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iBond - Another Question?

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  • iBond - Another Question?

    I have been reading through the iBond posts unable to find a specific answer, but please redirect me if this has been discussed. Dual physician household both working full time. Started -600k net work probably <12 months from 0$ net worth. Filling all of our financial buckets according to written investment plan (bdRoth, 401k...etc). Paying off student loans in <5 yrs. Living in ADU rent free currently nextdoor to family. Wanting to save 20% down for a house once we decide to buy/move. Where would you park your mortgage downpayment savings for the next 2-3 years? Currently in 0.5% (High? Interest Savings Account) which I know is losing money versus inflation. Behaviorally valuable to save this which is why we decided to go this route, however mathematically I don't want it sitting here for 3 years. Only a couple months into throwing into the HISA. Considering ibonds, avoiding taxable TSM index as too risk averse with this "bucket" of money. Curious any thoughts. I know iBonds would be limited to 30k and be untouchable for >12 months, but seems to fit goals despite 3 month penalty if pulling out before 5 years. Thanks!

  • #2
    You've thought through this issue and how it fits your overall plan. You don't mention emergency funds and where they are held.

    For a home purchase in 3 years, I Bonds make a lot of sense. You'll get a much higher yield and be almost risk-free. Knowing you'll lose three months of interest and recognizing you'll still come out ahead of holding in HISA. The biggest drawback is the yearly limitation of $10K/individual ($15K if using tax refund payment). But even then, you could easily get $60K in ibonds in the next two years.

    Do you have a specific concern about locking up your money for 12 months?
    Cobin Soelberg, M.D., J.D. - Principal & Owner
    Greeley Wealth Management | [email protected]

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    • #3
      if you need it in 0-3 years most important thing is just don’t lose it

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      • #4
        Emergency fund is in HISA with bank which is actually decent yield up to 5k per account, rest is held in HISA.

        Agree on not losing it, lazy of me to just dump it in HISA. Glad I came across iBonds, seem to go in and out of favor pending interest, but seems viable currently.

        Thanks!

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        • #5
          Originally posted by MrDuxworth View Post
          Glad I came across iBonds, seem to go in and out of favor pending interest, but seems viable currently.

          Thanks!
          Ding ding ding—congratulations you have just won the understatement of the year award!

          Take this shiny new I-bond as your prize

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          • #6
            yes I'd do what you recommend knowing you'll need to save more in a HYSA

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            • #7
              Yeah I'd definitely recommend maxing out your I bonds now if you don't need the money for 2-3 years. There is a way you can buy an extra $5k each, for $15k total per person, with a tax refund - you'd have to look into the specifics.

              (Obviously assuming you have some emergency fund in between, since the I bonds can't be redeemed for 1 year)

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              • #8
                Originally posted by MrDuxworth View Post
                Glad I came across iBonds, seem to go in and out of favor pending interest, but seems viable currently.
                iBonds only go out of favor by those trying impropey comparing them to equities and/or higher risk bonds. iBonds rarely go out of favor by those in the know, when looking for a higher earning alternative for cash or cash equivalents.

                With the exception of about five rate periods since inception in 1998. iBonds have consistently generated tax effective returns >= HYSAs and short-term CDs.

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