Comment by twblalock | Hacker News Reader

Comment by twblalock | Hacker News Reader

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After one year, I-bonds are pretty similar to savings accounts and they are indexed to inflation. Your money won't grow, but it won't shrink either -- and as Treasury bonds they are the lowest-risk investment that exists. If you buy some today, they will pay 7.12% for the next 6 months. After that they will probably be adjusted to pay even more, based on the current inflation rate.

There are two major catches: you have to wait at least 1 year before you cash them out, and a person can only buy 10k in I-bonds per year.

After the first year is over, selling I-bonds and getting access to the cash takes a few business days.

I've been tiering my emergency savings based on how many redeemable I-bonds I have. I have enough money in the bank to cover emergencies I might need to pay for very quickly -- things like plumbing problems, car repair, etc. The rest of my emergency fund is going into I-bonds. If I have a longer-term need for savings, like losing my job, I don't need all of my savings right away and I can wait for the amount of time it takes to cash out I-bonds.

For anyone who filed a 4868, and expects a refund, note that up to $5000 of it can be claimed in the form of paper I-bonds. This limit is independent of the $10000 online bond limit. There is a nuisance factor in that some portion will be delivered in small denominations -- down to $50.

If you're using TurboTax, the necessary checkbox is well hidden. Look for a "more options" tab or some such, IIRC.

This seems like oddly-timed tax advice -- the filing deadline (without extensions) was Apr 18 and today is Apr 23.

While it is unfortunately ill-timed, it's not like an expired discount code - it's still usable next year.

>For anyone who filed a 4868

A 4868 is a request for an extension. So those people still have time.

You can file corrections using 1040-X

I, for one, appreciated the humor here. But I also understand why others did not.

In addition to I bonds you can also buy up to $10K in EE bonds per year as well. These double in value, but you have to hold on to them for 20 years until they mature. I treat this as as retirement savings.

For example, if you buy them when you are between 40 and 50 years old, you will have $200K of risk free money by age 70.

Also, both I bonds and EE bonds are tied to the individual. If you are married your spouse can also buy $20K in bonds per year as well.

The downside of the EE bonds is they don't grow linearly. They are guaranteed to be worth double their original value via a one-time adjustment at the 20 year mark if they haven't already doubled -- and at today's rates they definitely won't double until then. If you need to sell them before the 20th anniversary they will barely be worth more than their original value, and in real terms they will be worth far less because of inflation.

doubling after 20 years is approx. 5% growth per year (locked in).

It's not that great an investment, but it does make sense to use it as a portion of your portfolio for retirement. I would imagine you'd put around 5-10% of your total networth in this form - may be even stagger it over time (e.g., put in 1% every year starting from 40). This can exist in lieu of bonds in your portfolio - though i would perhaps split it 50/50 with your bond allocation (which gives you some liquidity early if you truly need it).

I would want to have more invested in equities as their potential for growth is much higher, and over the long term, ought to beat inflation (as long as you purchase a market weighted index).

more like 3.6% with compounding interest…

I get 3.53%

    >>> 2**(1/20.)
    1.0352649238413776

i didn’t calculate it, i just did the rule of 72 in my head :-)

well, the EE bonds aren't compounded (or they compound with an interval of 20 years). That's why i used simple interest rather than compound, so as to make the calculations easier too.

This is misleading because everything you compare it to does compound.

When people talk about an interest rate, a growth rate, an inflation rate .. everything compounds.

If you're saying 5% of some special non compounding thing thats misleading to people without financial literacy to compare to every other rate they read.

So it's more correct to say 3.53%.

That's a 3.6% interest rate with your money locked up for 20 years. Personally, I'd rather risk that in index funds - your money would be much more accessible, the expected return would be greater, and the risk of the investment dive-bombing on a 20 year timeline is rather low.

I guess cool that it's guaranteed, though, and might make sense as part of a diversified retirement account.

> the risk of the investment dive-bombing on a 20 year timeline is rather low.

it's not that the risk is low - it's just that you cannot know if the equities wouldn't fall at the 20 yr mark, just you need to liquidate it to retire. You have to slowly decrease your % of equities the closer you are to retirement.

"Minimum term of ownership: 1 year"

Are there I-bond equivalents for us in Denmark? Watching my cash idly burn is not my idea of a good time.

I believe you can still purchase them. You're just loaning money to, and benefitting, the US government rather than your own.

You need an ssn.

> [...] a person can only buy 10k in I-bonds per year

You can create a trust and buy an additional 10k/year.

Where do you buy them?

https://treasurydirect.gov/indiv/research/indepth/ibonds/res...

How does one purchase I bonds outside of the USA ?

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