Update: The new fixed rate speculated about at 3:54 has been announced. It's 0.9%.

Acquired my current Ibonds at 9.62 last October. These will average down to 8.05 when they change-over to the 6.48 rate. Then the next 6 mo. APY moves down to 3.38 (existing Ibonds do not inherit the fixed rate) which will give me an average APY of 6.49% (=9.64+6.48+3.38 divided by 3) I am locked in til Oct 2023 but considering that the interest compounds tax deferred, I am not interested in redeeming any I bonds until at least May of 2024. Remember if you redeem now you give up 3 mo's of 6.48 apy. And do you think Ka-Powell has really whipped inflation now!?

@TripOfALifestyle

Жыл бұрын

Your math is a bit off because of compounding effects (it's not a simple average), but more importantly, the average return isn't what should guide your redemption decision. Think about it this way: If you owned something that paid 20% interest for a year and then dropped to 0%, you wouldn't keep holding it for the additional year on the basis that "the average will still be good." You'd take that money and put it somewhere more productive. With that said, we are NOT redeeming right now, because it's a little more complicated than that, as you mentioned. Personally, we're probably going to wait until October 2023 to make a decision about redeeming our I Bonds, so that we can see an additional 6 months of inflation data before deciding to pull the plug. It's a no-brainer because we bought in April 2022, so our I Bonds will keep paying 6.5% through September 2023. ONLY making I Bond purchases in the months of April and October is a "cheat code" for I Bonds, because it gives you extra information on the way in, and on the way out as well. We have a more detailed explanation of that here: kzread.info/dash/bejne/nJ-kts6AnbSfl9I.html Nicely done buying in October! We will probably be making a detailed video explaining our decision to redeem or not redeem in October 2023, so make sure you're subscribed. 😀

@alleneverhart4141

Жыл бұрын

@@TripOfALifestyle As one of our presidents once said, "Don't misunderestimate me!" The estimate I gave does leave off compounding effect but properly taking that into account the average APY comes out to be 6.79%. And that's tax deferred compunding mind you. Who knows where we'll be with inflation in a year.

@TripOfALifestyle

Жыл бұрын

@@straightopoint Yes! All of the percentages we report are ANNUALIZED RATES of return unless otherwise noted. Thanks for pointing that out for others. This is standard in the world of investing, and it makes it easier to compare one rate of investment return to another, regardless of the time period being discussed. EXAMPLE: If we say that something "earns 10% interest for 6 months," we're saying that it earns interest at a rate of "10% per year" for a period of 6 months. Thus, the total interest earned over that period of 6 months would be somewhere around 5% of the original principal.

I’m definitely waiting for the fixed rate announcement. If it stays at the current 0.4% or lower, then I’m done buying more I bonds. In fact, I will probably start selling bonds that are older than the 1 year minimum because, as you mention, there are higher interest rates available (CDs, etc) rather than the new ~3.8% I bonds will get starting in May. But, if the fixed rate jumps to ~1.0%, that will take I bonds to ~4.8% and lock in the 1.0% for 30 years no matter what happens with inflation/rates in the future…

@TripOfALifestyle

Жыл бұрын

We've never viewed I Bonds as a great long-term investment, so we don't think much about the fixed rate. To us, I Bonds are just a cute hack to get an outsized, guaranteed interest rate during a short burst of high inflation. We purchased ours (2 × $10,000) in April 2022, and we'll be redeeming them as soon as their "next 12 months" rate schedule becomes unfavorable (which is only possible to know in April and October of each year, as explained in this video: kzread.info/dash/bejne/nJ-kts6AnbSfl9I.html). We'll deploy that money in our normal investment portfolio, which you can see here if you're curious: www.tripofalifestyle.com/money/our-investment-portfolio/ Important note by the way: Unless you purchased your I Bonds in May or November, your bonds' inflation rate will not be changing in May. Each individual I Bond has its own "every 6 months" schedule. For example, the I Bonds we bought in April 2022 will continue paying 6.5% through September 2023 - even after the May 2023 rate change. It's an annoyingly complicated system, but that's also what makes it "hackable." We'll probably make a video about liquidation when we decide to dump our I Bonds.

@motogp9253

Жыл бұрын

Let us know how that works out, the fixed rate is not going to ~1.0%.

@TripOfALifestyle

Жыл бұрын

@@motogp9253 Based on what we've seen, 1.1% is probably an upper bound of possibility, though we expect the May 2023 fixed rate to be significantly lower than that in all likelihood.

@jeeplife5262

Жыл бұрын

Looks like fixed rate came in at 0.9%. My goal with I bonds is to move my 6mo emergency fund into them. Locking in 0.9% seems very good to me. 18 months ago I was getting 0.3% in a money market… so, I’m going to keep moving $800/mo into I bonds.

@motogp9253

Жыл бұрын

@@jeeplife5262 0.9%, I can't believe it! Shows what I know. Enjoy! 😎👍

Thanks for the timely video Steven! It seems like we will be better off building a T-Bill ladder instead of continuing to buy i- bonds going forward. We bought $40,000 of i- bonds in December 2021 and January 2022. My question now is when should I sell my current i-bond position to maximize the i-bond return?

@TripOfALifestyle

Жыл бұрын

Personally, we're probably going to wait until October 2023 to make a decision about redeeming our I Bonds, so that we can see an additional 6 months of inflation data before deciding to pull the plug. For us, it's a no-brainer, because we bought in April 2022, so our I Bonds will keep paying 6.5% through September 2023. ONLY making I Bond purchases in the months of April and October is a "cheat code" for I Bonds, because it gives you extra information on the way in, and on the way out as well. We have a more detailed explanation of that here: kzread.info/dash/bejne/nJ-kts6AnbSfl9I.html Since you bought in December and January, you'll get switched to the new, lower interest rate before us. You'll have to decide if you want to wait through that to see more data in October. We will probably be making a detailed video explaining our decision to redeem or not redeem in October 2023, so make sure you're subscribed. 😀

@roberthorwitz8607

Жыл бұрын

I bonds are stupid confusing to me anyway. I bought $10000 in April 2022. I am going to sell mine also. I got my 6 months of 7.12% for 6 months then 9.82% for the next 6 months. Currently getting 6.48%. As soon as I get my first 3 months of the expected 3.80% I will be dumping them. since those are the last 3 months of interest I will be loosing. Unless my thought process in off then overall returns should be just fine. you seem like you are in similar boat. so for me I will be unloading on DEC 1st 2023 or Jan 1st 2024 just to make sure. Good luck

Here are some of the reasons I moved some of my cash reserves into I-Bonds. First off its state income tax exempt. The federal tax is deferred, you don't pay any tax until you redeem them. And since this is my emergency cash reserves if I am tapping it its probably because I am not making money and therefore I am in a lower tax bracket. And unlike other bonds you can't loose money with these. With most bonds if you sale them before they mature and interest rates have gone up then the value of the bond can be less than what you paid for it. And finally its a lot less work than laddering CDs or T-Bills.

@majorgear1021

Жыл бұрын

Those are all good points!

Does the .9 percent change your advice as in your title?

@TripOfALifestyle

Жыл бұрын

Nope! But I do recommend watching the whole video. This point is discussed around 3:54. -Steven

I bought my first $10k I Bond in October of 2022 getting the 9.62%. I already regret buying it. I wish I would have put it in a good ETF. I will likely redeem it by the end of this year and do just that.

@TripOfALifestyle

Жыл бұрын

October 2022 was a great time to buy I Bonds! You guaranteed yourself an excellent 12-month return with no risk. Remember, you'll get 6.5% from now through September 2023, and then you're free to dump your bond when it switches to the crappy 3.4% rate if desired.

@ethancanin

Жыл бұрын

Yes I bonds were better. I bought CGUS for example in Sept. 2022 and it is unchanged in price today with no dividend. So happy I also bought I bonds.

The problem with this argument is that inflation is likely to tick back up again within the next year or two so the rate will likely increase again. Although on the flip side of that, bonds may not be guaranteed if the GOP forces us to default on our debts. Personally I'm sitting with a lot of cash right now as 4-6% on returns on cash is absolutely amazing especially when there's zero risk.

@TripOfALifestyle

Жыл бұрын

1) I Bonds are a very special and unusual type of investment. Unlike Treasury Bonds, corporate bonds, or stocks, which are all forward-looking, market-priced, and impossible to predict, I Bonds are BACKWARD-looking and very predictable by design. You can strategically own I Bonds when their interest rates are especially attractive, and own other assets when I Bonds are unattractive (which is most of the time, btw). There's a lot more info on how to do that in this video: kzread.info/dash/bejne/nJ-kts6AnbSfl9I.html 2) If you're legitimately worried that the federal government will fail to honor savings bonds, then you are on the "EXTREMELY conservative" end of the investing risk spectrum, and you may want to reconsider your position, because it may be very damaging to your long-term wealth. Here's some more information about the risks associated with different types of investments (and why you may WANT to take those risks): www.tripofalifestyle.com/money/investing-risks/

you lose 3 mo interest if you hold them less than 5 years.

@TripOfALifestyle

Жыл бұрын

Yes, that is already accounted for in all the calculations in this video. 🙂

My sofi saving account pays 4% right now, lol

@TripOfALifestyle

Жыл бұрын

Yep, high-yield savings accounts are a pretty decent option for money you may need to access in the short term. Here's a guide we made about them: www.tripofalifestyle.com/money/high-yield-savings-accounts/

@motogp9253

Жыл бұрын

5.4% > 4.0%, LOL

@jw4172

Жыл бұрын

But your locking your money down for longer than I would like to, with the 3 month penalty to get it back out, the lack of liquidity doesn’t make up the difference between a year at 4 and 9 months at 5.4. I bought what I wanted back when the returns were higher, the rest I’ll keep liquid for better opportunities that may present themselves.

@jw4172

Жыл бұрын

Actually, if you do the math, the 3 month penalty makes 5.4 less than 4 without penalty.

@TripOfALifestyle

Жыл бұрын

@@jw4172 The exact math on that is in the video. 🙂