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Posted
Just now, longterminvestor said:

Instrument comes SALT Free! Not subject to state/local tax - didn't mention cause I live in SALT Free Florida.  

 

 

right! forgot about that. true

Posted (edited)
6 hours ago, thepupil said:

I'm kind of torn on these. my biggest issue is the after tax upside. I live in high tax state and have a high marginal tax bracket. So as long as that's true making 7% all ordinary income on $20K/year ) isn't really that exciting to me because it gets chopped in (almost) half by taxes. Of course, I can defer and I won't always be in high tax bracket (once stop working), but then I'm tying up capital in something that yields 0% real for a long time which I think I can beat. I feel like I'm rich enough to no longer care about that extra $200-1000 of relative value to extract from that juicy uncle sam 7% bond, but not rich enough to where I can afford to deploy $10-$30K per year into something that generates no  real return. 

 No state or local taxes on isavings bonds. I think these bonds are a great way to park money for 12 month and depending on the situation and the interest at that point possibly longer. It’s simply part of my liquidity management framework.

Edited by Spekulatius
Posted

I-bonds are an obvious improvement on savings account or CDs, and to the extent you can afford a one year lockup at the start you should have your emergency fund in those instead of in the bank. I think it's pretty unlikely, and maybe impossible that bank deposits would beat the I-bonds in yield, let alone the tax deferral and state tax exemption offered.

 

As an investment they'll never be that exciting unless they bring back substantial real interest rates. IIRC, when they first came out you were getting 3% fixed plus inflation. Getting the inflation coupon alone isn't going to make you real money, but locking in 3% fixed for 30 years on top of that, knowing they'll be periods of much lower real interest rates in the future is nice. And even if you lock in at 0 fixed now, if they raise the fixed to 1 you can just redeem the ones at 0 and reinvest at 1. It would be like refinancing your savings account when rates rise. Like refinancing your mortgage in reverse. Of course with the 10k limit per person per year you can't really do it with big money.

Posted

My wife bought a piece of furniture in August for $699. We went today to order the same thing and the price now is $849. I like the 7.12% interest but man...the price increases on ordinary things is pretty insane. 

Posted (edited)

I follow that Tipswatch blogger on twitter, etc... he tracks the economic data and the auction results (which seem to factor into the real rates offered by Treasury for the savings bonds) and projects the rates (I'm sure you could emulate his maths, if so inclined).  Alerted me to the high relative real rates on offer a few years ago (they got up to 50bps for a minute).

Edited by CorpRaider
Posted
11 minutes ago, yesman182 said:

for those of you buying for you and your spouse, do you need to open two accounts, one for each person, or can you do this inside one treasurydirect account?

You each need your own account

Posted

I opened 1 for my wife, 1 for me, and then inside mine I "linked" minor accounts for both our kids.  We have 4 total accounts with 2 separate logins - the minor accounts are accessed through the log-in with my account.  Little annoying but its definitely set it and forget it.  Will be re-loading in Jan for the full amount.  

Posted
2 hours ago, longterminvestor said:

I opened 1 for my wife, 1 for me, and then inside mine I "linked" minor accounts for both our kids.  We have 4 total accounts with 2 separate logins - the minor accounts are accessed through the log-in with my account.  Little annoying but its definitely set it and forget it.  Will be re-loading in Jan for the full amount.  

can you then invest upto 10K per account, 40K in total each year ?

Posted
4 hours ago, ValueMaven said:

Yes - a family of 4 could in theory do $40,000 in Dec, and another $40,000 in Jan - all at the i bond rate.  Unique aspect of very high CPI U and the Nov reset occurrence  

thank you. can you explain what you mean by 'very high CPI U and the Nov reset occurrence  '

Posted
On 12/4/2021 at 7:24 PM, stahleyp said:

My wife bought a piece of furniture in August for $699. We went today to order the same thing and the price now is $849. I like the 7.12% interest but man...the price increases on ordinary things is pretty insane. 

Totally. I love the lack of sales at Costco currently. Virtually none of the normal discounted items. Regular grocery stores are interesting too. The normally $4.99 La Croix are now “on sale” 2/$11. 
 

thanks Brandon.

Posted
9 hours ago, longterminvestor said:

I opened 1 for my wife, 1 for me, and then inside mine I "linked" minor accounts for both our kids.  We have 4 total accounts with 2 separate logins - the minor accounts fare accessed through the log-in with my account.  Little annoying but its definitely set it and forget it.  Will be re-loading in Jan for the full amount.  

For your kids accounts, is that a gift to them that they will own forever, or are you simply using their SSN for your money?

Posted
8 hours ago, yesman182 said:

For your kids accounts, is that a gift to them that they will own forever, or are you simply using their SSN for your money?

In this instance, the 10k is within the 15k you are permitted to give tax free every year. You also have a lifetime gift exemption so there are way easier ways to optimize taxes here. 

 

If you want to get creative with taxes (you basically want to avoid getting hit with the kiddie tax.), the loophole here is to give the 10k that is assigned to the adult to the child right after you buy it. I bonds have a provision that when you gift/change owners, you must pay tax on any accrued interest. If you gift it right after you buy it, there will be minimal accrual of interest. 

 

The taxes for the child will look like this - the first $1.1k of interest (I think that's the current number) is a standard deduction. The next $1.1k will be taxed at kid's tax rate - if child has no income it is 0. After that, any interest will be taxed at adult's marginal rate. 

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