"I Bonds"
I was a bit surprised that Bob didn't know what I Bonds were when a caller asked him about them last week. Bob doesn't get stumped very often! Well, FWIW, here are a few tidbits about I Bonds:
Advantages
o Tax-deferred earnings, up to 30 years.
o Up to $30k per person per calendar year ($60k per couple).
o Inflation-adjusted interest.
o Principal guaranteed.
o State & local tax-free interest.
o Currently paying 6.98% (3.4% fixed, + 3.52% CPI-U adjusted).
o You can purchase them without fees, online, by credit card!
o Semi-liquid (after 6 mos, but less than 5 years, there's a 3-mo interest penalty).
Disadvantages
o Inflation-adjusted interest. During times of deflation, you can earn less than the fixed rate, as low as 0%.
If you haven't already guessed or didn't already know, I Bonds are US Savings Bonds, Series I. I'd never given Savings Bonds a second thought as a savings vehicle, but I Bonds make a lot of sense, to me, for some purposes. If you want to know more, you can visit:
publicdebt.treas.gov
For tax-deferred accounts, there are TIIS (Treasury Inflation-Indexed Securities), aka TIPS (Treasury Inflation-Protected Securities). These were recently paying about 3/4% more than I Bonds, but the only easy way to buy them for a tax-deferred account is on the open market through a broker, which means the usual hidden markups prevail. They have fixed maturity dates of 5, 10, & 30 years (though the longer bonds aren't anywhere near as volatile as "regular" long bonds, due to their variable inflation component). You can read more about TIIS at:
bondsonline.com
Ken |
