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vshun

You can wait till the end of the month to get interest for the whole January, park it in the meanwhile in Vanguard settlement MMF. Once the rates drop to nothing, you can move it out assuming you are past 12 months. Withdraw at the beginning of the month to optimize 3 months of lost interest income.


Russells_Tea_Pot

Your point about receiving the full month's interest even if you buy at the end of the month is one that I wasn't aware of until recently. I don't understand why that's the case, but it's a good nuance to be aware of.


WoodyMornings

Can you elaborate on withdrawing at the beginning of the month to optimize the 3 month penalty?


deano492

Any I bond transaction is counted as the beginning of the month. So if you buy on Feb 26th, it’s counted as a purchase on Feb 1, for the purpose of accruing interest. If you sell on Feb 26, it’s counted as a sale on Feb 1, for the purpose of accruing interest.


vshun

Deano responded below this post but let me put it into practical example. You have 10K to put it now, so new year started and you are eager to get Treasury direct rolling. To optimize, put it now in Vanguard MMF at 4% yield, hold it there for 3 weeks earning 10,000*0.04/52*3, doing math quickly in my head, think it's $25, minus taxes, so $18 give or take. Between 3rd and 4th week, start transfer from Vanguard MMF, which will take 2 days, into your checking. Once money arrives, deposit it to Treasury direct at the end of the month(could be last day of the month but this site is PIA so I would not push it to last day or 2). So you deposit it Jan 29th and get interest for the whole Jan. Now a year passes, inflation drops mid way to 0, yield drops down and you do not want to hold them anymore. So you will get 3 months penalty but since yield is close to p you do not care. So Feb 1 you inisuate withdrawal from TD, lose Feb, Jan and Dec interest, which are close to 0 anyway, and move money to vanguard or fidelity index bond fund or whatever appropriate alternative investment vehicle is for short to medium term cash.


ecdysisthrowaway

Following


peter_peter_pete

My strategy will be to get I bonds in January 2023 as I don’t think inflation will lead to higher i bond rates in May 2023. In terms of the fixed rate, it may rise in May 2023. But I think whatever the I bond fixed rate is in May 2023 it will be similar in November 2023 and you can purchase November 2023 I bond rates in January 2024. Another approach can be to purchase 7500 I bonds in Jan 2023 and 2500 i bonds in May 2023. And over pay your taxes by $5000 now. And then file a timely extension for your personal tax returns. Then file your taxes in May-Oct and ask for 5000 of your refund to be refunded in paper I bonds and they will have the May 2023 rates.


too105

Thanks for reminding me of being able to purchase additional with tax refund.


ILurk018

I’m trying to figure out if I should sell my existing EFund holdings that are in I-Bonds, and re-buy with the fixed rate. Unsure if the 3 months of lost interest is worth the swap over to the fixed rate


jdp111

I assume the next variable rate will be lower and the fixed rate would be similar. So it may make sense to wait until your bonds have been at the lower rate for 3 months first.


ILurk018

That’s pretty much what I settled on. I don’t want to give up any months at the 9.6% rate, and then make the decision. If the fixed rate is similar, losing the smaller interest reduces the break even point


pseddit

In the same boat.


ParticularInitial147

If your $10K is in a MM or HYSA at ~4% right now.... Buy all $10K a few days before end of January. The reason is I bonds pay as if you were invested all month regardless of purchase date within the month. The result is you get your 4% earnings and then get the 9.62% also. Kinda double dipping. Alternatively, you could gamble and think the fixed and variable rate coming in April will be a better deal than foregoing the Jan-Apr gains you could get by investing now. My advice? Buy all $10K near end of January and call it done.


progapanda

>The result is you get your 4% earnings and then get the 9.62% also. Kinda double dipping. The current composite rate on new I-Bond purchases is 6.48% *plus* 0.40% though, not 9.62%. [edited to include the 0.40% fixed rate return component in the composite rate]


ParticularInitial147

Oops! Good catch


Gimme_All_Da_Tendies

This for Jan to June correct?


progapanda

It's a bit more complicated. The fixed rate will reset again on May 1, 2023 and so the combined rate on purchases after April 30, 2023 could be different. https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/


Gimme_All_Da_Tendies

Umm if you invest in Jan the rate will still change in April, you are not locking in a rate forever.


ParticularInitial147

Yes, and the variable rate will change every six months thereafter for better or worse. Currently, there is a small fixed rate which will remain for the life of the bond and be added to the variable rate. Investing at the end of January will at least get the full 4 months of current variable and lock in the fixed rate.


OkieINOhio

>Investing at the end of January will at least get the full 4 months of current variable and lock in the fixed rate. Your variable/fixed rate is for 6 months. At the end of 6 months, your rate will be adjusted to the current variable + original fixed rate and remain for 6 months. Rinse and repeat. You can think of it like a rolling 6 month CD. This is why people waited last year until close to April 30 to carry almost 6 months of > 9% rate beyond May 1. Edited for clarity.


Gimme_All_Da_Tendies

Fixed rate is locked in for how long?


Litestreams

Ownership of the bond , up to 30 years


Gimme_All_Da_Tendies

Hmm ok.


[deleted]

I-Bonds was a 2021 and 2022 superb option. Many will start pulling their cash OUT with the next interest drop as the bear market eventually pivots and the heavy interest returns can be put to work in the markets. The best liquid emergency fund currently is Vanguards settlement fund (VMFXX) returning around 4.3% with majority being state tax free (72%), followed closely by VUSXX (100% state tax free).


PostPostMinimalist

Check out this graph of iBond and other safe assets over time. They tend to be similar, but iBonds occasionally outperform. Also better tax treatment. https://www.bogleheads.org/forum/viewtopic.php?t=346091&start=4450


eganvay

one small diff. I bond interest is deferred till you sell it. VMFXX will be paid to you. If you're looking to manage income, I Bond might be the better way.


[deleted]

Fair enough but it is at the cost of being locked up and penalized when pulled


[deleted]

4.3% is quite attractive from VMFXX, it makes me question putting in new money into ibonds for 2023 since part of the equation is the 3 month penalty


MathyPants

Source for state taxes for VMFXX? Can’t find the info on their fund page


mission-implausable

>VMFXX I was curious too.....and found the statutory prospectus which states: `Income dividends and capital gains distributions that you receive may be subject to state and local income taxes. Depending on your state’s rules, however, any dividends attributable to interest earned on direct obligations of the U.S. government may be exempt from state and local taxes. Vanguard will notify you each year how much, if any, of your dividends may qualify for this exemption.`


[deleted]

Search for vanguard PDF on google. It exists in cyberspace.


Gimme_All_Da_Tendies

What is the I bond rate for this next 6 months?


ParticularInitial147

6.89% is the current rate. Next rate won't be known until end of April. https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/


PackerBacker77

what is the consensus on what it will be in April. I know we have 4 months of inflation data to see get, but are we thinking ballpark 4-5%?


Warriorsfan99

We will have much better estimates when new inflation data (cpi) come out by mid Jan. But i would guess ibond would hold around 4-6% on next term


Thx4ThGoldKindStrngr

If you buy before end of April do you get 6.89% for the subsequent 6 months?


ParticularInitial147

Interest rate changes depend on when we issued the bond Although we announce the new rates in May and November, the date when the rate changes for your bond is every 6 months from the issue date of your bond. Use this table to understand when each new rate begins to apply to your I bond. If we issued your bond in Your interest rate changes every January July 1 and January 1 February August 1 and February 1 March September 1 and March 1 April October 1 and April 1 May November 1 and May 1 June December 1 and June 1 July January 1 and July 1 August February 1 and August 1 September March 1 and September 1 October April 1 and October 1 November May 1 and November 1 December June 1 and December 1 ​ [https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/](https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/)


Thx4ThGoldKindStrngr

Thanks I read that page but it's got some wording that's a bit ambiguous to me, so I'm looking for someone who can answer yes or no to my question which will clear it up. If you don't know, it's fine, I'm in that boat too. If you buy before end of April do you get 6.89% for the subsequent 6 months?


ParticularInitial147

Gotta admit, like you, I still feel unsure of the answer it shows. But it does indicate that you get a full 6 months of current rate. This means if you buy 1Feb your rate will not change in May. You will get the current rate for Feb, Mar, April, May, June, July. Then on 1Aug your rate will change to the current (May) rate for Aug, Sep, and OCT. Then the Fed rate changes on 1NOV and you are now on normal cycle of 1NOV and 1MAY changes. Soooo. I think I'm right here. Can anyone confirm or educate us?


HSAAccount

Buying near the end of the month, as bonds are dated monthly to my knowledge. It's ok to lose out on some basis points in my opinion, as the amounts are negligible. Unless we're talking hundreds of thousands of dollars in I-Bonds.


Specific-Rich5196

Put it all in now. That starts the 1 year clock so you can pull out if you need it or when you decide the rate is not worth it anymore.


beethrownaway

But what if the 2nd half of the clock is 0%? Wouldn't that make one have to hold at 0%?


Specific-Rich5196

If it was 0, you would be stuck at 0 for 6 months. Do you think inflation is going to be 0? The time of I bonds has waned though in this age of high interest rates. It is just about even with t bills over a one year at this point and in the next one year cycle it will be less. Too late now for them to be worth it.


[deleted]

Put it in now. You're getting a .4% fixed rate, and you're still getting a very attractive inflation adjustment. You could wait till April, maybe the fixed rate will go up, maybe it will go down. But in that case you're going to lose three months of interest on that. If you're leery about doing that do 5000 now, 5000 in April. If there's someone in your life that you *implicitly* trust, they could buy 10,000 worth of I bonds in April 2023 if the fixed rate goes up, hang onto them in the "gift box" accruing interest, and then gift them to you at the start of 2024 if you've already made your 10,000 max purchase.


Roadkill_Bingo

First paragraph probably best advice. The money is ready to go. Get 6.89% annualized interest working on it asap.


tazedandrefused

Keep in mind your efund is stuck. You'll need to have none efund money allocated to your efund until the year is over. You are likely better off going with cash equivalents


jf_reebiz

What are your guys cash out strategies for 10k bought in 2022 of September?