The once-obscure Treasury investment soared in popularity last year because of its enticing inflation-adjusted rate, which peaked at 9.62%. That leapfrogged bank deposit accounts and completely trounced negative stock- and bond returns. The caveat? Individuals are limited to $10,000 per year, and those who hit the maximum had to wait until the new year to get more.The current annualized offering at TreasuryDirect.gov is 6.89%, which is a composite of a 0.
That’s also the case if you’re not planning on holding your I-bonds for long, and will cash them out once your one-year holding period ends. If you follow suit with your $10,000, there are some ways to buy more throughout the year, primarily with a gifting strategy. You can buy up to $10,000 for any individual as long as you have their Social Security number and an email address. They can claim the gift in any year they haven’t already reached their own individual limit.
The key for him is whether it looks like the I-bond fixed rate will rise in May, for which there’s no public formula. So he’s watching the real-yield rates of TIPS as a proxy. “If real TIPS yields have been high the whole time, I may wait and hope for a higher fixed rate. It’ll be a guessing game, but I think if the 10-year TIPS is high, there’s a chance the fixed rate will go higher,” he says.
“By waiting, the only thing that happens is the clock doesn’t start ticking on your one-year holding period,” says David Enna, founder of TipsWatch.com, a website that tracks inflation-protected securities.
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