I-Bonds

[clarabelle]

Does anyone know anything about individual savings bonds? They are doing well right now -much better than savings or CDs
Any experiences? Thoughts? Comments?

 

[*pixie*dust*]

Savings bonds are not a great performer but some people still buy them. I Bonds are adjusted 2x per year. From treasurydirect.com:

Here's how the composite rate for I bonds issued November 2009 - April 2010 was set:

Fixed rate = 0.30%
Semiannual inflation rate = 1.53%

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = 0.0030 + (2 x 0.0153) + ( 0.0030 x 0.0153)]
Composite rate = [ 0.0030 + 0.0306 + 0.0000459]
Composite rate = 0.0336459]
Composite rate = 0.0336
Composite rate = 3.36%

 

[clarabelle]

3.36 is a whole lot better than my savings account.
So why aren't they a good idea?
Anyone?

 

[PatsMom]

Bonds are not immediately liquid, even with a penalty. You do need to keep that in mind. There are also limits on the dollar amount you can purchase in a year - I can't remember it right now but the Treasury's web site has details.

Bonds can make a good emergency fund as long as you have liquidity until they are able to be cashed in (six months I think). And even then you are penalized jus tlike an early surrender of a CD.

One good thing about bonds is that the interest is tax deferred federally and tax free from the state.

 

[clarabelle]

Thanks!
I didn't know that about the tax part

 

[Grumpy's Gal]

I believe they are tx free if cashed in for higher education expenses.

 

[PatsMom]

I believe they are tx free if cashed in for higher education expenses.

There are some income limits and the bonds have to be purchased after a certain date - can't remember what it is but if you are holding older bonds, they might not be eligible. If the bonds are eligible for the education exclusion on income tax, you can also cash them in and roll them over to a 529 plan.

Also, to be eligible the bonds must be in the parents name, not the child's.