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.
