An I-deal inflation hedge – Buy Treasury I bonds that could soon offer a 9.6% return
Published 5:13 pm Friday, May 13, 2022
When I hear the word retro, the first thing that comes to mind is fashion. You take an old trend, modernize the look just a touch and…voila! What is old is new again.
And while I do not have any hot fashion tips for you today, I would like to share with you a money idea from the past that is so en vogue now. Savings Bonds.
Your last interaction with savings bonds may be the old Series EE bonds. In their paper form, Series EE treasury bonds resembled pretend money, but earned real interest. The treasury stopped issuing paper bonds in 2011.
Nowadays instead of walking into a bank to purchase a savings bond, you go online to the government website: treasurydirect.gov. The website requires you to set up an account. By doing so, you can then purchase the savings bond so valuable in these inflationary times- the Series I Bond.
What makes the I bond different from the Series EE bonds is how the interest is calculated. The EE bonds paid a fixed interest rate percentage determined at issue. Series I Bonds on the other hand receive an interest rate tied to inflation. This interest rate gets updated every six months in May and November. The interest rate announcement for May is expected to be over 9%!
What to know before investing in I Bonds:
- You can only purchase up to $10,000 per year, per person but also $10,000 per year per entity (for example corporation, partnership, limited liability company, sole proprietorship and a trust)
- In addition to this, and if you have a tax refund, you can elect to receive the refund in form of a paper Series I bond up to an additional $5,000 limit.
- Prior to purchasing I Bonds, be sure you do not need the money for the next 12 months. The overall holding period for the I Bonds is 30 years. However, after 12 months, you would then be able to redeem your I Bond by forfeiting three months of interest. After holding for five years there is no longer any forfeiture of interest.
- Additional benefits are that they are backed by the full faith and credit of the U.S. Government making them virtually risk-free investments, and their earnings taxed when the bonds are cashed in and are not subject to state or local taxes.
So, revamp your cash savings with this season’s hot idea – the savings bond.
I Bonds are backed by the full faith and credit of the US Government as to the timely payment of principal and interest. The principal value will fluctuate with changes in market conditions. If they are not held to maturity, they may be worth more or less than their original value.
Securities offered through Cetera Financial Specialists LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Cetera is under separate ownership from any other named entity.
Jesse Duhon, CFS – Advisor, can be reached at firstname.lastname@example.org.