Treasury Series I Bonds

[Bill]

Folks,

Wanting some advice. I've got a diversified portfolio-mostly index funds with an 80/10/10 mix of stocks/bonds/other. I've got at least 25 more years to work. I'm in a 2 earner high income household with kids. In filling out my tax returns this year I'm fortunate to be getting a large refund. One of the options to receive said refund is by buying Series I bonds. I could fund the max (for paper bonds)- $5000/social security number for several people.

Is this a good idea or a bad idea? I've already maxed out my employer sponsored Roth 403(b), 401(k), 457, HSA, and 2 529 college savings accounts and am looking for other places to stash $$.

Open to suggestions.

Thank you in advance.

[VagabondMD]

Bill wrote:

Folks,

Wanting some advice. I’ve got a diversified portfolio-mostly index funds with an 80/10/10 mix of stocks/bonds/other. I’ve got at least 25 more years to work. I’m in a 2 earner high income household with kids. In filling out my tax returns this year I’m fortunate to be getting a large refund. One of the options to receive said refund is by buying Series I bonds. I could fund the max (for paper bonds)- $5000/social security number for several people.

Is this a good idea or a bad idea? I’ve already maxed out my employer sponsored Roth 403(b), 401(k), 457, HSA, and 2 529 college savings accounts and am looking for other places to stash $$.

Open to suggestions.

Thank you in advance.

Click to expand...

Howdy, Bill,

I use I-bonds as a cash proxy. Currently, they pay 2.58%, more than the Ally savings account (1.35%) though the rate fluctuates every six months. I like the fact that you do not have to pay the tax on the interest until you sell them.

[Bill]

Thank you sir-that's what I was thinking too. Other than the 3 month interest penalty if you sell in less than 5 years, it seems to be a cash equivalent that's protected against inflation.

Thank you

[jz]

@Bill,
ditto everything Vagabond wrote. I am on the verge of retirement and also use Series I bonds as a cash-equivalent; currently 20% of my cash-equivalent bucket. Six months ago inflation was pronounced dead. You are wise to consider it's reemergence, esp. given your context of being too young to be scared by the inflation of the 1970s.
There are 3 strategies to deal with the ravages of inflation. 1) high proportion of stocks/bonds, 2) TIPS, 3) series I bonds.
Three dates to remember: 1 year: can withdraw with a penalty. 5 year: can withdraw with no penalty, and 30 year: the bond will expire with no more interest payments.
I believe the annual limit is $10,000/person. That's what I've been buying.

[Bill]

Thank you JZ. We figure that a few good decisions now and a little luck will pay off huge in a few years.