Series I Savings Bonds...7.12% interest...sort of hard to pass up

[pygmypony]

i just put a little bit of our savings into one of these. i don't think many people realize these even exist, but it's a pretty sweet deal

• 7.12% interest for the next 6 months
• the rate changes based upon CPI every 6 months. the next rate change is in April
• you can purchase up to $10K / calendar year / individual (so you and a spouse can buy $10K each)...and you can buy one in December, and another in January and still get that sweet 7.12%
• you can put another $5K of your Fed Tax refund toward them as well
• they earn interest for 30 years
• you cannot cash out before 1 year
• after 1 year, if you cash out prior to 5 years, you forfeit the last 3 months of interest
• after 5 years, you can cash out penalty free
• oh, and state and local tax free, and fed tax free if you use proceeds for higher ed - and you don't pay taxes until you cash out

I bonds — TreasuryDirect

www.treasurydirect.gov

 

[w_b]

gotta be a catch? If not, gotta buy these for my Dad.... He's chasing interest on savings accounts right now

 

[JerseyPete]

gotta be a catch? If not, gotta buy these for my Dad.... He's chasing interest on savings accounts right now

Is he willing to tie up his money for 15 months? Unless I read wrong, can't cash out for a year, and after that you lose 3 months interest.
It does sound like there must be a catch other than the 10K limit.

 

[rick81721]

gotta be a catch? If not, gotta buy these for my Dad.... He's chasing interest on savings accounts right now

The "catch" is inflation will be 8% next year!

 

[Santapez]

Isn't the danger/concern that they drop down to a base rate interest that's very low? Not a huge deal if cashing out in 2 years however the base rate I believe is 0.0% on I-Bonds being issued now.

 

[pygmypony]

no catch, other than the one year lock up and then forfeiture of 3 months interest until you hold for 5 years. and that's not really a catch per-se...just the terms of the bond you are buying

as part of one's overall savings plan, these are pretty solid in my view...i'm going to start "laddering" a some of these so they become fully liquid on an annual basis

the other caveat is, the 7.12% is only effective for the first 6 months. Come the next reset date, if inflation somehow goes to ZERO, your interest for the next 6 months will be ZERO, but you will still have earned 3.56% (7.12%/2) for the first year

 

[pygmypony]

Isn't the danger/concern that they drop down to a base rate interest that's very low? Not a huge deal if cashing out in 2 years however the base rate I believe is 0.0% on I-Bonds being issued now.

and yep, that's correct, the base rate is ZERO...so, that is a possibility. see math in prior post however, and, if you did decide to cash out after a year, with 6 months at 7.12% and another 6 months at ZERO, the three months of interest you would be forfeiting would be ZERO.

in short, if you think inflation is going to stick around for a bit, these are probably a good place to stash some cash

it's either this or stablecoin

 

[pygmypony]

here's a pretty good article from the NYTimes that has some more color for those interested...

Inflation Bonds Are Getting a Big Rate Bump (Published 2021)

The rise in prices has affected not only consumer goods but some government savings bonds, and it could benefit some investors looking for safe spaces for their money.

www.nytimes.com

 

[w_b]

3 months interest penalty; hmmmmmm. That’s a bit of a di<k punch, but still the rate beats hi yield savings accounts by 5-10x or more.

 

[The Kalmyk]

I could change buying habits and make that money just on savings.