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  • Series I Bonds

    I’m considering purchasing I bonds however I have some questions.

    I understand that currently the rates are 7.12% and that rate may change in April 2022. Would an Ibond purchase now stay at 7.12% and new Ibonds purchased after April 2022 have the new rate or would a currently purchased Ibond at 7.12% have its rate changed to a new rate come April?

    Also, I understand the limit is 10K for the calendar year. However you can purchase Ibonds in your name as well as in an entity. Could you purchase over 10K if you were to purchase additional Ibonds within an owned LLC?

  • #2
    The current interest rate applies for the six month period that you own the bond (7.12% annualized). Then, it will (likely) change to the interest rate declared for the next period for six months. Ans so on.

    Yes, you can buy $10k as an individual and $10k as an entity.

    Comment


    • #3
      If you purchase Ibonds now, the rate will be 7.12% for six months, then change to the new rate effective on 5/1 for the following six months, and so on.

      Treasury Direct does allow for entity purchases. You may need a separate EIN if you are going to do it with an LLC. I have a separate entity account as a sole proprietor.

      Comment


      • #4
        Originally posted by Lithium View Post
        Treasury Direct does allow for entity purchases. You may need a separate EIN if you are going to do it with an LLC. I have a separate entity account as a sole proprietor.
        Is your EIN the number you use for purchasing I bonds as a sole proprietor?

        Comment


        • #5
          Other threads here also outlined using a living trust. I set up a living trust and bought i-bonds a that way. An aside: I used a NOLO library book & online forms. I was pretty surprised when a recommended estate attorney said his language would have been a little different for the living trust and will I created from NOLO books but they were fine for my situation. I showed up expecting to pay $3k, not to be told I was set. (My situation: renting, divorced, employed doc, minor children)

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          • #6
            Originally posted by StateOfMyHead View Post

            Is your EIN the number you use for purchasing I bonds as a sole proprietor?
            Yes.
            im doing ibonds in RLT, sole prop, tax refund. $35k a year

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            • #7
              I bought $5K of ibonds with my taxes this year and I'm curious how much of a hassle it will end up being. These links (https://thefinancebuff.com/overpay-t...c-12-envelopes, https://thefinancebuff.com/how-to-de...e-account.html) explain the steps to buying the paper bonds and depositing them into the online account. Given that I've already lost my passport in the mail this year, I'm a little worried whether I'll even receive all 12 envelopes of bonds

              Comment


              • #8
                Originally posted by Lithium View Post
                If you purchase Ibonds now, the rate will be 7.12% for six months, then change to the new rate effective on 5/1 for the following six months, and so on.

                Treasury Direct does allow for entity purchases. You may need a separate EIN if you are going to do it with an LLC. I have a separate entity account as a sole proprietor.
                ​​​​
                Interesting, did you find some clear documentation from them for what is allowable in this regard? I wonder if you need to have income as sole proprietor or could just register an EIN? Or more accurately, if my sole proprietor income is less than $10k can I still buy $10k of ibonds?

                Comment


                • #9
                  Originally posted by CFEonline View Post

                  ​​​​
                  Interesting, did you find some clear documentation from them for what is allowable in this regard? I wonder if you need to have income as sole proprietor or could just register an EIN? Or more accurately, if my sole proprietor income is less than $10k can I still buy $10k of ibonds?
                  Documentation is not clear. It does not say that these are requirements, nor does it say that these elements are not required.

                  Comment


                  • #10
                    What are your thoughts on the fixed rate this year? will it go up? currently it is at 0, but if I buy ibonds before May I would get the 7.12 rate for 6 months and the new changeable rate will be again above 7 so it may not be worth it to wait for an increase in fixed rate?

                    Comment


                    • #11
                      yes the fixed rate will go up. Likely the fed will raise rates within 10 days. will probably raise rates 2 more times after that this year, depending on external factors of course

                      Comment


                      • #12
                        To me it makes sense to wait until April to buy for this year but I just want to clarify a few things that were said to make sure my logic holds up.

                        Rules:
                        1) The fixed (0%) and inflation-indexed (7.12%) rates for ibonds are about to change in April.
                        2) Buying now will lock you into current rates (fixed rate -forever, and inflation-indexed rate-for next 6m) regardless of any April changes.
                        3) The inflation-adjusted portions of ibonds purchased now or in april will sync up over the long run (i.e. within 12M and beyond)


                        To me, it seems like buying in April makes sense because:

                        1) ANY fixed rate (even if it's a pitiful 0.1-0.5%) on an ibond is precious as it guarantees an annual real return. Current rates are 0% so it can only go up.
                        2) Inflation-indexed rate is not likely to go down dramatically if at all
                        3) The only way buying now could be better is if you think that juicy 7.12% is about to disappear AND the fixed rate will not increase. Even then, we are talking about missing out on a max of $356 over 6M w/ a $10K ibond investment. Even if April-November 2022 inflation-adjusted rate is 0%, if the fixed rate goes up to as little as 0.3% you'll made up this difference x2-3 fold in the long run.

                        Is this thinking sound?

                        Thanks!

                        Comment


                        • #13
                          https://www.treasurydirect.gov/indiv...rms.htm#change

                          The fixed rate is locked for the 30 yr life of the bond.
                          The variable rate resets every 6 months.
                          The total is what you earn which will change every 6 months.
                          The design is only to lock in inflation protection. No trading really. You can let a zero fixed expire and buy the new combined rate. Thus I disagree with the long run conclusion. The problem is, the rebalancing is limited due to the holding periods and new purchase limits of $10k. It is not permanent, but it is gradual. If you want fixed, EE bonds (not the same fixed rate and no inflation adjustment).
                          IBonds by design will adjust in total only to inflation. The fixed interest play you are attempting will be difficult.

                          Comment


                          • #14
                            Originally posted by CaffeineNepenthe View Post
                            To me it makes sense to wait until April to buy for this year but I just want to clarify a few things that were said to make sure my logic holds up.

                            Rules:
                            1) The fixed (0%) and inflation-indexed (7.12%) rates for ibonds are about to change in April.
                            2) Buying now will lock you into current rates (fixed rate -forever, and inflation-indexed rate-for next 6m) regardless of any April changes.
                            3) The inflation-adjusted portions of ibonds purchased now or in april will sync up over the long run (i.e. within 12M and beyond)


                            To me, it seems like buying in April makes sense because:

                            1) ANY fixed rate (even if it's a pitiful 0.1-0.5%) on an ibond is precious as it guarantees an annual real return. Current rates are 0% so it can only go up.
                            2) Inflation-indexed rate is not likely to go down dramatically if at all
                            3) The only way buying now could be better is if you think that juicy 7.12% is about to disappear AND the fixed rate will not increase. Even then, we are talking about missing out on a max of $356 over 6M w/ a $10K ibond investment. Even if April-November 2022 inflation-adjusted rate is 0%, if the fixed rate goes up to as little as 0.3% you'll made up this difference x2-3 fold in the long run.

                            Is this thinking sound?

                            Thanks!
                            I have been buying these, intermittently, since 2002. Over the past 12 years, I have one bond greater than 0.1% fixed rate, and that is from 1/10. (I have some earlier bonds at a higher fixed rate.) Based on the last decade of bond issues that I have in my account, all at either 0.1% or 0%, I would be quite surprised if the rate is greater than 0.1% and would give long odds at that.

                            Comment


                            • #15
                              Originally posted by VagabondMD View Post

                              I have been buying these, intermittently, since 2002. Over the past 12 years, I have one bond greater than 0.1% fixed rate, and that is from 1/10. (I have some earlier bonds at a higher fixed rate.) Based on the last decade of bond issues that I have in my account, all at either 0.1% or 0%, I would be quite surprised if the rate is greater than 0.1% and would give long odds at that.
                              I got this off the Treasury Direct website. A lot of dry spots but the fixed rates over the last 5 years have been as high as 0.5% (2018/2019)--a far cry from the good old days--but better than zero. Am I right to say that choosing to buy in May [I keep saying April] is rolling the dice with a ($356- [$new inflation rate]) chip?
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