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| Zer92780 |
 Posted: Sun Jun 19, 2005 2:57 pm Post subject: US savings bonds: i-bonds, ee-bonds |
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Investing Associate
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TreasuryDirect.gov is worth a visit if you are looking for low-risk investing. Bonds are held on site with easily accessible monitoring and managing by electronic means. Rates are re-set in May/Nov. Interest is state tax free, and federal tax is due when bond is cashed out (if that's your choice).
I'm still learning about the site, but it is something no one should overlook.
I'm using my account at TD to buy gift bonds for nieces and nephews who may someday be surprised to find they have a stash of cash that will be tax free if the proceeds are used to pay for education. -Zer |
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| StatTrader |
| Posted: Sat Sep 10, 2005 4:27 am Post subject: |
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Member Of The Month! April
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In general, be careful with i-bonds. They pay a fixed amount above the inflation rate, adjusted every 6 months. Currently they pay 1.2% above the inflation rate of 3.6% for a 4.8% yield. You pay federal income tax on the interest when you cash them out (or 30 years, whichever comes first). The 1.2% represents 25% of the interest so the person in the 28% bracket ends up losing.
As the original poster indicated, if you are using these for educational expenses, allowing you to avoid the taxes, then they are a very good deal. |
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| rody084 |
| Posted: Tue Mar 14, 2006 6:50 am Post subject: |
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Investing Sr. Associate
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| StatTrader, do you think you could elaborate on how the person in the 28% bracket ends up losing? |
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| StatTrader |
| Posted: Tue Mar 14, 2006 4:57 pm Post subject: |
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Member Of The Month! April
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Initially, the taxes at 28% slightly exceed the fixed portion, thus you lose slightly to inflation. In the event inflation heats up, raising the adjustable portion of the payment, the 1.2% fixed portion represents less than 100% of the tax burden, how much less depends on how high the adjustable portion goes. It is the adjustable portion that is supposed to let you keep up with inflation.
In the event this does happen though, you can sell your i-bonds and buy new i-bonds with a higher fixed portion. |
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