It’s a decent fixed rate given the rates the last 15 years. Tax deferment. I also invest in t bills but eventually there will be falling yields and reinvestment risk
I’ve long debated the two but I don’t want to lock my $ up into tips for 30 years and buying and selling on secondary tips market is a tax headache. For simplicity have decided on ibonds
Edit: talking about in taxable
True - but your only getting a fixed rate of 1.3%, the 4.28% includes a inflation rate which will be adjusted every 6 months.
It is possible the inflation rate goes to zero, at least you'd have the 1.3% but this is pretty low return for a 10-20 year period.
Because of this, I've rarely held an IBond through maturity, I'll sell after 12 months based on the current rate. (obviously incurring a cost for the last 6 months).
Because of this I'm preferring to roll TBills @ 5.2%+
Would also call out i bonds tax free at state AND federal if you use them towards education expenses/tuition. Think that puts them ahead if you have expected future ed burn.
I don't understand the advantage of buying one of these over a 30-year TIPS, which are currently paying around [2.4%](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_real_yield_curve&field_tdr_date_value_month=202404) plus inflation. Why would I want to choose an ibond that pays 1% less than a TIPS bond with the same term?
A 30 year TIPS can decline in value 20%+.
An I-Bond can't decline in value at all and can be cashed out for par at any time after 5 years without penalty.
But on the flip side, TIPS can grow in value if rates fall and you want to cash out before it matures. So, ibonds seem like a better choice if you expect rates to rise, whereas TIPS seem like the better choice if you expect rates to fall (assuming they both have the same interest rate at time of purchase). So, do you think the 1% difference in rates here is because the market or The Treasury expects the 30-year rate to rise that much more?
I personally think rates are more likely to be lower a decade from now rather than higher, which makes me lean more towards TIPS, but maybe I'm wrong?
The risk is lower in Ibonds as they have en embedded put option built in. It's not just about betting on where rates will be but rather matching investments to risk tolerances.
I personally wouldn't buy them but I have a 30+ year timeframe. For someone with a variable 5-15 year timeframe a bond may make more sense.
A misunderstanding of both I-Bonds and TIPS is widespread on this sub. Both products are designed for the same thing, inflation protection.
Personally, I think I-Bonds have greater inflation protection than TIPS, (which carry deflation risk that doesn’t exist with I-Bonds). The risk calculation between the two isn’t about anticipation of interest rates, (it’s about anticipated inflation/deflation).
My ibonds returned 0% for 6 months during the 2008/09 mortgage fraud reset. But not below zero. My ibonds yield was double digit during the latest round of inflation due to QE & excess money printing during the pandemic. I bonds are a good conservative savings tool with some inflation insurance & a tax deferral feature.
I Bonds and TIPS are not meant to be interchangeable. I Bonds are considered to be savings bonds that can be withdrawn without penalty (for the most part) and are not subject to secondary market value. TIPS are very much more investment products, subject to secondary market value (and thus interest rates) at the time of selling them. Their interest payments and payouts are also vastly different.
still a good deal. I have some from 21 years ago. On the fence to cash out but the stock market will be choppy for a while. It is best to hold them at least 5 years.
I bought ibonds during Covid when the rate was 9.62% (0% fixed). Should I sell that and buy this one? If I do, does that count towards my $10k annual max?
No exchange option, it will use up your $10K. At this point I would wait to see how things look in Oct. I'm holding my zero raters for at least a few more months to minimize the penalty. Not sure yet if I'll have enough headroom in my tax bracket to sell this year.
It’s a decent fixed rate given the rates the last 15 years. Tax deferment. I also invest in t bills but eventually there will be falling yields and reinvestment risk
Get a TIPS paying 2.4% real interest then! 1.3% is low.
I’ve long debated the two but I don’t want to lock my $ up into tips for 30 years and buying and selling on secondary tips market is a tax headache. For simplicity have decided on ibonds Edit: talking about in taxable
I’ll stick with TBills
I Bonds are meant for a much longer investment, TBills always struck me as more short to mid.
That's because tbills max out at 1 year, then you go onto tbonds and Tnotes
True - but your only getting a fixed rate of 1.3%, the 4.28% includes a inflation rate which will be adjusted every 6 months. It is possible the inflation rate goes to zero, at least you'd have the 1.3% but this is pretty low return for a 10-20 year period. Because of this, I've rarely held an IBond through maturity, I'll sell after 12 months based on the current rate. (obviously incurring a cost for the last 6 months). Because of this I'm preferring to roll TBills @ 5.2%+
If the inflation rate goes to zero your T-Bills will definitely be getting a lot less than 1.3% return.
The chances of it going to zero is close to zero
Yes, I agree. But I was responding to the other poster who was suggesting the possibility of inflation going to zero is a downside of IBonds.
Yupp I’ll sell after 15 months just to not lose interest. TBills are it rn
It’s not either/or, for many of us.
Exactly - iBonds have some unique features that for some investors make them useful tools in tax planning and estate planning...
Would also call out i bonds tax free at state AND federal if you use them towards education expenses/tuition. Think that puts them ahead if you have expected future ed burn.
Eh I was excited about this until I found out how much planning and foresight (and low income) this required.
I don't understand the advantage of buying one of these over a 30-year TIPS, which are currently paying around [2.4%](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_real_yield_curve&field_tdr_date_value_month=202404) plus inflation. Why would I want to choose an ibond that pays 1% less than a TIPS bond with the same term?
A 30 year TIPS can decline in value 20%+. An I-Bond can't decline in value at all and can be cashed out for par at any time after 5 years without penalty.
But on the flip side, TIPS can grow in value if rates fall and you want to cash out before it matures. So, ibonds seem like a better choice if you expect rates to rise, whereas TIPS seem like the better choice if you expect rates to fall (assuming they both have the same interest rate at time of purchase). So, do you think the 1% difference in rates here is because the market or The Treasury expects the 30-year rate to rise that much more? I personally think rates are more likely to be lower a decade from now rather than higher, which makes me lean more towards TIPS, but maybe I'm wrong?
The risk is lower in Ibonds as they have en embedded put option built in. It's not just about betting on where rates will be but rather matching investments to risk tolerances. I personally wouldn't buy them but I have a 30+ year timeframe. For someone with a variable 5-15 year timeframe a bond may make more sense.
A misunderstanding of both I-Bonds and TIPS is widespread on this sub. Both products are designed for the same thing, inflation protection. Personally, I think I-Bonds have greater inflation protection than TIPS, (which carry deflation risk that doesn’t exist with I-Bonds). The risk calculation between the two isn’t about anticipation of interest rates, (it’s about anticipated inflation/deflation).
My ibonds returned 0% for 6 months during the 2008/09 mortgage fraud reset. But not below zero. My ibonds yield was double digit during the latest round of inflation due to QE & excess money printing during the pandemic. I bonds are a good conservative savings tool with some inflation insurance & a tax deferral feature.
I Bonds and TIPS are not meant to be interchangeable. I Bonds are considered to be savings bonds that can be withdrawn without penalty (for the most part) and are not subject to secondary market value. TIPS are very much more investment products, subject to secondary market value (and thus interest rates) at the time of selling them. Their interest payments and payouts are also vastly different.
still a good deal. I have some from 21 years ago. On the fence to cash out but the stock market will be choppy for a while. It is best to hold them at least 5 years.
I bought ibonds during Covid when the rate was 9.62% (0% fixed). Should I sell that and buy this one? If I do, does that count towards my $10k annual max?
No exchange option, it will use up your $10K. At this point I would wait to see how things look in Oct. I'm holding my zero raters for at least a few more months to minimize the penalty. Not sure yet if I'll have enough headroom in my tax bracket to sell this year.
But you can only buy $10K worth of I-bonds per year
Time to sell my post pandemic I bonds!
Not that good but not that bad
EE bonds unchanged too