With the release of April 2023 CPI numbers, we can now calculate the new inflation rate on I bonds that will go into effect next month. I put that number at about 3.38%. We don’t yet know what the fixed rate will be. But assuming it stays the same, currently 0.40%, I bonds are no longer the attractive investment they once were.
Here’s why I’m selling, not buying, I bonds.
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#ibonds #ibond #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (
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The U.S. Treasury Department recently announced that starting on November 1, 2021, the new interest rates for Series I savings bonds, commonly known as I Bonds, will decrease from its previous 3.54% to a new rate of 3.54%. While this may seem like a small change, it could have a significant impact on investment decisions for those considering purchasing I Bonds.
As an AI language model, I am not capable of making investment decisions or predictions. However, I can assist in providing information for individuals to make informed decisions, based on current market trends and events.
It is important to note that I Bonds are a type of savings bond, meaning they are considered safe investments with guaranteed returns. Unlike stocks, I Bonds are not subject to fluctuating market conditions and do not carry the same risks. However, the trade-off for security is usually lower returns compared to riskier investments.
With the new interest rates for I Bonds decreasing, investors who have already purchased these bonds will see a decline in their returns. Conversely, those looking to purchase I Bonds after November 1st will receive a lower interest rate on their investment.
Considering this, it may be reasonable for some individuals to sell their current I Bond holdings before the new interest rate takes effect. Selling the bonds now may potentially generate higher returns than waiting for the lower interest rate to take effect. This is, of course, a personal decision and depends on each individual’s investment objectives.
For those who are still interested in investing in I Bonds, there is some good news as well. The Treasury announced that starting in 2022, I Bonds will be subject to semi-annual inflation adjustments instead of the previous adjustments made once a year. This change can potentially lead to higher returns for investors in the long run.
In conclusion, while the new interest rates for I Bonds may not seem like a significant change, it is essential to evaluate how it may affect your investment portfolio. It is also helpful to note that investing is a personal decision, and it is crucial to conduct your research and seek out professional advice before making any investment decisions.
The stock market's bonds motivated me to start investing. What counts, in my opinion, is that you will be able to live off of dividends without selling if you invest and make more money in addition to payouts. It suggests that you can give your children that advantage, giving them a head start in life. I've invested more than $600k throughout the years in dividend stocks; I'm still buying more today and will keep doing so until the price drops even further.
Bait and switch with large rate last year and a joke of an inflation rate on thiß latest rate. Suck you in then put the hammer down when you have already bought in.
“There’s more and more of a concern that incoming data is revealing that the Fed might be a little bit behind the curve than maybe they expected heading into this year,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. In my portfolio, I'm noticing more red than green. How are other people in this market raking in over $350k gains within months.
Fixed rate of 0.40% for I- Bond=chump change…as inflation is at least 10%.. you are losing 9.6%/ year….buy Gold.
rob actually believe gubt inflation figures lol. remember, they have one job, make their politician master look good by making inflation appear less than it actually is. 1.38 "real return? dont count on it! more like negative 5-10 is my guess.
I can't believe that ANYONE actually thinks that the CPI is anything close to reality???? Real inflation is probably 8-10% not 5%.
Is this 3.38% really correct? Because there is the 6 month rate and the 12 month rate which is twice the 6 month rate. To me, it's hard to believe that the 12 month rate is so low, rather than this being the 6 month rate.
Go Bucks!
Rob, you are missing something big in the TIPs vs iBonds debate for the small investor (so please correct your clickbait title — add the "for near term"). iBonds — interest rate at any given point (fixed+variable) can never fall below zero. TIPs — at maturity you are given face value, but your multiplier — aka inflation factor can be less than one. The simple math is in any year the value you see on an ibond can not go down numerically (of course inflation adjustment real value may go lower). There is additional risk in TIPs that needs to be factored in.
I’m holding because inflation comes in bouts and I’m not convinced we have tamed it
I've been unsure about the market due to volatility, at the same time I still feel it's the right time to make profit cos of the price decrease, heard someone speaking of making over $200k since the lockdown and I'm driven to ask what techniques/skillset is needed to achieve this
@Rob, why are all the robo scammers attracted to your channel?
I-bonds are too much of a gimmick. Time spent vs their capped potential may not be worth the hassle.
One important consideration, if you're thinking of selling that old I-Bond that has a 0.0% fixed rate, is that you will need to pay taxes on the interest accrued. For example, a $10,000 I-Bond from 2/1/2012 is now worth $13,112. Assuming you're in the 24% tax bracket, you will owe $746.88 income tax on the $3,112 interest. If you keep the bond, then you will continue to compound interest on that $746.88 for the duration of time you keep the bond.
Alternatively, if you sell the I-Bond and put the proceeds minus the tax owed into a short term T-Bill or CD, you will pay tax on the interest each year until the T-Bill or CD matures (and if it's a CD, you'll pay state tax too if applicable), so you lose some of that compounding effect.
just buy a CD pays 5%
A number of the most eminent market experts have been expressing their views on the severity of the impending economic downturn and the extent to which equities might plummet. This is because the economy is heading towards a recession and inflation is persistently above the Federal Reserve's 2% target. As I'm aiming to create a portfolio worth no less than $850,000 before I turn 65, I would appreciate any advice on potential investments.
I can't believe how much our lives have changed since meeting Marcia Ann Bice .
She’s helped us become debt-free and save for retirement." | made over 220K during this dip, which made it clear there's more to the market than we average joes know. Having an investment adviser is currently the best course of action, especially for those who are close to retirement
Rob, thanks for your videos and newsletter. Regarding selling (and buying) I-Bonds, something that I consider is the tax impact. I am planning to retire in next few years and expect my marginal tax rate to by much lower then. So I bonds have an advantage there vs TIPS and T-Bills. Agree?
I'm favoured, $230k every 4weeks! I can now afford anything and also support God's work and the church.
The Treasury Direct website also leaves a lot to be desired. I have too many bank accounts and am looking forward to dumping my IBond accounts.
I thought I was a genius buying my first I-bonds last year and then again early this year. Now not so much. These I-bonds cost me quite a few IQ points.
The iBond inflation rate underestimates the inflation rate of my basket of goods. 40 bp is not worth it to lock in even 12 months.
In spite of how everyone is frightened and calling the crash, there is already an excessive amount of demand waiting to absorb it, which is another reason it's less likely to happen that way. This forecast was not made in 2008, at least not by the general public, as I will explain below. The ownership rate peaked in 2004, according to the other comment. We reached a peak in the second quarter of 2020 and are currently at the median level. From 2008 to 2012, it fell by 3%, and in the second quarter of 2020, it dropped from 68 to 65.
I agree completely that having a fixed rate is great. So buy some this year and if rates start going down, sell older bonds with 0% fixed rate. If you are married and have not bought I bonds yet this year, you can buy $10k now at 6.89 and if the fixed rate goes up in May you can buy another $10k each as a gift to your spouse
Now isn't the time to be getting into I-Bonds or purchasing new ones. I got in when the rate was 7.12% which was the perfect time to do so. I don't like penalties so I'd rather hold on to my bonds for now but if the rate drops yet again then I will have to consider waiting three months and then cashing in.
The market and the Fed consistently underestimate the sticky nature of inflation. The markets are still unsure if the Federal Reserve will continue to its plan to raise interest rates until inflation is under control, despite the fact that bond yields are rising while stock prices are falling. What is the greatest strategy to take advantage of the current bear market while I'm still deciding whether to sell my $401k worth of stocks?
With markets tumbling, inflation soaring, the Fed imposing large interest-rate hike, while treasury yields are rising rapidly—which means more red ink for portfolios this quarter. How can I profit from the current volatile market, I'm still at a crossroads deciding if to liquidate my $125k bond/stocck portfolio
We are choosing to sell some 0% fixed rate bonds from 2010 to 2011 to buy this year's allocation in April since we can upgrade the fixed portion to 0.4%. This comes at a small tax cost on the sale, but it upgrades the portfolio. The one year lock and <5 year interest penalty is no problem as this is a long term holding for us. If fixed rates remain above zero we will look at doing the same thing in future years.
@Rob Berger, great content as always – thank you as always for the straight-forward, honest approach and the reminder that everyone's situation/strategy is different.
I began purchasing I-bonds two years ago partly as a way to build an emergency fund but also with the long-term strategy to supplement eventual retirement before claiming social security. I'm 55 this year, hope to retire between 60-65 but not claim SS until 70. We spend @ $200/week on groceries and so I purchase an I-bond weekly ($192.30 x 52 = $10k) thinking this will eventually fund my grocery bill when I retire. Note that my I-Bond holdings represent @ 1% of my entire portfolio so for me the long-term strategy works as I'm covered in stocks, real-estate, etc.
An aging baby boomer doesn't like 30 year bonds anymore…..gee I wonder why.
I have some I bonds I've held for 13 years with a fixed rate of 0.30%. They are part of a college fund for my son who is 13. The profits would be tax free if I used them for that purpose. I'm in a fairly low tax bracket. Should I sell them, pay the tax and buy a CD now?
Rob. I bought $10K Ibond right before the 9% rate offer ended late 2022. Should I sell and put in S&P500 ? If I cash out my $10K I lose the 5 months interest I had or what penalty? I also have 30 year $75K worth of Ibonds bought in 2003. Cashing them out wise?
I prefer I bonds with fixed rates, with the assumption of a long-term hold.
Over the next 30 years (at least 5 years not to lose 3 mo interest), there will likely be plenty of volatility; but, the fixed rate remains the same!
– I use I bonds as a hedge against inflation & safe storage of essentially a cash equivalent.
– I do not use I bonds with an expectation of large returns….
A good discussion with many important points.
Government policy has thrown the future under the bus for decades. The day of judgment is near. I predict an 80% drop in the stock market. Investors will abandon stocks in favor of real estate. There will be no money in banks… You must devise a strategy for survival.
i am only interested in protecting my principal and then earning interest for the next 3 years. if the current people stay in power it is financially all over, so it does not matter. if you don't live and work a farm, you will not be eating after the emergency food runs out.
Thank you for the suggestion to hold until the past 3 months have been at a lower rate. So if the new lower rate kicks in in May, and I sell my 17-month-old I-bond in August, then my 3-month penalty will be at the new lower interest rate ? Just want to make sure I get the timing right.
Is there an EWP calculator for ibond holdings on the TD platform to assist with our decision to sell or hold an ibond ? Anyone ?
Depends on the purpose. I bond cannot beat stock market long term. But it’s good to park the emergency fund. Long time bond has liquidity issue and risk of losing money if sold on the secondary market.
What about a TIPS ETF like SCHP?
I’m using I bonds as a place to park and mostly forget buffer/emergency/project funds for the long term, so I have no plan to sell due to declining inflation.
You have a 10K limit per person per year. If you sell all your I bonds, thats it, you cannot get back in except 10K a year going forward. So by selling them, you eliminate the opportunity to get back in at the level you sold out at. Thanks for the video, 3 % I bonds sounds depressing but 9% was not sustainable.