CONCERNED ABOUT INFLATION AND MARKET VOLATILITY?


Many investors are looking for high yielding yet safe investments in these difficult market condition - Series I Saving Bonds are very attractive now.


With inflation at a 40-year high and the markets in bear market conditions a lot of investors are hording cash in very low yielding bank accounts while purchasing power of their savings is being eroded by inflation. $10,000 a year ago has the purchasing power of around $9,090 today.

Consider Series I Savings Bonds – following is a summary of the attributes of these bonds:


The Upside

  • Issued and backed by the Federal Government

  • These bonds earn interest for up to 30-years

  • Interest rate has two components

  • Base rate, fixed for the life of the bond

  • Variable rate, pegged to the inflation rate which changes in 6-month intervals

  • Most of the current yield is coming from the variable component

  • Current total yield is 9.62%

  • Next adjustment period begins in November of 2022

  • Interest is added to your principle, so it compounds over the holding period

  • Interest earned is exempt from State and Local taxes

  • Once your account is established at TreasuryDirect.gov your initial and subsequent purchases are easy to make and have zero fees


The Downside

  • Minimum holding period is 1-year

  • If you redeem the bond between 1 and 5 years, you forfeit the previous 3-months of interest

  • Interest earned is added to your principle, not paid to you until the bond is redeemed

  • The interest earned is considered Federal taxable income in the year earned, even though you did not receive the cash payment

  • Maximum annual electronic purchase of is capped at $10,000 per year, per person (not per family), can purchase an additional $5,000 in paper bonds with your Federal Tax refund. this brings the cap to $15,000 per year, per Social Security number

  • Need to set up an account at TreasuryDirect.gov to buy the electronic bonds, this is a legacy system that has some quirks

  • Follow the exact account set up directions or watch the video provided by Treasury Direct

  • If not computer savvy, its best to have a trusted resource available

  • Do not exceed the electronic annual purchase cap, getting a refund can take several months


While Series I Savings Bonds are not an ideal fit for everyone, they do currently offer safety, high yields, with zero fees - other than about 15-minutes of your time to set up an account.




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