4.30% annualized – including a surprise higher-than-expected 0.90% fixed rate. What does this mean for both short-term & long-term I-Bond investors? THAT’s what I’ll be covering in today’s video:
1. How this new annualized I-Bond rate of 4.30% is calculated
2. What your new rate will be depending on when you bought your I-Bonds
3. A quick recap of when I would redeem if I were a short-term I-Bond investor
4. How the higher-than-expected fixed rate changes our 2023 I-Bond plan as long-term I-Bond investors &
5. Who might consider redeeming 0% fixed rate I-Bonds to grab this new fixed rate
WATCH NEXT
⭐ How I-Bond Interest Works:
⭐ Redeeming I-Bonds In 2023:
⭐ I-Bond Gifting 101:
⭐ I-Bonds vs TIPS 2023:
SOURCES:
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LEARN MORE ABOUT: Treasury Inflation Protected Securities
REVEALED: Best Investment During Inflation
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HOW TO INVEST IN SILVER: Silver IRA Investing
Should I Redeem & Buy More I-Bonds, Just Buy More OR Just Redeem My I-Bonds (May 2023 I-Bond Rate)
Investing is a key aspect of financial planning, and with a plethora of options available in the market, it is crucial to make informed decisions. One such investment option that often grabs attention due to its unique features and potential returns is the I-Bond. I-Bonds are a type of savings bond issued by the U.S. Department of the Treasury, providing individuals with a safe and inflation-protected investment opportunity.
As an investor, you might be pondering over the question of whether to redeem and purchase more I-Bonds, simply buy more I-Bonds, or just redeem your existing bonds in light of the May 2023 I-Bond Rate. To make an insightful decision, it is essential to understand the key factors associated with I-Bonds and their performance.
One aspect to consider is the current I-Bond rate. The May 2023 I-Bond rate announced by the U.S. Department of the Treasury is composed of two components: a fixed rate and an inflation rate. The fixed rate, determined at the time of purchase, remains fixed for the duration of the investment. On the other hand, the inflation rate is adjusted twice a year in May and November based on changes in the Consumer Price Index for All Urban Consumers (CPI-U).
To evaluate whether to redeem or buy more I-Bonds, you should assess the current fixed rate and compare it with the rates of other investment options. In May 2023, the fixed rate for I-Bonds stands at 0.0%. If you believe that alternative investments offer higher fixed rates, it may be worth considering redeeming your I-Bonds and exploring those options.
However, I-Bonds provide an attractive feature that sets them apart from traditional investments: protection against inflation. The inflation rate, set at 1.77% from May to October 2023, ensures that the return on I-Bonds adjusts with the changing purchasing power of the U.S. dollar. Consequently, I-Bonds can serve as a hedge against inflation, which may be advantageous in times of rising prices.
If you are currently holding I-Bonds with a fixed rate that exceeds what other investment options offer, buying more I-Bonds might be a good strategy. By doing so, you can benefit from the inflation protection and maintain a satisfactory fixed return. Additionally, bear in mind that I-Bonds have a purchase limit of $10,000 per calendar year per Social Security Number, meaning you shouldn’t exceed this limit when buying more I-Bonds.
On the other hand, if you believe that the current fixed rate on I-Bonds falls short of your expectations and alternatives seem more promising, redeeming your I-Bonds could be a suitable option. However, it’s important to weigh the potential earnings you would give up due to the loss of inflation protection. If you decide to redeem your I-Bonds, keep in mind that you must have held them for at least 12 months before you can redeem them.
Ultimately, the decision to redeem and buy more I-Bonds, buy more I-Bonds, or redeem your existing bonds should align with your personal financial goals and risk tolerance. Carefully evaluate the fixed rate, consider the inflation protection feature, and compare it against other investment possibilities. Additionally, consult with a financial advisor who can provide personalized guidance based on your unique circumstances.
In summary, the decision regarding I-Bonds can be influenced by the May 2023 I-Bond rate, fixed rate, and inflation protection. Assess your current situation, compare options, and make an informed decision that best fits your financial needs. Remember, investing should always be approached with a long-term perspective, keeping your goals and risk tolerance in mind.
Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam – PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
>> WATCH NEXT <<
⭐ How I-Bond Interest Works: https://youtu.be/9hfHoSijJEk
⭐ Redeeming I-Bonds In 2023: https://youtu.be/40pb9MRfqrk
⭐ I-Bond Gifting 101: https://youtu.be/bSoZJJypSAQ
⭐ I-Bonds vs TIPS 2023: https://youtu.be/JKbvtdcsPSM
redeem
Another great video!
i redeemed 1/2 of my holdings. assuming inflation will continue to drop.
Purchased 7,500 I Bonds prior to the 5/1 reset and 2,500 in May. Next, for the first time I redeemed 4,288 worth of I Bonds that are greater than 5 years old and have 0.00% fixed rate. Sold I bonds purchased in May, Nov, June and Dec. to maximize the higher rates. Next I redeemed 1,396 worth of I Bonds purchased in July or Jan, greater than 5 years old and 0.00% fixed rate. Then purchased 1,396 of Bonds in wife's account registered in my name and put in gift box. May do more of this in October for Maybe 2,500 total in gift box. In Jan 24, redeem 7,500 of 0.00% I bonds and then buy 7,500 of new I bonds with hopefully 0.90% or higher fixed rate. Then maybe redeem 10,000 more 0.00% fixed rate bonds and buy 10,000 in gift box. Idea is to eventually get rid of all 0.00% fixed rate bonds.
So, I need an answer regarding the sale of ibonds, I bought over 40 k last year, over 20k was in gifts. I am able to sell now with the 3 month penaly but I will most likely wait until Nov or possibly 3 months after the next rate is announced. So my question is, is the amount listed on treasury direct for the value of my ibonds the amount I recived when I sell? in other words is the 3 month penalty already deducted from that value? it seems like it is. Thanks folks.
Wealth front pay 4.55% and if you referral your friend you can earn up to 5.05% for 3 month..
Youve mentioned that there are a few things to keep in mind regarding an I bond: must keep at least a year and that there is a three month interest penalty if redeemed prior to five years of holding the I bond. I bought my I bond in April 2022. Given that, what is the earliest date that I should redeem my I bond to take advantage of other instruments that pay better rates that will reduce the penalty that I will have to surrender?
So, assuming I purchased a 0%-Fixed Rate I-Bond on Jan 15, 2022, in order to maximize my return due to the 3-month penalty, I should wait to sell until Oct. 15, 2023, since the interest earned from July 15, 2023 to Oct. 15, 2023 would represent the current lower interest rate. Is that correct?
Brilliant!
So to confirm, the 21 and 15 months redemption strategy you offer is based on the date the i Bond was originally purchased, so an i Bond purchased on 11/10/21 would qualify (using your logic here) to be redeemed on 8/11/23?
CIT bank paying 4.75% right now
If the worst happens and the government actually does default I know I-Bonds will become virtually worthless( Principle and Interest Combined). My question is does anyone know if the debt ceiling is raised at a latter date (post June 1st) will the funds in the I-Bonds be able to be realized in full or will they just be basically gone forever? Basically, will you be able to recover the funds if the default happens and then later down the line the debt ceiling is raised?
One advantage of I-Bonds vs a T-Bill ladder at Treasury Direct is that after one year, they can be redeemed in whole or in part within two business days without any of the hassle of dealing with selling T-Bills on the secondary market. In that sense they are perfect for an emergency fund — once you get past the first year.
Great info. However trying to figure something out. According to the treasury site, if I bought an I Bond in January, my interest doesn't change until July 1? I bought an I bond on 1-1-22 and the interest from the beginning of this year was 6.89%. Even though the new I Bond rates changed starting May 1, to 4.3% , do I still receive 6.89 % interest until July 1, and then it changes to 4.3%? If so, that would mean I would have to wait 3 months after July 1, which would be October 1, to forfeit 3 months of 4.3% interest. If I redeemed 3 months after May 1, which would be August 1, I would be forfeiting 2 months of 6.89% interest and only 1 month of 4.30% interest? Thanks
Let it ride
Hi..I'm a bit confused…are you not doing videos anymore except for the Supersaver Bond Fan channel that we pay for? Not complaining, just wondering, you've been great.
Thanks!
Question here…. I bought my first I bond, right before the deadline. Can someone advise if that was the right move?
The I-bonds rate is very low. After you buy it, the inflation rate can only guarantee for half year.
Hello, do yoy know If the TD is down today? Its telling me my password is incorrect after properly receiving my OTP and i entered the correct password after 3 attempts its asking for tax payer id. That has not happend before when login in.
You videos are amazing – thank you!
Thanks again for another great video.
I have two 10k bonds that got 7.12% for 6 months, 9.62% for 6 months, and I will get 6.48% for 6 months. Six months at 3.38% for these two bonds is fine. I have far more than that in on-line CDs and an on-line saving account. I would never think it wise to keep 100% of my eggs in one basket. If the I-Bond rate completely tanks in November, which doesn't seem likely, then I'll wait three months into the new rate and then cash in.
Can you explain the pros/cons of VTAPx v VTIPS v buying the issues directly? Is this appropriate for a Roth v IRA v indiv acct and why or why not v CDs?
I'm still trying to figure out the formula. I'm confused, I purchased an I Bond November 1, 2022@ 6.48%, and just dropped to 3.79%. I don't understand. Additionally, I bought an I Bond May 1, 2022, @ 9.62%and it dropped to 3.38%.
Can you please post the interest formula with the .4% fixed rate? Do you just add it to the 3.38% or is there a different formula?
Thanks for extremely well-done and informative video!
Amazing video, and advice! Thanks for keeping iBonds easy! 🙂
Anyone else having treasurydirect not available issues ? Had them for nearly a week. Can access account but not allow purchase of t bills.
I'm not sure the 0.9% fixed rate is enough to lure me into putting more into this Byzantine system of savings especially with the 10K cap. I plan to let my 2021,2022, and 2023 amounts age for a year or two and then consider redeeming them. I am happy I did it however and I got familiar with TreasuryDirect which has made rolling 17 weekers over easy!!
Hi, I have a question. If US goes default on June 1, will people lose all the bond money? Thanks
What is the advantage of I-Bonds over just laddering T-bills which r presently getting 5.2% on 13 week)? My husband & I (both retired & over age 70) bought $10K each, $10K gift to each other & $10K in our trust when I-Bond rates were 9.62%. Why would we want to buy more I-bonds at 4.3% now rather than take that same amount to buy T-bills/ What am I missing here?
Here's a question. If I redeem my I bond series now; obviously, I'll be penalize 3 months interest rate but what interest rate is applied? the current low interest rate or the high interest rate when I bought the Bonds?
If the house and Senate doesn't come to an agreement on the debt ceiling and the US defaults, will I lose my IBonds and treasury bonds?
What happens to our ibonds and tbills if the government defaults. Is our money gone?
From Treasury Direct Site: The Virtual Keyboard will be removed the week of May 7th to improve the customer experience. Mind blown!
If I cash out my 0% fixed rate I-Bond and pay the 3 month penalty (at the new 3.38% rate) and then purchase the I-Bond with the new 0.9% fixed rate then how long will I have to hold the new I-Bond to compensate for the penalty? My back-of-the-envelop calculation says 13 months but I would like to have that confirmed. Can you please do that calculation for us?
Last year, I start owning I-Bond for the first time. The more I watch your clips, the more I understand the I-Bond. Thank you for sharing all these knowledge.
Off the topic a bit. Assume earned income of $16,000 and an over age 60 retiree. Can the retiree contribute $7500 to an IRA and another $16,000 to a 401k/403b/457 for a total of $23,500? Or, is the 401k/403b/457 contribution limited by the IRA contribution causing the retiree to only be able to contribute $8500 ($16,000-$7500) to his 401k/403b/457?
Thank you for this video presentation. I noticed in TD that the interest on my iBond is shown as 6.4%. Is this the rate at the time of purchase (3/1/2022) and not the current rate as you described? Thanks again.
I will have to have funds to pay for a funeral. Ovarian Cancer is very bad. Since I have held for more than 1 year my plan is to redeem enough to pay funeral expenses, rather than transferring from accounts that pay more than the 4.3% yield. Thank you for your educational videos!
If you buy Ibonds in the months where interest rate has already been set, when does your rate change for that particular i-bond. For example if I bought an Ibond in September, my rate would be fixed for the first 6 months according to what the right was in September. However after the first 6 months does my rate reset at the current rate or whatever the rate was reset to in November?
I just looked at my iBond portfolio and TD says bond bought on 11/1/21 is "Not Available" Other iBonds have rates. Do you know why or do I need to wait on hold at TD for two hours to find out?
Question on I bond rates. Lets say you purchased $10,000 when the rate was 7.12%. The rate then changed to 9.62, then to 6.48 over time. Does the rate you are paid on that $10,000 change every 6 months, or are you locked in at the 7.12 rate forever?
If I bought a May 1922, I bond at the prevailing rate of 9.62%, will my current I bond get the new 90 basis points of fixed interest rate effective May 1? Or will I simply get 3.38% for each month from May to the end of October of this year?