There is this post on r/personalfinance where the top comments are praising treasure direct I bonds.
I looked into it, and it doesn't seem that great. I just want to make sure I understand the terms correctly.
- The best thing about it is the 7% rate right now. However this is this year only. historically speaking it is about 2%.
- You literally cannot take out the money in a year no matter what. It is not an issue of penalty.
- Interest are paid every 6 months. If you take out the money any time before 5 years, you are penalized 3 months of interest. So if you keep the bond for 17 months, do you only get 9 months of interest, since the 3rd payment hasn't hit yet.
- Supposedly an advantage is tax defer. However this is only on interest right? It is not tax deferred on the principal deposit. It also only tax defer on state (so moot for those of us w/o state tax)
If I understand all of this correctly. The best case scenario of this vehicle is keep it for a year, and hope the return/inflation doesn't drop too much. It is likely to return to the 2% in a 5 year horizons so it is likely to take the 3 month penalty on something that pays out every 6 months.
Submitted November 08, 2021 at 12:31AM by asiandwight https://ift.tt/301g6mg
