condos that are each smaller than the adverage home . since i only spend HALF my year in either condo , i don't feel the need for a larger space . both condos are less than a thousand square feet . taxes are less . i have one single vehicle parked inside each secure building . each residence has everything needed to exist . clothing , underware , toothbrush , etc . the new restriction against carrying all these items aboard the airplane doesn't bother me cause i never carried all that stuff anyway . all i have to bring aboard the aircraft is my laptop and a couple of checkbooks and assorted other lessor paperwork and that's it . my wife and i usually check one single bag between the two of us with assorted other junk like computer software disks , manuals , etc . my Alaskan condo is in Anchorage , Alaska and i just returned from a real estate trip to the North Pole / Fairbanks area and stopped by Denali National Park on my return yesterday afternoon / evening . i travel down on the Kenai Peninsula to Homer , Alaska next week on other real estate business . i drive a VW Eurovan poptop camper model here in Alaska and use it for everyday driving and RVing and camping out while on real estate trips in Alaska . my Hawaiian condo is in Kailua - Kona on the Big Island close to Kona village . i'm less than a block from sandy beaches and less than a mile drive from White Sands beach where i surf every morning . later when i move over there full time , i'll get myself a big old fat tire bicycle and pedal to the beach every morning . one of my first real estate trips over there will be to drive over the saddle road between Mauna Loa and Mauna Kea to the windward side in Hilo and stay there in a hotel for a couple of nights while i work on clearing jungle on my three lots over on the windward side in Puna near Pahoa , Hawaii . on my return from the windward side back to the leeward side in Kona , i'll stop by Volcano National Park and catch up on what the lava has been doing since my absence . i drive a downsized suv Mazda Tribute in Hawaii with the back seat always lowered so i can carry my assorted surfboards , boogie boards , swimfins , beach chairs , etc . as some have said , i have the best of both worlds . Sep 1, 2006 5:15 PM
cr :
Your livin large Al. GNMA up again today.
Sep 1, 2006 6:00 PM
allancoleman :
you would spoil my day , " dude " , by telling me that those dang GNMAs that i haven't bought enough of yet went up again in nav today . :)
oh well , win some , lose some . least i managed to get $101k worth on my one buy . maybe they're be other purchases in the future if the will of the bond marker traders breaks while they continue to hold bond prices ever higher and yields ever lower than the Fed funds rate . i'll continue to be patient until the Fed lowers rates and then i'll have to decide if i'll buy at that time and nav price . Sep 1, 2006 8:20 PM
cr :
You'll get it done. I was thinkin I would sell some ibonds today but realized they are going to make 7.35% and 6.93% for one more month. I'll sell Oct. 1 and scale into GNMA. You can have Alaska. Hawaii would be sweet. I've never bought real estate for investment but I've built two houses and made good money on both. Real estate has to many hassles for me but a lot of people do quite well with it. What ever you make is usualy well earned. Hang loose. Aloha.
Sep 1, 2006 9:00 PM
allancoleman :
you're right , dude , i'll " get it done " . one way or nother . either buy'em slightly lower in the near term over the next couple of months or slightly higher in the longer term end of this year or next year .
designed , built , and remodeled several houses . i'm into condos now because of that knowledge . and now i only have two left . and in the end , when i'm too old to fly back and forth between Alaska and Hawaii , one . i'll " take " Alaska . Land of Opportunity . been here over 40 years now . winters are too hard on me now though with possible minus 60 degrees below zero in Fairbanks and 30 below in Anchorage . not to count the snow , especially with a condo that paid for in Hawaii . you're right about real estate having " too many hassles " . that's why i've been on a liquidation program to sell it since 1997 . and you're right , i've done very well with it . and really earning it this summer as buyers are beginning to show fear . fortunately i probably won't have trouble finding buyers for the last couple of pieces i have left here in Alaska and Hawaii . talk of the Natural Gas Pipeline will help sell my Alaskan stuff in the future . and the natural world wide appeal of " paradise " means my Hawaiian property will always have a market for the stuff i have left over there . as you said , " i'll get it done " . Sep 15, 2006 9:06 AM
runner26 :
I-bonds payouts are setting up for a nice bounceback at the next reset.
Five of the six months have passed leading up to the I-Bond variable rate reset. I took a look at where we stand so far. During the five months of March to August (November reset will include the months March to September), the CPI-U has risen from 199.8 to 203.9 or 2.052%. So if the reset were to be held today (which it is not) the new rates would be approx. as follows for the various recent base rates: Base----Rate 1.0%----5.12% 1.1%----5.23% 1.2%----5.33% 1.4%----5.53% With still 1 months to go, these number will move up or down depending on the September inflation data. Sep 15, 2006 9:54 PM
J :
Kirk:
What is your projection for tax rate in the future? If it is going higher, is it still a good idea to defer tax payment? Thanks. Sep 17, 2006 2:05 PM
:
Kirk wrote: You see, I am slowly converting LT capital gains to cash to live on and store away in places like I Bonds or fat pitches for newsletter stocks when served over the plate. I can pay the LT cap gain tax now, when it is probably as low as it will ever be... and delay the "regular income" taxes with I Bonds for later on.... .
So far, nobody has pointed out any flaws in my logic. :) You cash in gains with LT capital gains at 15% (but still have to pay CA taxes). But don't you avoid federal taxes on any future interest payments of the I bonds too as will as delaying future taxes or am I wrong again? It sounds like a very sweet way to go. Sep 30, 2006 1:19 PM
cr :
Any estimates on the new ibond rate on Nov. 1?
Sep 30, 2006 1:31 PM
runner26 :
see September 15, 2006 9:06 AM post. That is as good an estimate as can be made at this time. If you have different base rates, you can extrapolate from these. September CPI will be available on October 18, then a final estimate can be made.
Sep 30, 2006 1:36 PM
cr :
Thanks Runner.
Sep 30, 2006 2:34 PM
cr :
I plan to cash some 1.6% base rate ibonds that are due to make 2.6% for the next 6 months. I'm going move to an 18 month cd yeilding 5.75%. I'm in the 10% tax bracket. No state income tax in WA. state. With inflation trending lower for the forseeable future does this seem like right thinking or am I off again?
Sep 30, 2006 3:33 PM
allancoleman :
Hello again , dude .
To my way of thinking and looking at ibonds is that these lower base rates they are sold at presently , they only make sense IF inflation is higher in the future . The only way , you'll get an accurate prediction to your question of whether ibonds make sense is to know what inflation is going to do over the longer term . I would say over the foreseeable future is that if it were my money i'd probably do as you've suggested and make that move from your 1.6% base rate ibond to your 5.75% CD . If the base rate gos higher or inflation begins to move higher , you can adjust your fixed income strategy at that time . In the meanwhile , you'll be earning 5.75% . In a Roth account , that could be taxfree and in a deferred account , you can earn interest now and pay taxes later . Congradulations on being a resident of one of the seven ( 7 ) income taxfree states in our great United States . Sounds like pretty " right thinking " to me and not " off " at all . Possibily others have other ideas and disagree . Sep 30, 2006 4:20 PM
cr :
Yeah, sounds right to me too. CDs,GNMAs and Ibonds. That's good enough on the income side for me. On the stock side I'm sittin with SPY and QQQQ. I missed the run in international and small cap. Guess nobodys perfect. Aloha.
Sep 30, 2006 4:49 PM
allancoleman :
Although i agree with your SPY choice of an investment , i don't particularly care for your pick of QQQQ's . Never cared for an index with a percentage of stocks of companies with no earnings and therefore no PEs .
And i know what you mean about missing out on the International sector . After having invested in the International sector for years , if not decades , the overall returns didn't quite beat fixed income performance enough for me over that period of time to justify the risk . So i haven't gone into that sector again and i feel my large cap stock fund i use as a marketimg vehicle has enough International earnings in it for me . Plus it's alot easier for me to track our own US large cap market . Although i have moved from using the DOW as my benchmark index to compare my performance to the S & P 500 as Bob Brinker is now doing to the Wilshire 5000 . And feel that that index gives me the smaller cap exposure needed from those smaller companies . On small cap , i'm guilty of the same thing you have been as i'm usually in large caps again for the same reasons stated above . As you've said , no one is perfect and there's more than one way to make money or skin a cat . Sep 30, 2006 5:15 PM
cr :
I probably should just scale out of the Qs into total stock. I always think they'll take off at least to some redeeming degree. For me investing is like golf. I just hope I can find my ball.Aloha.
Sep 30, 2006 5:33 PM
allancoleman :
You aren't the only one waiting for Qs to redeem themselves . But as an index , they've never shown me much . Some of those investors are still looking for their " ball " in that rough . :)
And most of those investors don't have an ' Aloha ' spirit . And as they say in Hawaii , " Live Aloha " . Our halau ( hawaiian for club or group ) hula instructor ( ' kumu ' in hawaiian ) says that one day all the world's problems will be solved and it will be summed up in one word , " Aloha " . Sep 30, 2006 6:05 PM
cr :
Lets hope they're right. I do have profit in them. I bought most in the mid twenties. I agree qs are probably damaged goods.Aloha.
Oct 16, 2006 1:34 PM
oshea :
Can you please give me the 30ft view of the ibond. I see you defer taxes and they are currently paying 6.13%yr with a 3 month early release before 5 years.
In short does this mean you get taxed on what you gain when you pull the money out? Say $20,000 staring Nov 2006 and you leave it until Nov 2007. -You would only earn 9 months of the 6.13% because its before 5years. -And how much extra would you need to claim on your 2007 taxes? -Do you get to claim less income on your 2006 taxes? Oct 16, 2006 3:10 PM
runner26 :
You cannot get a 6.13% rate for new purchases. The current rate is 2.41% which represents a 1.4% base rate.
Kirk's general information write-up can be found here: http://investment.suite101.com/article.cfm/IBonds Oct 18, 2006 8:42 AM
runner26 :
Wow, a big drop in the September CPI-U from the prior month (203.9 to 202.9) reduced the projected reset to a much lower rate. From March to September, the CPI-U rose from 199.8 to 202.9, resulting in my estimate for the reset for various base rates as follows:
Base----Rate 1.0%----4.12% 1.1%----4.22% 1.2%----4.32% 1.4%----4.52% 1.6%----4.73% 2.0%----5.13% 3.0%----6.15% 3.3%----6.45% 3.4%----6.56% 3.6%----6.76% We need to wait for the announcement of the new base rate to determine the payout for newly issued I-bonds. Oct 18, 2006 9:38 AM
Harold Bridges :
Right now (before Oct. 25) is the right time to buy I-bonds, even though for the next 6 months you will only earn interest at a 2.41% annual rate. For the six months beginning six months from now you will earn interest at an annual rate of 7.64% So, for the next 12 months you will get a little better than 5%, state & local income tax free. The import consideration is locking in the 1.4% fixed rate. On Nov. 1 that rate will likely drop to 1.2% or 1.0% The fixed rate applies for the 30 year life of the bond so it is much more important than the floating rate portion which resets every 6 months. The other major advantage of I-bonds is that they compound without a tax liability until you redeem the bond. So, it's like having another IRA even if you income eligibility requirements prevent you from contributing to an IRA.
The 1.4% fixed rate is the highest it has been since 2002. If inflation remains high the fixed rates offered in the future will be low. Historiaclly, by comparison, T-bills only return about 0.5% real rate of return. I-bonds are especially appropriate for long-term savings purposes for people in high tax brackets, especially those with high state income tax rates. TIPS are better for tax-deferred accounts. Oct 18, 2006 10:03 AM
runner26 :
<b>though for the next 6 months you will only earn interest at a 2.41% annual rate. For the six months beginning six months from now you will earn interest at an annual rate of 7.64%</b>
This statement is <b>not</b> correct. You will get 2.41% for 6-months followed by 4.52 at the 6-month reset. Oct 18, 2006 10:38 AM
Harold Bridges :
I calculate the rate for the second six month period as
.014 + 2 * .031 + .014 * .031 = .0764 which is an annual rate that will apply for 6 months. Is there an error in this calculation? Oct 18, 2006 10:51 AM
runner26 :
<b>Is there an error in this calculation? </b>
There sure is! The inflation calculation is based on the 6-month change in the CPI-U, that is the semi-annual inflation rate. The semi-annual rate currently calculates as follows: (202.9-199.8)/199.8 = 1.55155% or a reset of: .014 + 2*.0155 + .014*.0155 = 4.52% Oct 19, 2006 11:01 AM
James :
Absolutely not correct.
I Bonds have the worst rate for any government security or insured investment right now and there is no reason to jump before the rate goes up considerably in November - which is guaranteed. The money that would buy those I bonds should be earning interest somewhere else right now, hopefully at 4% or higher (MMDA accounts are paying this and more) So here is an optimal strategy for moving money into I Bonds at the new rate that one hopes will come in be somewhere around 4.1 to 4.5% depending on on the fixed rate and assuming they don't drop the fixed rate (it has never been less than 1.00% and is currently 1.40%) 1. Maintain cash designated for I bonds in liquid (e.g. MMDA) accounts paying at least 4.0% until purchase. 2. Bonds pay interest for the entire month, even when purchased at the end, so near the END of November, extract cash for high-interest cash account, and purchase I Bonds at 4.0% or higher rate. Considering the big increase in the rate, this probably applies whether the accounts are tax-advantage (e.g. IRA) or not. If you need to create or stay in a tax-advantaged investment in the very near term, consider purchasing 13-week T Bills... this pushes back the I Bond purchase a bit, but the bond will ultimately earn six months' interest at the new 4.x% rate once purchased. Oct 19, 2006 11:42 AM
cr :
Do I keep 2% and 3% base rate bond even though they are earning 3 and 4 percent for the next six months? They were purchased in Oct. 2001 and 2002. S3.
Oct 19, 2006 11:56 AM
James :
I'm not qualified to answer such a question for anyone, probably including myself...
I have some Oct 2001 I bonds also and I am keeping them. The considerations for me include: The loss of 3 most recent months' interest on the 2002 bonds (the 2001's are clear after October), the fact that the 01 bonds have been great earners in the past and their average return is still really high, and that these are going to go back to 2%+ inflation rate (5.1%) and 3% + inflation rate (6.1%), after their six months in the doldrums, and the tax considerations in cashing the bonds. I could pull the 01's and maybe get 5% from T bills for a little while... for my part, there's too much frictional loss in taxes, effort and uncertainty that rates will go higher later, so I'm holding. Oct 19, 2006 12:06 PM
cr :
Gonna hold em. Sold 1.6 base rate and below. Bought VG GNMA at 9.98. I'm in 15% bracket 4% effective. No state income tax in WA. S3.
Oct 19, 2006 12:07 PM
runner26 :
<b>If you need to create or stay in a tax-advantaged investment in the very near term...</b>
I-bonds do not make sense in a tax-deferred account. In tax-deferred accounts, TIPS are the better choice due to the higher base rate. I-bonds may be a better choice in taxable accounts due to their tax deferral property. Tips on TIPS and I-Bonds: http://news.morningstar.com/article/article.asp?id=122398& Oct 19, 2006 12:34 PM
James :
I agree. It was dumb of me to write that.
What I should have discussed there, was that if an investor needs or wants to stay in issues that are free of state and local taxes before going right into an I Bond, they may do well to use T Bills. Nov 1, 2006 8:49 AM
James :
So to cap this thread for the Nov 1 2006 announcement...
Fixed rate remains unchanged at 1.40% Inflation rate as previously discussed, 3.10% overall APY for I Bonds today thru April 30, 2007 = 4.52% Nov 1, 2006 12:26 PM
peter norwest :
how does one cash it out thru treas direct? Do you just do redeem securities and if you do does it just transfer back to your bank account if it is linked?
I put in 30000 last year when it was 6.73 and my cash out is 31164. Hmm, doesnt sound right to me. Thanks Nov 1, 2006 12:40 PM
LBMelman :
Sounds exactly right to me. I also put 30000 in late last November. 1164 increase is 3.88%. We earned 6.73% for 6 months and 2.01% for 3 months. 6.73/2 + 2.01/4 = 3.87%. Close enough for me. We're losing 3 months of that crappy 2.01% interest, which on $30000 is about $150.
Nov 1, 2006 1:30 PM
runner26 :
<b>Do you just do redeem securities and if you do does it just transfer back to your bank account if it is linked? </b>
Yes. Nov 1, 2006 1:45 PM
peter norwest :
Thanks very much. I read the faq prior to posting and now its all done.
Nov 3, 2006 7:56 AM
Henry Z :
I have $20,000 paper I bonds purchased in 2003 and would like to redeem them now. But according to Treasury Direct web site state(see below), you can only redeem $1000 at one time at a local bank. Is it ture? Thanks.
Following is from TD web site: Amount You Can Redeem at One Time You may redeem up to $1,000 worth of bonds at one time based on documentary identification alone. If you want to redeem more than $1,000 worth of bonds, your servicing Treasury Retail Securities Site that handles savings bond transactions can help. In this instance, you'll need to mail the bonds to the Treasury Retail Securities Site Nov 3, 2006 8:10 AM
runner26 :
I've never heard of such a limit. The I-bond FAQ simply states
"Where can I Bonds be redeemed? If you own electronic I Bonds, you can redeem them in the TreasuryDirect application. <b>Most financial institutions serve as paying agents for paper I Bonds and Series EE Bonds.</b> If they redeem Series EE Bonds, they also redeem I Bonds." I recently walked into my S&L with a EE paper bond worth $5300 and deposited into my checking account. No problem. Check with you institution. Nov 3, 2006 8:22 AM
Henry Z :
Thank you for your quick response. I am going to call my local bank.
Nov 6, 2006 6:10 AM
Lcha :
Last year I wrote the Treasury Direct folks complimenting them on their website but admonishing them to tighten up their access security.
I notice that when signing on to Treasury Direct now, instead of entering the password by keyboard, you have to select the keys from a graphical on-screen keyboard. And the keyboard layout changes with every sign-on. This is a big plus as this thwarts keyloggers from capturing keystrokes as passwords are entered. Vanguard has also beefed up their login system. It's good to see these financial institutions taking security seriously. Nov 20, 2006 11:16 AM
Chris Desmond :
I've been stung by some banks when I liquidate a Money Market Account say, on the 15th of the month -- I lose 15 day's worth of interest because ya gotta liquidate on the 1st of the month or wait until another month goes by. My EE savings bonds -- same kind of thing -- liquidate at the every-six-month-mark or I lose interest from that mark forward (example: if I liquidate now I lose interest from 10/1/06 to now). Is there any such trick to my 2003 and older I-bonds, or do I get interest compounded daily right up to the day that I liquidate?
Nov 20, 2006 1:03 PM
Philip J. Stack :
In a nutshell:
The government pays you interest for the whole month you buy (the issue date). You do NOT get interest for the month you sell, no matter what the date, first, last, or in between. Since you do not get any interest for the month you sell, I guess it is "best" to sell as close to the first as you can so that you can put your money to work somewhere else. pjstack Nov 20, 2006 2:50 PM
Chris Desmond :
Thanks. A lot of money's involved, and I didn't see an answser to this simple question at savingsbond.gov
Nov 20, 2006 2:51 PM
Chris Desmond :
Thanks. A lot of money's involved, and I didn't see an answser to this simple question at savingsbond.gov
Nov 20, 2006 6:05 PM
AL_W :
I have a chunk of cash to put someplace liquid, like in a MMkt, very short CD, or Direct Saving Account.
In browsing around, I find E-loan will do a Direct Savings at 5.5% Apr. Anyone know of anything better? Anyone have any feelings plus or minus about E-loan and/or Direct Savings? Nov 21, 2006 5:07 PM
Joslyn Kirk :
I am confused about the interest rate posted on my purchased I Bonds. Bonds pur 10/1/05 show my rate is %2.21. Pur 11/1/05 rate 4.12%. Is this my rate plus the fixed rate? Help please
Nov 21, 2006 6:18 PM
runner26 :
<b>I am confused about the interest rate posted on my purchased I Bonds. Bonds pur 10/1/05 show my rate is %2.21. Pur 11/1/05 rate 4.12%. Is this my rate plus the fixed rate? Help please </b>
Your 11/1/05 bonds just had their 6 month anniversary, so they now get the new variable portion 3.12% (effective 11/1/06) added to their fixed 1% portion. Your 10/1/05 bonds had their 6 month anniversary when the variable rate was 1.21%. And that added to their 1% fixed portion yields 2.21%. They will continue to earn 2.21% until thier next 6 month anniv. on 4/1/07 when the will then earn 4.12% for the next 6 months. Dec 15, 2006 7:35 AM
runner26 :
After 2 months, 1/3 of the way to the March reset, the inflation portion of I-bonds is negative.
Oct. CPI-U 202.9 Nov. CPI-U 201.8 Dec. CPI-U 201.5 I sold some 1% base rate I-bonds with the intent of reinvesting in 1.4% base rate, but may not because of the potential for a crappy return at the next reset. I'll be content with Vanguard MM yields and wait for another months CPI-U data. Dec 28, 2006 6:14 PM
John_17 :
Today 12/28/06 while talking to a customer service representative on the phone at Treasury Direct gave me a tip that the $30,000 maximum limit amount you can buy per year would be reduced to $5,000 in 2007 then layter after speaking to a bank officer who had just spoken to some one in the treasury department rebuted that tip, anybody out there heard anything about this ?
Jan 3, 2007 9:48 AM
cr :
Why is the interest pay out on the ibonds purchased on 10/2002 more than the ibonds purchased on 10/2001 according to the treasury direct calculator? Anyone.
Jan 3, 2007 9:54 AM
runner26 :
It is still
"$30,000 in TreasuryDirect and $30,000 in paper bonds" per year. Jan 3, 2007 9:59 AM
runner26 :
You have that backwards:
10/2002 is reported by that calculator as 3.01%, and 10/2001 is 4.02%. 10/2002 have a base rate of 2% 10/2001 have a base rate of 3%. Jan 3, 2007 10:04 AM
cr :
When I put in the 10/2002 $1000 bond it shows ytd interest of $7.60. When I enter 10/2001 $1000 bond it shows $4.40 ytd interest. What am I missing?
Jan 3, 2007 11:19 AM
runner26 :
Ohhh. That is a horse of a different color. You got me somedude3. It makes no sense whatsoever that a lower yielding bond, of lesser value, would have more ytd return. I see the same thing. Looks like a programming bug to me!
Jan 3, 2007 11:24 AM
runner26 :
OK, I got it! The 10/2001 bond is more than 5 years old, so the interest that is being posted is what it is earning NOW, that is the December 2006 earnings. The 10/2002 bond, you have not yet held it for 5 full years. So the last 3 months interest are still being withheld. Therefor, the 10/2002 interest being posted is what was earned in September 2006, when the inflation portion was higher. It will drop next month!
Jan 3, 2007 11:35 AM
cr :
It has to do with the 3 month interest penalty. The 2002 bonds are still at the higher rate of 7.6% versus 4.01% for the 2001 bonds. The 2002 bonds will inherit the new 3.01% this month that will be paid Feb. 1. Thats the way I understand it.
Jan 18, 2007 6:40 AM
runner26 :
After 3 months, 1/2 of the way to the March reset, the inflation portion of I-bonds is still negative.
Sep. CPI-U 202.9 Oct. CPI-U 201.8 Nov. CPI-U 201.5 Dec. CPI-U 201.8 While we are up slightly, returning to the Oct. level, we are still under the inflation level at the start in Sept. At this level, there would be no inflation adjustment added to the base rate in the March reset. I sold some 1% base rate I-bonds with the intent of reinvesting in 1.4% base rate bonds (currently yielding 4.52%), but may not because of the potential for a crappy return at the next reset. I'll continue to be content with Vanguard MM yields and wait for another months CPI-U data. At this level, I would anticipate a higher base yield in March. I would hope inflation stay underwater for 2 more resets so the Treasury would be forced to increase the base rate. Jan 26, 2007 8:11 AM
cr :
Thinking of liquidating 2% base rate bonds. Any thoughts?
Jan 26, 2007 8:19 AM
allancoleman :
I can't give you advice on whether to sell your 2% base rate bonds , somedude3 , but IF GNMA navs drop low enough in the future , you might look at them as a possible alternative .
Jan 26, 2007 8:31 AM
cr :
Hi Allen, bonds getting pummeled pretty good. I'll keep an eye out for the Coleman buy bulletin.
Jan 26, 2007 8:46 AM
allancoleman :
It won't necessarily be a " buy bulletin " , dude , but I will post my second eighth position purchase IF and WHEN I make it on our GNMA forum . I will also update our " For the Record " thread on that forum IF anyone else posts their purchase price on that forum too . So stay tuned .
Jan 26, 2007 9:04 AM
runner26 :
<b>Thinking of liquidating 2% base rate bonds. Any thoughts? </b>
I can only speak for me. If I had them, I would be hanging on to them at this time. The current yield is 5.13%, and they have a lot of interest built up that would trigger taxes (for me, 25%). At this time I would wait and see what the next reset brings. A lot can happen in 3 months. Jan 26, 2007 9:29 AM
cr :
Mine issued 10/2002 are have a rate of 3.01%. Will they get the next cpi rate currently being calculated?
Jan 26, 2007 10:55 AM
runner26 :
<b>Mine issued 10/2002 are have a rate of 3.01%. Will they get the next cpi rate currently being calculated?</b>
These will jump to 5.13% for the 6-month period beginning April 1, 2007. Then, beginning Oct. 1, 2007, they will get the new reset that is announced May 1 (what currently looks dismal). By the way, on Oct. 1, 2007, your bonds will reach the 5-year mark, and can be redeemed with no 3-month penalty. So for you, redeem now, loose 3 months of 3.01% interest, pass on the up coming 6 months of 5.13%, and pay taxes on your gains. Wait till October, get 3 more months of 3.01%, then 6 months of 5.13%, check the new yield, and if it is crappy, redeem with no penalty. Jan 26, 2007 11:15 AM
cr :
Makes good sense. I'll take your advice and keep them. Do you think the next three months of inflation numbers will be skewed more to the high side? Hard to believe we would get 6 months of no or even negative inflation.
Jan 26, 2007 12:59 PM
runner26 :
<b>Hard to believe we would get 6 months of no or even negative inflation.</b>
Agree. The trend has started back up, oil and food are headed up, and rents are up since people have stopped buying houses adding to rental pressures. Sep. CPI-U 202.9 Oct. CPI-U 201.8 Nov. CPI-U 201.5 Dec. CPI-U 201.8 Feb 21, 2007 7:15 AM
runner26 :
After 4 months, 2/3 of the way to the March reset, the inflation portion of I-bonds continues negative.
Sep. CPI-U 202.9 Oct. CPI-U 201.8 Nov. CPI-U 201.5 Dec. CPI-U 201.8 Jan. CPI-U 202.416 (first time I have seen them post more than 1 decimal place) . While we are up slightly, we are still slightly under the inflation level at the start in Sept. At this level, there would be no inflation adjustment added to the base rate in the March reset. . I sold some 1% base rate I-bonds with the intent of reinvesting in 1.4% base rate bonds (currently yielding 4.52%), but I will not because of the potential for a crappy return at the next reset. I'll continue to be content with Vanguard MM yields and wait for another months CPI-U data. . At this level, I would anticipate a higher base yield in March. Feb 21, 2007 7:24 AM
cr :
Care to speculate what the new baste rate will be? I'm holding 2% and 3% base rate bonds. Would probably buy if base rate exceeded 2%.
Feb 21, 2007 7:52 AM
allancoleman :
Present Vanguard Prime money market ( VMMXX ) yield , runner26 , is 5.10% and the yield on my Vanguard Admiral class shares GNMA fund ( VFIJX ) is now 5.54% . :) . And the nav appreciation since I bought them in June has been good .
Feb 21, 2007 8:45 AM
runner26 :
<b>Care to speculate what the new baste rate will be? I'm holding 2% and 3% base rate bonds. Would probably buy if base rate exceeded 2%.</b>
. It looks like 2%+ could be a possibility, though it seems to always be lower than I would expect. A lot depends on the fed needs. Apparently their need is down due to high revenues from cap. gains, so they may lowball us again. I am sure they have good statistics on the demand at various levels, and cut it to minimum. It is to our advantage to hold out for reasonable returns. Feb 25, 2007 8:23 AM
hat42 :
My question is off topic a bit, I have been buying I-Bonds on a monthly basis since Oct 2003,, I understand they are holding three months back on each one, how do I get my three months interest ? Is it added all at once at the end of 5 years? at what rate ?
Feb 25, 2007 10:30 AM
runner26 :
The 'most recent' 3 months is held out. Each month, the posting is the interest earned 4 months prior. At 5 years, the 'most recent' 3 months is posted all at once, and its rate is what it was at the time it was earned.
Feb 25, 2007 3:29 PM
hat42 :
Thanks , logic meant it had to work something like that
Mar 9, 2007 8:11 AM
hat42 :
anyone tell me when the rate is set, I know it starts May 1 but some here have an idea what it will be, any thoughts
Mar 10, 2007 2:27 PM
Wayne Dohnal :
You can calculate the variable portion of the rate for the next 6 months when the CPI numbers come out in mid-April. I'm not aware of any official formula for what the base rate is set at. Years ago it looked to me like the base rate was set to the same as the current 10-year TIPS base rate on the open market, but the last few years it's been close to the 10-year TIPS rate, minus 1%.
The current 10-year TIPS rate is is 2.24%. If the variable part calculates to zero for the next 6 months, will they offer the I-bonds at 1.24%? I don't think we'll know until May 1. If they fudge the base rate up to 3%, I'll buy and suffer the 6 months of low interest. If it's lower than 2%, I'll pass on it. Mar 12, 2007 7:29 AM
Henry Z :
Hello,
Redeemed my I-BOND at a local bank in 2006. Got a receipt at that time. I was expecting a 1099-INT form, but the banker said I can use receipt as 1099-INT for tax filing purpose. Is this true? if true, is this a common practice? Thanks. Mar 12, 2007 7:58 AM
Wayne Dohnal :
My big bank sent a 2006 1099-INT for savings bond redemption, and also gave me a statement at the time of redemption showing the amount of interest paid. IMO, as long as you know the correct amount of interest to report, you don't need the 1099. I don't know what the official obligations of the bank are.
Mar 12, 2007 9:29 AM
Henry Z :
Thanks tigerwillow1 and Kirk.
The 1099-INT from my bank only includes interest from my checking and saving. The I-BOND receipt lists the amount of interest I got. So I will use that amount to report to IRS. Have been this forum and Bob Brinker forum over 2 years. Enjoy reading posts. Thank you for all the inputs. Mar 12, 2007 11:35 AM
runner26 :
Like Kirk said, mine was listed on my banks 1099-INT box 3.
I also redeemed through Treasury Direct. They did not send a 1099-INT, and you needed to pick it up through the Treasury Direct service. Mar 13, 2007 5:39 AM
Henry Z :
Thanks runner26. I hope they will include it in 1099-INT form next time, although I have no plan to buy I-BOND since the rate is so low right now.
Mar 16, 2007 6:17 AM
runner26 :
After 5 months, with one more month of data to be reported before the next reset (the March CPI data in mid April), the inflation portion of I-bonds is now positive.
Sep. CPI-U 202.9 Oct. CPI-U 201.8 Nov. CPI-U 201.5 Dec. CPI-U 201.8 Jan. CPI-U 202.416 (first time I have seen them post more than 1 decimal place) Feb. CPI-U 203.499 . If the reset were held today (it is not and there is still one more month to factor in), the new rates would be: Base----Rate 1.0%----1.59% 1.1%----1.69% 1.2%----1.79% 1.4%----1.99% 1.6%----2.20% 2.0%----2.60% 3.0%----3.60% 3.3%----3.90% 3.4%----4.00% 3.6%----4.20% . Current I-Bonds are at a 1.4% base rate. I am still not going to purchase these because of this pending crappy reset. . If the CPI-U rises next month at the same rate as this month, it would add about 1% to each of these estimated rates. . At this level, I still would anticipate a higher base yield with the new issue May 1. We will have a better idea after the March CPI data is reported in Mid-April. Mar 29, 2007 10:35 AM
runner26 :
Rising rents (as well as gas), a factor in the CIP-U could push up the variable portion of I-bonds in the comming resets. We shall see.
http://investment.suite101.com/discussion.cfm/35#message_353 Apr 10, 2007 4:46 PM
runner26 :
March 2007 CPI data are scheduled to be released on April 17, 2007, at 8:30 am Eastern Time.
. I will post the final I-bond estimates sometime that day. That should give us a good idea if the base rate may increase for May new issues. Apr 11, 2007 10:04 AM
Jim Johnnes :
Even with a 1% additional gain, which would be unusually high, the I-bonds' rate does not look attractive. I hold $60,000 worth of I-bonds with a 1% base rate. The low rate prompts me to cash out my bonds after the adjustment and put the funds in T-bills, notwithstanding the couple thousand dollars of addition to this year's federal taxable income it will cause. I'm also willing to take the 3-month interest rate hit to move the money to a better-paying investment. The only advantage I can see to holding the I-bonds is that the income is deferred.
The I-bonds have to be held 5 years to avoid the 3-month penalty, correct? I will have only held them 2 years in November. Waiting another 3 years seems like an eternity. Apr 11, 2007 10:43 AM
runner26 :
.
I did just that jamesj24, I sold all my 1% I-bonds last year taking the penalty, and hold the funds in sort term T-Bills now. If the new base rate is higher than 1.4, I may find it worth a buy back. I do still have 1.1's that mature next year, so will hold and 1.2's that I will keep, unless I can justify an earlier sale. . Yes, you are correct, hold 5 years to avoid the 3-month penalty. Apr 14, 2007 8:39 AM
hat42 :
I wish they would increase the real rate because the return on some of these I-Bonds I have is rather low, I started buying them in 2003 as a way to defer some taxable income and today buy one each month, I will probably hold mine as I am retired and my wife retires in 13 months ,at that time I may quit buying them because of the five year thing and I don't want to give them interest even though one might come out ahead to cash them in and put the money elsewhere,of course logic says that is the thing to do, we have a local bank here that is paying 5.64 yield on a two year CD, how long they will continue I don,t know but that is a very good return on cd's
Apr 17, 2007 7:30 AM
runner26 :
All data is in to estimate the new variable reset for existing I-Bonds. The CPI-U history for the six month reset period (Sep. 2006-Mar. 2007) is as follows:
. Sep. CPI-U 202.9 Oct. CPI-U 201.8 Nov. CPI-U 201.5 Dec. CPI-U 201.8 Jan. CPI-U 202.416 (first time I have seen them post more than 1 decimal place) Feb. CPI-U 203.499 Mar. CPI-U 205.352 . Since the 3 digits decimal was introduced in the middle of the period, I might be slightly off this time in these estimates since I don't have any observations on how they will treat this change. . The March jump in CPI was large. This brings the new rates up from the trend we were seeing of dismal reset to just poor. . My estimate for the new rates for existing bonds will be the following when their 6-month reset period arrives. Base----Rate 1.0%----3.43% 1.1%----3.53% 1.2%----3.63% 1.4%----3.83% 1.6%----4.04% 2.0%----4.44% 3.0%----5.45% 3.3%----5.76% 3.4%----5.86% 3.6%----6.06% . Current I-Bonds are at a 1.4% base rate, which means if you buy them before the end of this month, you will get 4.52% followed by 3.83% at their next reset in 6 months. . If they leave the base rate at 1.4%, new May issue bonds would carry a 3.83% rate. That is not very attractive. At this level, we may see a higher base yield with the new issue May 1. I don't see it being lower. Apr 17, 2007 10:34 AM
Roope Ankka :
Is it your estimate that the new semiannual inflation rate will be 1.21%?
Apr 17, 2007 11:02 AM
runner26 :
<b>Is it your estimate that the new semiannual inflation rate will be 1.21%? </b>
. (205.352-202.9)/202.9 = .012084771, or 1.21% rounded to 2 decimal places. Apr 17, 2007 12:43 PM
hat42 :
I wish they would raise the base rate to around 2 at |