Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: Have you bought I bonds yet? Why not?

news.ycombinator.com

Post reply on HN
Print view View original

81–90 of 107 posts

Re: Ask HN: Have you bought I bonds yet? Why not?

#81

Post by BbzzbB »

lotsofpulp wrote: post #41
BbzzbB wrote: post #27

Earlier quoted context omitted.

You're gonna invest that 10k somewhere in all likelihood, a risk free 10% is pretty much unbeatable, it's higher than most high-yielding (and vice) stocks, but without bearing the risk of capital loss. Seems silly to me not to use I-bonds even if the cap is relatively low, sure wish I could (not American).

As other comments have indicated, the time and effort to actually invest the $10k in ibonds is considerable given the difficulty of using the website. I also want my cash to be accessible within a few days, so I prefer FDIC insured savings accounts. For locking up money for months or a year in an ibond, the annual gain compared to a savings accounts is only a maximum of $700 or so. The rest I invest in equities, whic…

I mean... which one is it? Is $10k too small an amount to be worth filling a form, or too large an amount that you need it accessible within a few days? I see this sentiment a lot in this thread, but it's so contradictory to me.

Only a raging bull market like the one we've gotten out of makes a 10% government backed rate of return sound bad.

Re: Ask HN: Have you bought I bonds yet? Why not?

#82

Post by fred_is_fred »

ElevenLathe wrote: post #6
icapybara wrote: post #2

Their website is awful and I’m afraid my money will be locked away with no recourse due to a technical error.

Same. For the potential upsides ($10,000 x 9% is $900, and that assumes I will keep it in cash otherwise), the downside risk is too great. If I could just click a button in my brokerage account and buy them, I would.

What is the downside risk of a US Bond? The website is bad?

Re: Ask HN: Have you bought I bonds yet? Why not?

#83

Post by PopAlongKid »

No one has yet mentioned the tax-advantaged aspect. Interest income from I-bonds is exempt from state income tax, and federal tax can be deferred until you cash them in or 30 years, whichever comes first. Paying tax on the interest when you are in a lower tax bracket later in life makes a lot of sense. The income can also be tax-free if used for qualified educational expenses for you or some family members (not going into the details here).

It seems to me the only competition here is bank CD (certificate of deposit) for 1 to 5 year term, which also has an early withdrawal penalty but is not tax advantaged in any way, and even now, you'd be hard pressed to get more than 2-3% interest on CDs from most banks, and that rate usually does not adjust at all during the life of the CD.

As some have mentioned, this is also a pretty good place to keep emergency funds, once you get past the one year lockup.

Re: Ask HN: Have you bought I bonds yet? Why not?

#84

Post by ElevenLathe »

fred_is_fred wrote: post #82
ElevenLathe wrote: post #6

Earlier quoted context omitted.

Same. For the potential upsides ($10,000 x 9% is $900, and that assumes I will keep it in cash otherwise), the downside risk is too great. If I could just click a button in my brokerage account and buy them, I would.

What is the downside risk of a US Bond? The website is bad?

Yes, you the order form can hiccup and you will be out the 10k (for a matter of months until Treasury sorts it out) but still have no bond. There have been several instances of people reporting this, and presumably many more privately. My free time is worth too much use it picking up pennies in front of a steamroller.

Re: Ask HN: Have you bought I bonds yet? Why not?

#85

Post by bombcar »

giantg2 wrote: post #71
bombcar wrote: post #63

Earlier quoted context omitted.

Yeah, they can be wonderful; but not everyone will want to bother with them (I find one of the easiest is to just get your tax return in physical bonds if you want to dabble).

How do you get a physical bond? I thought they went all virtual these days.

https://www.irs.gov/refunds/using-your-income-tax-refund-to-...

You can still get them if you get them as part of your tax return. Overpay estimated tax or increase your withholding.

10. Will I get actual paper bond certificates? Yes. Savings bonds purchased with a tax refund will be issued as paper bond certificates in your name. If you are married and filed a joint return, the savings bonds will be issued in your name and your spouse's name. If you purchase savings bonds for someone else, the bonds will be issued in the name(s) that you listed on Form 8888.

Re: Ask HN: Have you bought I bonds yet? Why not?

#86

Post by bombcar »

giantg2 wrote: post #76
bombcar wrote: post #53

Earlier quoted context omitted.

It's entirely possible that for a bit more hoop-jumping you could beat the 10% by continually churning where your money is for the signup bonuses; again, not likely actually worth it considering the time.

What sign-up bonuses?

Things like https://account.chase.com/consumer/banking/seo or https://www.bankrate.com/investing/best-brokerage-account-bo... or similar. They're not quite as good as they used to be, but if you had $10k in cash you could cycle through some and collect a few $hundreds.

Re: Ask HN: Have you bought I bonds yet? Why not?

#87

Post by ElevenLathe »

treis wrote: post #31
ElevenLathe wrote: post #6

Earlier quoted context omitted.

Same. For the potential upsides ($10,000 x 9% is $900, and that assumes I will keep it in cash otherwise), the downside risk is too great. If I could just click a button in my brokerage account and buy them, I would.

I smell a business opportunity

As in taking my 10k and buying the bond in my name and returning my money at maturity? If it's legal, this is exactly the business brokers are already in. Presumably it's illegal (there are lots of restrictions on I Bond purchases) or it's not worth their time since rarely is there retail interest in these bonds.

Re: Ask HN: Have you bought I bonds yet? Why not?

#88

Post by evanelias »

sf_rob wrote: post #61
timr wrote: post #34

Earlier quoted context omitted.

Yes, I-bonds are a bit of a meme right now, and IMO, overhyped. The other important things to note are that your money is locked for a year from purchase , you incur a penalty (3 months of interest) if you sell before 5 years, and the APY values being quoted are not indexed to inflation. I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them. Do not buy…

The penalty point is an important one for the above. If you only plan on holding them for the minimum of 12 months and the second half interest rate is 3% then your effective annualized return is 5.48% (1.0962^.5*1.03^.25). >I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them. Yes and no, I-bonds use a trailing inflation definition so you receive a r…

One minor I-bond hack: It's generally better to only buy them a few days before the end of the month, since it counts the same as if you bought them at the beginning of the month. For all timing purposes (interest, 12-month lock-up, and 5-year penalty), only the purchase year and month matter. The day is irrelevant.

In other words, time it correctly and your money is only locked up for 11 months + a few days. And since interest accrues on the 1st of the month, this also helps the interest rate math slightly.

Just don't go too close to end-of-month, since (iirc) it takes a few days for the transfer/purchase to go through online, and you don't want to get bumped to the next month.

Re: Ask HN: Have you bought I bonds yet? Why not?

#89

Post by lotsofpulp »

BbzzbB wrote: post #81
lotsofpulp wrote: post #41

Earlier quoted context omitted.

As other comments have indicated, the time and effort to actually invest the $10k in ibonds is considerable given the difficulty of using the website. I also want my cash to be accessible within a few days, so I prefer FDIC insured savings accounts. For locking up money for months or a year in an ibond, the annual gain compared to a savings accounts is only a maximum of $700 or so. The rest I invest in equities, whic…

I mean... which one is it? Is $10k too small an amount to be worth filling a form, or too large an amount that you need it accessible within a few days? I see this sentiment a lot in this thread, but it's so contradictory to me. Only a raging bull market like the one we've gotten out of makes a 10% government backed rate of return sound bad.

The increased interest return on the $10k is insufficient not enough for me to sign up for and then manage an account at treasurydirect.gov. Of course, it could be for others.

My philosophy is I keep a certain amount of physical cash (in case electronic payments go down), I keep digital cash (in case my income gets disrupted), and the rest is invested. I already have the digital cash in an FDIC insured savings account earning 2.4%, and I do not need to worry about splitting it up into per year amounts or when I can and cannot withdraw it and how much.

It is more of a simplicity thing I guess for me, and the abnormal inflation calculations which lead to the last 18 months of exceptional i bond returns probably will not last.

Re: Ask HN: Have you bought I bonds yet? Why not?

#90

Post by lotsofpulp »

giantg2 wrote: post #74
lotsofpulp wrote: post #41

Earlier quoted context omitted.

As other comments have indicated, the time and effort to actually invest the $10k in ibonds is considerable given the difficulty of using the website. I also want my cash to be accessible within a few days, so I prefer FDIC insured savings accounts. For locking up money for months or a year in an ibond, the annual gain compared to a savings accounts is only a maximum of $700 or so. The rest I invest in equities, whic…

"ibonds is considerable given the difficulty of using the website." First, this is ridiculous. It was pretty easy to set up. Yeah, the virtual keyboard is weird and there's some waiting with the verification, but it's trivial effort. "I also want my cash to be accessible within a few days" Now we're comparing apples to oranges. If you need the cash in a few days (kind of odd/rare to begin with), then you want a savin…

> Depends on the equities and your definition of a functioning society. It's more likely to be flat, at least in real terms, over the next decade.

I am under the assumption that the US’s leaders have every incentive to keep broad market equity values going up, even if it means the USD loses purchasing power. There are a ton of leaders with equity ownership that want to see it go up, as well as political support from constituents with IRA/401k/etc, as well as the innumerable underfunded defined benefit pension plans across the country that rely on broad market equity values to keep rising to meet their projected expenses.

For that reason, I consider an SP500 ETF like VOO or even VTI to be relatively safe and track inflation over the long term.

Post reply on HN