Is this window the author speaks about still open?
I don't know anything about money/finance. Can someone ELI5 to me if I can still get the free money from this, this year?
I don't know anything about money/finance. Can someone ELI5 to me if I can still get the free money from this, this year?
The US Government offers a special savings program called iBonds (not an apple product). Technically they’re referred to as Series I bonds.
These bonds are special. Each citizen can only purchase $10,000 per year. The thing that makes them special is that they have really favorable interest rates that are made up of two components. There’s a fixed component largely controlled by the Fed. Currently this is essential 0% though rates are rising. The second component is tied to inflation. Right now, that component is ~8% for the most recent issuance (there are two issuances per year of these bonds where they recalculate the interest rate). This rate may change if inflation goes up or down.
The bond is special because that 8% is really high compared to other risk free instruments. For example, compare that 8% to what you’re earning on your savings account. Hence why many people have taken interest in iBonds recently.
You can only purchase these instruments directly from the treasury department. Google Treasury Direct. Also there are rules about how long you have to hold them and how much interest you give up if you need to withdraw your money early. Those rules are outlined on Treasury Direct.
[1] https://www.treasurydirect.gov/indiv/research/indepth/ibonds... under “Who May own an I Bond”
The rate tied to inflation is set every 6 months (May 1 and November 1), and when you buy a bond, the rate holds for 6 months. So if you bought on April 25, then in October you would get approximately 3.6% of the value of the bonds you bought, and the rate would reset to the current 6 month period, which is expected to be somewhere around 9% when they announce it soon.
You can cash in the bonds after either a year or 15 months (I don't remember for sure), but if you cash them in less than 5 years, you lose 3 months of interest. I'm guessing they don't give you money if you cancel when the rate is negative which can happen.
It can't happen -- I-bonds have a composite rate floor of 0%.
I mean, it's exactly 0%. https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
> The bond is special because that 8% is really high compared to other risk free instruments. For example, compare that 8% to what you’re earning on your savings account.
Some people might call that special high interest "free money."
You can still purchase I-Bonds, with the understanding that the May rate will be adjusted again in 6 months (it could go down if inflation goes down) and you won't be able to pull your funds for a minimum of one year.
It's a great option for inflation protection if you can let that money sit for awhile. https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
Arguably an i-bond would out preform anything in my portfolio based on the last six months.
Yes, if you have a Social Security Number and meet any one of these three conditions:
- United States citizen, whether you live in the U.S. or abroad
- United States resident
- Civilian employee of the United States, no matter where you live