IBONDS: Possibly 'hot' to cash out if you purchased in late 2021
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Hello,
If you purchased an IBOND towards the end of 2021 when it was paying 7+% (and now paying 3.94% and likely lower next reset) you are now past the 3months of the lower 3.94% rate that you’d forfeit for early redemption (5 years for no penalty, versus 2 now)
ie, if you opened a $10K ibond in Dec 2021 it is now worth $11, 332.00, if you cash out now, this is what you will receive as the last 3 months interest isn’t yet posted (what you forfeit).
You can easily earn 5% or more on this same money, so on 11.3K that would be $565 on this money versus about $440 at 3.94%. That more than makes up for the $110 you’ll forfeit at 3.94%. Only consideration for some is state income tax as bank interest is taxable both state and federal as the IBOND money is exempt from state income (and city income tax)
As noted, if we are 3 months into the 3.94% rate if you bought in Dec 21, so come April, it will likely be even lower, probably around 3-3.25% based on recent inflation reports. So your loss the next 12 months vs a 5.25% one year CD is even greater.
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https://www.doctorofcredit.com/212507-2/
Actually, I-Bond purchased from Dec 21 could have been cashed out in Sep 23. I just redeemed mine from Apr 22.
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@c3 said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
https://www.doctorofcredit.com/212507-2/
Actually, I-Bond purchased from Dec 21 could have been cashed out in Sep 23. I just redeemed mine from Apr 22.
When you cashed out last year, what tax form number did they give you? They don’t mail it to you, right? I think you have to go to their website to print it out.
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@c3 said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
https://www.doctorofcredit.com/212507-2/
Actually, I-Bond purchased from Dec 21 could have been cashed out in Sep 23. I just redeemed mine from Apr 22.
That was not wise IMO. You forfeited 3 months of the higher interest, I purposely waited 3 months to forfeit 3 months of the 3.94% interest vs 6.xx interest it was paying up until 9/30. Not to mention, rolling it into the next tax year.
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@mistercheap I bought in 2021 and 2022. Cashed out the 2021 late last year 3 months after MY rate went below 5%, and cashed out the 2022 this week 3 months after MY rate went below 5%. The new iBond rate is over 5%, but since it’s tied to inflation, you have to make a guess if inflation is going up or down over the next few months. I’m guessing down, so I am putting the money into 12-month CDs with an APY over 5.5%. That way, I’m guaranteed the >5.5% return for at least 12 months rather than guess what the new six-month rate will be for iBonds.
– Z –
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@mrvietnam said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
When you cashed out last year, what tax form number did they give you?
I cashed out last week, on Jan 2.
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@mistercheap said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
That was not wise IMO. You forfeited 3 months of the higher interest,
3 months of low interest already passed for me – Oct/Nov/Dec of 2023. For <5 years, the holding period is always (6 months * N) + 3 months.
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@c3 said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
@mistercheap said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
That was not wise IMO. You forfeited 3 months of the higher interest,
3 months of low interest already passed for me – Oct/Nov/Dec of 2023. For <5 years, the holding period is always (6 months * N) + 3 months.
OK, your comment was a bit confusing since you had ‘just redeemed’ after the Sep 23 part, so I thought that’s when you did it.
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@zerenia said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
@mistercheap I bought in 2021 and 2022. Cashed out the 2021 late last year 3 months after MY rate went below 5%, and cashed out the 2022 this week 3 months after MY rate went below 5%. The new iBond rate is over 5%, but since it’s tied to inflation, you have to make a guess if inflation is going up or down over the next few months. I’m guessing down, so I am putting the money into 12-month CDs with an APY over 5.5%. That way, I’m guaranteed the >5.5% return for at least 12 months rather than guess what the new six-month rate will be for iBonds.
– Z –
The NEW ISSUE ibond rate is over 5% due to the guaranteed part, but people who bought in late 21 or early 22 don’t get that. they are getting 3.94%
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@mistercheap said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
@zerenia said in IBONDS: Possibly 'hot' to cash out if you purchased in late 2021:
@mistercheap I bought in 2021 and 2022. Cashed out the 2021 late last year 3 months after MY rate went below 5%, and cashed out the 2022 this week 3 months after MY rate went below 5%. The new iBond rate is over 5%, but since it’s tied to inflation, you have to make a guess if inflation is going up or down over the next few months. I’m guessing down, so I am putting the money into 12-month CDs with an APY over 5.5%. That way, I’m guaranteed the >5.5% return for at least 12 months rather than guess what the new six-month rate will be for iBonds.
– Z –
The NEW ISSUE ibond rate is over 5% due to the guaranteed part, but people who bought in late 21 or early 22 don’t get that. they are getting 3.94%
Agreed, which is why I tried to be clear about MY rate vs. new issue rate. You are spot on.
– Z –
