Considering buying I-Bonds...

[ret5hd]

Anyone familiar with them?

The smallest bit of reading I’ve done makes me think they might be for me.

1) is the $10k/yr limit per person or household? Can my spouse and I each buy $10k/yr?

2) is there any big downside I should be aware of?

Thnx in advance.

[progree]

1. There is a recent discussion in this thread (unfortunately the title doesn't say what its about

so was hard to find, but OTW a good thread)

https://www.democraticunderground.com/11213995

I don't know the answer to your "per person or household" question (my guess: per person).

As for any big downside -- none other than the 10K$/year limit. And having yet another account to watch and manage, though in some other thread somewhere someone says you can get them through your brokerage account, e.g. Fidelity, but that conflicts with something else I've read. They might have been talking about an inflation-protected bond fund which is different in a number of ways.

Edited to add: #1 in that thread isn't quite true. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.) -- Source: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm

[question everything]

2. Series I Savings Bonds: What Readers Want to Know - WSJ

If I buy these Series I savings bonds, what’s the minimum amount of time I have to hold them?

At least one year. If you can’t afford to lock up any money for at least that long, these bonds aren’t for you. But if you can, keep in mind that they can continue to earn interest for 30 years, or until you decide to cash them in, whichever comes first. If you redeem them before five years, you lose interest for the previous three months. “For example, if you cash an I bond after 18 months, you get the first 15 months of interest,” the Treasury website says.

If I buy now, am I guaranteed to get that 9.62% rate for as long as I hold the bonds?

No. That 9.62% rate is only the initial annualized rate on new I bonds sold from May through October of this year. That rate “is applied to the 6 months after the purchase is made,” the Treasury site says. “For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through January 1, 2023. Interest is compounded semiannually.” The Treasury resets the rate every six months based on a formula tied to inflation.

Are there limits on how much of these bonds I am allowed to buy each year?

Yes. The annual limit is $10,000 per person, according to the Treasury. You can buy the bonds in electronic form from Treasurydirect.gov, and you can also buy up to an additional $5,000 a year in paper I bonds by using your federal income-tax refund. Also, many investors buy Series I bonds not only for themselves but also as gifts for relatives, friends and others.

I bought $10,000 of Series I bonds late last year. Do I have to wait until 12 months from the day I bought them to buy more? Or can I buy more anytime this year?

You don’t have to wait 12 months. You can buy more at any time during 2022. “The annual purchase limit applies on a calendar-year basis and resets on Jan. 1,” according to a Treasury spokesman.

Interest rates generally have risen significantly. Could the value of these bonds drop below my purchase price?

No. The Treasury says the value of your I bonds can’t ever be less than you paid for them: “The interest rate can’t go below zero and the redemption value of your I bonds can’t decline.”

Another attractive feature that may surprise some taxpayers: Bondholders have flexibility in deciding when to report the interest income. Most taxpayers choose to postpone reporting the interest until they file a federal income-tax return for the year in which they receive “what the bond is worth, including the interest,” the Treasury says. But there is another option: Report the interest each year, which could be a smart move for someone with little or no taxable income.

https://www.wsj.com/articles/series-i-savings-bonds-what-you-should-know-11652834560 (subscription)

See also Treasury Direct iBond FAQ

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ifaq.htm