May Economic Update: I-Bonds
Ryan Antepenko, AIF Financial Advisor
Strothman Wealth Care
At Strothman Wealth Care, we want to make you aware of opportunities that exist both inside and outside of our management. Recently, the U.S. Treasury announced that I-Bonds will pay 9.62% through October 2022 which we believe is very compelling given the challenging start in the markets we’ve seen so far this year.
What is an I-Bond?
An I-Bond a product issued by the US Treasury that is fully backed by the U.S. government, does not lose value, and earns interest based on combining a fixed rate (currently 0%) and the current inflation rate (adjusted every 6 months). I-Bonds earn interest for 30 years unless you cash them out first. You can cash them out after one year, but if you do so before five years, you will lose the previous three months of interest. The interest is subject to Federal Income tax, which is paid at redemption (proceeds are exempt if used to pay education expenses). I-Bonds are exempt from state taxes. The fixed rate is set for the life of the bond. The variable portion of the rate will reset every six months based on the Consumer Price Index (CPI). The maximum purchase amount is $10,000 per individual, per calendar year.
Given the market volatility we are seeing, we believe I-Bonds are currently a great place to park some cash that you do not need in the near-term. Unfortunately, we cannot purchase I-Bonds for you as these bonds can only be purchased through the U.S. Treasury at www.TreasuryDirect.gov. Further, I-Bonds can only be purchased with non-qualified money (not IRAs, Roth IRAs or other qualified dollars).
As always, if you have any questions with this idea or your accounts in general given the recent market volatility we’ve seen, please reach out to your advisor or a member of our team anytime.