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iSavings bonds yielding 7.12% currently


Spekulatius
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Someone posted this on Twitter and it’s great idea for US persons/ citizens. Due to the inflation of inflation, the ISavings bonds now yield 7.12%. You can open an account with a treasury directly and put 10k in these each calendar year. Seems like a great way to put some money in for the medium term. If you pull your money, you lose the last 3 month of interest, but since you don’t get interest in money market or savings accounts anyways, that’s not a big deal.

 

Looks like a no brainer to me - put in 10k this year and another 10k in January.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm

 

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Edited by Spekulatius
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1 hour ago, sleepydragon said:

Also, interest profit is tax free if used for education.

and interest is auto added to principal and compound.

 

However, it unlikely this high interest rate will last..

Also, you can’t withdraw for the first 12 months.

good deal though. I bought 20k for me and my wife

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8 hours ago, IceCreamMan said:

Nice find. Can you always redeem these for par? e.g. if interest rates rise to 5%, can we still redeem $10k of Series I bonds for $10k?

Yes, you can, after 12 month as @sleepydragon noted. Interest will likely get adjusted downwards after 6 month. On the other hand, if inflation does stay elevated or takes off this would be a great medium term investment.

Edited by Spekulatius
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7 hours ago, Mephistopheles said:

It says you lose 3 months of interest if cashed before 5 years. I guess if you want cash equivalent locked up then it's fine. But even when pulling for par after 1 year, you will only get 9 months of interest.

 

This is how I'm using it. You're locked for the first 12 months and have a 3 month penalty at any time between that and 5. So using it as a "cash equivalent" for a portion of my cash. 

 

Seems to me that taxes are deferred until sale as well which is nice in the event inflation stays high and I can continue to compound that return. 

 

Thanks @Spekulatius for bringing these to the board's attention. 

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You can get around the $10k limit by purchasing more with EINs or in Trusts. Purchased them last month to lock in the 5.33% (3.54% for six months, and then the 7.12% for six months).

 

Will get $20k more in January. Even if you leave it in for exactly a year and take the penalty you're still beating the hell out of a savings/MM account.

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My understanding is the $10k limit is per person, so husband and wife could buy total of $20k. Anyone done this out of curiosity?

 

Edit: sleepydragon seems to have answered my question above. Thanks.

Edited by tede02
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Thanks for sharing this @Spekulatius

 

Just an FYI as I didn't see it mentioned above that the penalty exists for a 5 year period. 

 

When can I cash (redeem) an I bond if I need the money?

You can cash your Series I bonds any time after 12 months. You receive the original purchase price plus interest earnings. I bonds are meant to be longer-term investments; if you redeem an I bond within the first 5 years, you'll lose your last 3 months interest. For example, if you redeem an I bond after 18 months, you'll receive the first 15 months of interest.

 

 

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