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I Bond rates can be an inflation hedge: Why you should consider buying now

edsl48

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As the cost of bacon and other goods sizzles, more people want to protect their savings from getting burned to a crisp by inflation.
One simple move, which I wrote about this past summer as well, involves setting aside some money in inflation-protected savings bonds, known as I Bonds.
You're likely going to hear even more about I Bonds come November when some startling new rates are expected to be announced.
But it's not a bad idea to try to pick up some I Bonds by Oct. 28 to lock in some already solid rates — and set yourself up for an estimated 5.3% rate for a 12-month period. Here's how you'd do it.

How to get a 5% rate​

First, you need to realize that I Bonds issued this year from May through October now offer an annualized rate of 3.54%, good for six months, thanks to an uptick in inflation. This is a variable rate that will go up or down over time, and likely change every six months after the issue date of the bond.
The I Bonds issued this year from May through October have a fixed rate of 0% and then a variable adjusted rate for the next six months after buying the I Bond.
On Nov. 1, the Treasury will announce the next rate for I Bonds and that's expected to be around an annualized rate of 7.12% for a six-month period, according to savings bond guru Dan Pederson.
"So if I buy before Nov. 1 and get an October issue date," he explained, "I will get an annualized rate of 3.54% for the first six months and 7.12% for the second six months."
That's an approximate total return of very attractive 5.33% for the year, experts said. To get to that number, you'd take half of the annualized 3.54% for the six months and half of annualized 7.12% for six months.
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Yet, you'd want to pay attention to the I Bond rules. You cannot cash an I Bond until after you've held it for one year. And if you cash them before five years, you'd lose the previous three months of interest.
I Bonds earn interest for 30 years unless you cash them first.
David Enna, who has a website called Tipswatch.com, said he'd recommend that a person planning to hold the I Bond for five years or more try to buy in October.
"That's no problem for someone who already has a TreasuryDirect account," Enna said, "but for someone who doesn't, the account should be opened as soon as possible."
Over the next five years, Enna said, he'd expect that I Bonds would have a six-month variable rate that is less than 3.54%, which, if so, would mean the return for the buyer in November would lag behind the buyer in October.
But if a person is looking at this as a short-term investment, selling after a year, buying in November is a good choice, he said.
"If an investor can't open the TreasuryDirect account this week, just buy in November and don't worry about it," said Enna, who has been tracking I Bond rates and auctions of Treasury Inflation-Protected Securities or TIPS since 2011.
"On Jan. 1, the purchase cap will reset to $10,000 per person per year, so that will be a second buying opportunity," Enna said.
Based on the September inflation report, Enna anticipates that savers will see an inflation-adjusted interest rate of 7.12%, annualized, for six months for I Bonds purchased in November, or in six months for I Bonds purchased in October.
Enna said it has been "a dreary decade for inflation protection."
"Suddenly, that's turned around," he said, "at least for I Bonds, which are very attractive and a hot topic right now."

Why an I Bond vs. regular savings?​

The argument for buying I Bonds is you'd get a better rate on some low-risk savings and keep up with inflation.
While consumer prices are edging up, banks aren't exactly paying a great deal when it comes to interest rates.
The average yield on a one-year certificate of deposit is 0.15% as of Oct. 25, according to Bankrate.com. More aggressive promotional rates for those who shop around range around 0.55% to 0.75% based on Bankrate.com listings.

How to buy an I Bond​

To get the current annualized 3.54% I Bond rate, you'd have to move quickly. I Bonds that are bought through TreasuryDirect online must be purchased before 11:59 p.m. on Oct. 28 to obtain a bond with an October 2021 issue date.
The customer must complete the transaction and actually arrive at the "Confirm Page" in the TreasuryDirect system before that cutoff time, according to John Rizzo, senior spokesperson, public affairs for the U.S. Department of the Treasury.
You can buy I Bonds online and hold them in electronic form via the TreasuryDirect.gov system. And that's where you'd need to go if you're look at buying I Bonds now. I Bonds are not issued at local banks any more.
If you want to buy savings bonds as gifts for the holidays, you must go through that electronic system, too. The person you're giving the savings bonds to as a gift also must have an electronic TreasuryDirect account. You must know the recipient’s full name, Social Security number or Taxpayer Identification Number and the person's TreasuryDirect number.

I Bonds aren't easy to understand​

Unlike a traditional one-year or five-year CD, you're not getting the same set rate month after month. Rates on I Bonds can fluctuate every six months.
On Nov. 1, an updated variable rate will be announced and it would apply to new bonds bought from Nov. 1 through April 30, 2022.
The new rate beginning Nov. 1 would replace the 3.54% variable rate for I Bonds bought from May through October after those bonds turn 6 months old. This variable inflation-adjusted rate applies to I Bonds bought years ago, as well.
Again, you don't lose a 3.54% annualized rate if you buy I Bonds before 11:59 p.m. on Oct. 28 and then the rate changes in November. Instead, a shift takes place six months after you bought that I Bond where you'd start getting the new rate, too, at a later date.
A bond issued in October, for example, would receive a new higher rate as of April 1, 2022.
Buying in November or after means that you only know what you'll get for the next six months, not what you might get for a 12-month period. A new inflation adjusted rate is announced every May 1 and every Nov. 1.

How to buy I Bonds with a tax refund​

There are two ways to buy I Bonds and it might be useful to know the second way if you're looking to buy I Bonds later but not right now.
It is possible to get paper I Bonds in a limited way. The Series I Savings Bond is the only savings bond that can still be issued in paper form but you must buy those bonds through a program that's connected to your income tax refund.
You'd need to file a Form 8888 when you file your tax return to allocate your federal income tax refund to U.S. Series I Savings Bonds.
In any single calendar year, you can buy up to a total of $5,000 of paper I Bonds using your federal income tax refund.
So you can theoretically buy up to $15,000 in I Bonds in a calendar year. To get to that maximum amount, you could buy up to $10,000 in electronic I Bonds in the TreasuryDirect system and up to $5,000 in paper I Bonds using your federal income tax refund.
Not everyone, of course, receives an income tax refund — or even anything close to $5,000 in an income tax refund in a year — so the actual total that individuals can buy in I Bonds will range significantly.
The minimum purchase is $25 for an I Bond bought online; and there's a $50 minimum for one bought through the tax refund program.

Monroe-based Pederson said it's not a bad idea to try to buy the I Bonds before 11:59 p.m. on Oct. 28, given that we already know what the first six months would bring and the likely rate for the next six months.
"So you have some solid numbers for the first year," said Pederson, who operates a savings bond consulting firm and has a website called BondHelper.com.

Do you miss out completely?​

While buying before the end of October can work for many, I Bonds are still a strong option if you don't make a move until November or after.
You could buy I Bonds any time from Nov. 1 through April 30, 2022, to get that expected annualized rate of 7.12%, good for six months. The official rate will be announced Nov. 1.
Buying before the end of October, Pederson says, just gives you more assurance over the rate you'd get for 12 months.
If you buy I Bonds from November through April 2022, you're starting out with a solid rate but then you'll need to wait closer to May 2022 to find out what the next six months will bring.
No one knows, of course, if things will settle down or heat up come May 2022 when another six-month rate is announced.
Another point of interest to consider: You won't pay state or local income taxes on the interest earned from savings bonds.
Interest earned is subject to federal income tax — plus federal estate, gift and excise taxes as well as any state estate or inheritance taxes.
In some cases, you may be able to exclude interest earnings from federal income taxes when the money is used to pay for higher education. But you need to pay attention to some complex rules. For example: "A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child," according to TreasuryDirect.

How much money can you make?​

Some smaller savers, Pederson said, might not think it's worth their time to set up an online account to buy I Bonds online.
If you're only looking at setting aside $500 or $1,000 in I Bonds, the interest earned overall is still minimal — even though it's far better than sitting in a checking account that likely pays no interest.
After all, a 5% rate on $1,000 amounts to around $50 in interest after one year.
If you're looking at setting aside $10,000 or so, you're looking at roughly $500 in interest after one year if you pick up 5% for the next 12 months.
But again, if you're looking to diversify some savings and get an inflation hedge, the I Bond may be worth a second look — especially if you want to put high priced bacon on the table one day.
ContactSusan Tompor: stompor@freepress.com. Follow her on Twitter@tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.
 

Scorpio

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tigerwillow1

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http://www.321gold.com/editorials/benson/benson102721.pdf
I-Bonds Will Rock The Financial Markets & Could Upend Politics
I don't see how they're going to rock anything with the $10k per SSN per year purchase limit. This particular article could use a little help. It says the next 6 month rate starting Nov 1 will be 5.33%. Wrong. It will be a bit over 7% as noted in the first post of the thread. And as for trying to get it right, it says the purchase limit is $10,00,000 per year, meaning a family of 4 could buy $40,000,000. I could do the proofreading and math better when totally drunk.
 

southfork

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Perhaps it would be better to to wait till after the first of the year when we be expecting a large interest rate jump in January
 

Mujahideen

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I just can’t get excited. A little bit of risk and you can make double that easily and with none of that lose 3 months interest bs.
 

specsaregood

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I-Bonds Will Rock The Financial Markets & Could Upend Politics
From that:
I-Bonds are direct obligations of the US Treasury, which fortunately, in turn, is backed by the unlimited money printing capability of the Federal Reserve.So, getting out of lower yield assets, with the same or lower credit rating to get into higher yielding I-Bonds, which are a compounding asset, is a “no brainer”.
Yes, how fortunate for all of us.
 

Scorpio

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that is the thing,

if you dump 10 k in there, then another come Jan 1, ya'll have the privilege of only losing 10-20% to inflation that they have created,

so if you sign up, in my opinion, you are going backwards

and as stated, 10 grand is a small amount to fiddle with and play their games, while possibly introducing yet another main line to the IRS
 

edsl48

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I personally use bonds and notes to provide "ballast" if you will to my investment portfolio. I would opine fixed investments are not viewed as the best investment these days. However, at my age, should I die something like this would give me piece of mind regarding taking care of my decendants. I just found out about of this, showing my bad investment abilities, but am going to at least grab my interest today being my usual Treasury Direct monthly investments yeild practically zero.
I might add my gold and silver investments haven't done to well lately...but thats another story
 

wastrel

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I'm sorry, I just don't see the United States government as a good long-term investment. It doesn't look like it will be a going concern all that much longer.

Are those Confederate bonds still available? ;)
 

Pyramid

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Generally speaking, bonds are a pretty poor investment right now. Both yield and principle are quite low on most bond products in comparison to equities and other pumped up investment options.

If you have bond products in your 401k or similar, TIPS would be a better option right now instead of US Treasuries or corp. bonds. US Treasuries are getting hammered, corp. bonds are somewhere in between.

Dr. John Williams at shadowstats has the real inflation data. 5% inflation as reported by .gov, 9% in real terms.

Good luck out there folks.
 

Casey Jones

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Bonds pay five percent; where CPI increases, figured using the method employed before 1981, are running at about 14 percent.

That's maybe not hyperinflation but it's sure getting in screaming range.
 

Buck

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if you do your game wisely, there is money to be made for yourself

as they say here in Ca:
If You Don't Play, You Can't Win


...they say that for the lottery

protect what you have, and if you're not shifted around, properly, right now, better start soon

GL
 

Casey Jones

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But aren't you going backwards slower?
Yes.

Do you have to go backwards?

My gold has done as well, or better - over ten years it's doubled in value. In spurts and jumps, of course.

But my gold will outlast bonds, government bonds, and dollars. So I'm not going to be moving into that sort of paper.
 

jrog100

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I diversified some of my investments back when I was a kid and bought $2,500 worth of I-Bonds in 2001. Those bonds are worth $7500 today so way better than cash. 300% gain in 20 years. But, with all documented investments there is that tax issue when they mature.

I should've bought PM's instead. They've done much better.
 

Fatrat

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Just an aside, I miss Fatwallet, that was a great site.
 

edsl48

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I diversified some of my investments back when I was a kid and bought $2,500 worth of I-Bonds in 2001. Those bonds are worth $7500 today so way better than cash. 300% gain in 20 years. But, with all documented investments there is that tax issue when they mature.

I should've bought PM's instead. They've done much better.
Hindsight is always 20-20. We should have all bought the oil ETF earlier this year for example. However looking forward I personally feel that someone should have access to some liquid funds should they need them. I might find an investment rental house to buy and need a source of cash. There are other things like unexpected illnesses, auto accidents and other short term emergencies. I persoanlly have been stacking or whatever since mid 1970s and there have been times when I would be underwater on the value vs purchase price. It happenes because markets go up and down one might opine. None the less I view my Pms as an insurance thing rather than an activity entered into for profit. Premiums and LCS issues make, in my mind, difficult to achieve profitable status quite often and think for those situations paper gold/silver is a better choice.
To each their own but to me, having access to liquid funds is an absolute must in my case. I do allocate on a percentage basis rather than an absolute amount and while I may not make as much on one thing vs another the peace in my mind has a value.
Just sayin
 

the_shootist

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Scorpio

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and yet, the dollar was up 79 tics friday,

as if all this chit coming out is dollah positive,

kind of tells us something about the rest of the currencies around the world
 

edsl48

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Fiscal Service Announces New Savings Bonds Rates Series I to Earn 7.12%, Series EE to Earn 0.10%​

FOR RELEASE AT 10:00 AM​

November 1, 2021

Effective today, Series EE savings bonds issued November 2021 through April 2022 will earn an annual fixed rate of 0.10%. Series I savings bonds will earn a composite rate of 7.12%, a portion of which is indexed to inflation every six months. The EE bond fixed rate applies to a bond’s 20-year original maturity. Bonds of both series have an interest-bearing life of 30 years.

Rates for savings bonds are set each May 1 and November 1.Interest accrues monthly and compounds semiannually. Bonds held less than five years are subject to a three-month interest penalty.

I Bond Composite Rate of 7.12% includes a Fixed Rate of 0.00%
The composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate. The 7.12% composite rate for I bonds bought from November 2021 through April 2022 applies for the first six months after the issue date. The composite rate combines a 0.00% fixed rate of return with the 7.12% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 264.877 in March 2021 to 274.310 in September 2021, a six-month change of 3.56%.

Series EE Bonds Issued May 2005 and Later
Series EE bonds issued from November 2021 through April 2022 earn today?s announced rate of 0.10%. All Series EE bonds issued since May 2005 earn a fixed rate in the first 20 years after issue. At 20 years, the bonds will be worth at least two times their purchase price. The bonds will continue to earn interest at their original fixed rate for an additional 10 years unless new terms and conditions are announced before the final 10-year period begins.

Series EE Bonds Issued from May 1997 through April 2005
Series EE bonds issued from May 1997 through April 2005 continue to earn market-based interest rates set at 90% of the average 5-year Treasury securities yields for the preceding six months. The new interest rate for these bonds, effective as the bonds enter semiannual interest periods from November 2021 through April 2022 is 0.77%. Market-based rates are updated each May 1 and November 1.

Series EE Bonds Issued Before May 1997
Series EE bonds issued before May 1997 earn various rates for semiannual earnings periods, depending on the issue dates. Please visit www.treasurydirect.gov for details and current values.

Savings Bonds Over 30 Years Have Stopped Earning Interest
All Series E savings bonds have matured and stopped earning interest. Series EE bonds issued from January 1980 through November 1991 are no longer earning interest. Series EE bonds issued from December 1991 through April 1992 will stop earning interest during the next six months.

More Information
Electronic Series EE and Series I savings bonds may be bought in TreasuryDirect®, a secure, web-based system operated by Treasury since 2002. Owners of paper savings bonds can continue to redeem them at some financial institutions. Paper Series EE and Series I Bonds can only be reissued in electronic form in TreasuryDirect.

Series I paper savings bonds remain available for purchase using part or all of a federal income tax refund. For more information on this feature, visit www.irs.gov.

To find more information on savings bonds and which ones are still earning interest, visit Fiscal Service’s website www.treasurydirect.gov. The Savings Bond Calculator tool, which is helpful for calculating redemption values, also can be found on the site. The website provides information and instructions for opening an on-line account to buy electronic savings bonds and Treasury marketable securities: bills, notes, bonds, Floating Rate Notes (FRNs), and Treasury Inflation Protected Securities (TIPS).

TreasuryDirect is a registered mark of the U.S. Department of the Treasury.
 

tigerwillow1

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I bonds that were purchased between September 1998 and October 2001 will be earning a bit more than 10% APR for their next 6 month period.
 

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Better off buying something tangible like a machine gun or pistol ammo.
Periods of high inflation are best dealt with buying “ things”, “products “. I visit the local Academy Sports every Wed. night after church, and noticed guns are increasing with each new shipment, the handguns go on sale when they get down to the last few….the Sig 365 a few months ago that was $480 is now $575, the SW .38 Airweight that was $415 is now $497….throw in their additional 10 percent discount for Vets and you have an affordable investment, new in the box, stacked nicely for quick resale when the fear and distrust of our government starts to run rampant. Be sure to buy at least a box of ammo for each handgun.
 

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Better off buying something tangible like a machine gun or pistol ammo.
I've heard rumors of this shiny stuff that appears on the Periodic Table...
 

Uglytruth

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First through INFLATION then through DEFLATION................

Should we be more concerned about inflation or the following deflation? What if we have mass dieoffs of quad jabbed sheeple who will get the remaining assets?
 

nickndfl

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Where can my retired mother buy some I bonds?
 

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Now that interest rates are rising, how is the bond market doing these days?
 

EO 11110

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Now that interest rates are rising, how is the bond market doing these days?

bonds and preferred stocks are getting crushed, historic scale. dont know about I-bonds or tips though.
 

Casey Jones

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bonds and preferred stocks are getting crushed, historic scale. dont know about I-bonds or tips though.
Nothing makes sense. Gold got hammered nearly ten percent, in a period of runaway inflation.
 

rte

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I know nothing about it.
Had a guy send me this today.
9.62 for six months.
Should I be looking into them?
Department of the same group that doesn't tell you the whole truth?

IMG_7100.jpg
IMG_7101.jpg
 

Uglytruth

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It's easy to get into anything but much harder to get out. Check out the small print & how you exit these and with what and when.
 

tigerwillow1

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gnome

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Nothing makes sense. Gold got hammered nearly ten percent, in a period of runaway inflation.
Right, gold is down from a year ago and basically flat from a decade ago, despite the dollar losing 30% or more of it's purchasing power.
Let's not even talk about silver...

Inflation hedges that couldn't...
 

Casey Jones

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Right, gold is down from a year ago and basically flat from a decade ago, despite the dollar losing 30% or more of it's purchasing power.
Let's not even talk about silver...

Inflation hedges that couldn't...
Weren't allowed to.

Once the sheeple are herded into digital tokens...watch THEM get smashed. Or just banned, or taxed heavily.