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DavidScubadiver said:   It seems so peculiar to hope for inflation rates to go up. Surely that means you will spend more on goods and services than you earn on your i-bonds, no?
  Plus you will pay income tax on the I bond interest.

The more inflation goes up the more tax you will pay.

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Well, no tax on the bonds if you use it to pay for the kid's college, right?

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Some inflation is actually a good thing and a positive economic indicator (like wages increasing annually).  IMO an I Bond variable rate consistently around 2-3% would be a sign of a Goldilocks economy.

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DavidScubadiver said:   Well, no tax on the bonds if you use it to pay for the kid's college, right?
Only if your income is under a certain amount, according to https://www.treasurydirect.gov/indiv/planning/plan_education.htm

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Fortunately for me, I started late in life with having children. By they time they are in college, I may be retired so the income limits should be manageable. They will be in school between the time I might retire and the time I am required to take mandatory distributions from my retirement accounts.

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I have been toying with buying I-bonds for a while and looked up this thread to see if now is the right time. It seems like the rate is decent compared to years past, should I go ahead and move forward or wait til May?

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PennSmoke said:   I have been toying with buying I-bonds for a while and looked up this thread to see if now is the right time. It seems like the rate is decent compared to years past, should I go ahead and move forward or wait til May?
  I would not at this time. I own some old ones(with 3% fixed rate) that I will own probably until just before they quit earning interest(at 30 years old). Other, better places to put fixed income money now, in my opinion.

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Why own until "just before" they quit earning interest instead of redeeming when they stop earning? And.... what are the better places to put fixed income money? Just curious. Personally, I have no idea what to do with fixed income investing. I just started buying bond indices like BND, but I still buy the i-bonds too, figuring I may use them for education and not have to pay tax on the income.

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I bought I-Bonds for the first time in 2001 and they had a 3% fixed rate.I bought the max. Today, I have over 70k untaxed interest.If I don't start drawing them down before they mature at 30 years old, tax on all the interest will be due in one tax year and will be taxed at a much higher rate.I'll probably draw them down over 3-4 years. I all about paying the lowest tax rate I can.I did not realize they were taxed at maturity until about 2-3 years ago after reading a post here.
Better places today , IMHO, are Andrews CU 3% 7 yr CD and Navy Fed 2% 17 month CD.Not really great options, but better than current I-Bonds. Also, 20k max per year for a couple is not a lot for I-Bonds.HTH.

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The CD is intriguing, thanks!

For clarification - all other retirement vehicles are on track and maxed out, this would be an alternate to cash being parked in savings.

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PennSmoke,
Everybody's situation is different. YMMV

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I thought the point of I-Bonds was to protect against inflation in the future? I guess maybe because we have had such low inflation for so long people have lost sight of that? (seems like people in the thread above are just looking at today's rate)

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I agree. There is a certain degree of risk buying these things in the sense that if you buy $10,000 a year for many years earning 0% you give up the opportunity to earn a bit more. On the other hand, having your bus filled with these things before inflation kicks in means you have a busload of bonds earning a decent rate.

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sfchris said:   I thought the point of I-Bonds was to protect against inflation in the future? I guess maybe because we have had such low inflation for so long people have lost sight of that? (seems like people in the thread above are just looking at today's rate)
  
Yes but rates across the investment universe are linked together. If inflation goes up in the future you would also see the returns on all other investment options go up as well

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AnEnlightenedGuy said:   
sfchris said:   I thought the point of I-Bonds was to protect against inflation in the future? I guess maybe because we have had such low inflation for so long people have lost sight of that? (seems like people in the thread above are just looking at today's rate)
  
Yes but rates across the investment universe are linked together. If inflation goes up in the future you would also see the returns on all other investment options go up as well

  
If that is the case, why buy I-Bonds at all? They are supposed to offer inflation protection greater than most other options.

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sfchris said:   
AnEnlightenedGuy said:   
sfchris said:   I thought the point of I-Bonds was to protect against inflation in the future? I guess maybe because we have had such low inflation for so long people have lost sight of that? (seems like people in the thread above are just looking at today's rate)
  
Yes but rates across the investment universe are linked together. If inflation goes up in the future you would also see the returns on all other investment options go up as well

  
If that is the case, why buy I-Bonds at all? They are supposed to offer inflation protection greater than most other options.

I believe, because, it isn't the case.  If inflation goes up then the price of all bonds drop and the returns on those bonds will go down with absolute certainty.

The iBonds will have a higher coupon so their value will increase with inflation (unlilke any other bond besides the TIPS)

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dj63401 said:   I bought I-Bonds for the first time in 2001 and they had a 3% fixed rate.I bought the max. Today, I have over 70k untaxed interest.If I don't start drawing them down before they mature at 30 years old, tax on all the interest will be due in one tax year and will be taxed at a much higher rate.I'll probably draw them down over 3-4 years. I all about paying the lowest tax rate I can.I did not realize they were taxed at maturity until about 2-3 years ago after reading a post here.
 

You can always switch to accrual basis if you happen to have a down year income wise.  From that point forward you have to pay taxes each year, but only on the interest accrued during that year.  This is especially helpful if you have a child that has savings bonds in their name.  Since you don't need to file a tax return if a minor's unearned income is less than $1050, they'll never have to pay taxes on the amount accrued before they day they start working.

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