This does beg the question - is there any other “safe, relatively liquid” option that has even close to the same yield as I Bond? Seems like traditional bank savings and short term CDs are still well below 1% everywhere.
EDIT: Thanks for the replies. TIL.
There's some rules on if you cash out before 5 years (you give up the last 3 months of interest) and you MUST hold for 12 months.
You can ladder them too and have different amounts / times of purchase.
I like it for planned emergency funds that would otherwise be cash, ladder into it so you always have your EF available.
https://www.thebalance.com/tax-advantages-of-series-i-saving...
1) No state tax on I-bonds
2) You can defer and pay tax on the interest only when you sell the bonds (which means you can time the sale to when you have lower income)
> or do they retain the 8% for however long you hold the bond?
No, the interest rate is updated every 6 months, see the sibling comment.
As the parent comment stated - this isn't meant to get anyone rich. This is the government providing a service that allows (working-class) individuals to keep a rainy-day fund relatively insulated from risk. If you're able to save more than 10k per year, you're not the primary target for this service.
Still worth getting the yearly $10k though.
Also, assuming a government bailout will come to the rescue is a pretty risky strategy.
>Also, assuming a government bailout will come to the rescue is a pretty risky strategy.
Of course, this is just my opinion, but I feel like it is risky to not assume a government bailout. As far as I can see, the options are bailout of public markets, or revolution.
Everyone should have some emergency plan or fund if at all feasible.
Compare this with a 529, which serves a similar purpose. Then this just reduces to a stocks vs. bonds argument, but for your kid's education. Do you value safety or STONKs then?
Also, I find changing beneficiaries for an I bond is easier than a 529, in the event whatever beneficiary doesn't pursue college (a decision I understand more these days), but IANAIA (I am not an investment advisor?)
Also, I am not exactly sure what you mean by "STONKs", but if one's investment timeline is on the order of years, all the history I see shows broad market equity index funds to be pretty safe.
So this doesn’t allow you to avoid the income phase-out, it just lets you time-shift the educational spending to an earlier year (in which your income may be below the threshold).
If your family income is above the threshold in every year until you need the money for tuition, then there will not be an opportunity to get the tax benefit.
From your link, emphasis mine:
> Taxpayers can bypass the income phase-outs on savings bonds by rolling them over into a 529 college savings plan before their income increases beyond the income phase-outs.
https://institutional.vanguard.com/iam/pdf/ISGCTIPS.pdf?cbdF...
https://www.google.com/finance/quote/VTAPX:MUTF?sa=X&ved=2ah...
The longer they exist, the more it feels TIPS are a sucker's bet.
The Funds will decline because you have to sell old Bonds at a discount to buy up the new higher interest payout bonds. But if you held on to the original bond, then you'd still get the fixed payout. You'd just miss out on the opportunity of the new higher payout bonds on the market.