Ask KT & Suze Anything: Answering Your I Bond Questions.
Nov 9, 2023
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Suze and KT answer pressing questions about Series I Bonds, including the recent change in interest rates, the worth of redeeming bonds with different fixed interest rates, and strategies for maximizing interest rates. They also discuss the benefits of opening a kids ultimate opportunity savings account to teach children about saving money.
Consider redeeming I bonds with a 0% fixed interest rate to purchase new I bonds with a 1.3% fixed rate, but be aware of penalties and taxes.
Wait at least three months after interest has been credited before redeeming I bonds to minimize penalties.
Purchase new I bonds towards the end of the month to maximize interest credits from the beginning of the month.
While the fixed interest rate on new I bonds is 1.3%, it is not guaranteed and may decrease if inflation rate falls below that.
Evaluate your financial objectives before redeeming I bonds and explore alternative investment options if high interest rates are your main concern.
Deep dives
Consider redeeming I bonds with 0% fixed rate for higher interest rates
Many people are suggesting redeeming I bonds purchased when interest rates were higher and buying new I bonds with a 1.3% fixed rate. Redeeming allows for a higher interest rate of 5.27% instead of the current approximate rate of 3.94%.
Redeem I bonds to take advantage of the 1.3% fixed rate
If you own I bonds with a 0% fixed interest rate, it may be beneficial to redeem them to purchase new I bonds with the 1.3% fixed rate. However, consider the penalty and taxes you'll incur. It may be wise to spread redemptions over multiple years to minimize taxes.
Timing considerations for redeeming and purchasing I bonds
When redeeming I bonds, wait until the interest has been credited for at least three months to minimize the penalty. Additionally, if you plan to purchase new I bonds, do so towards the end of the month to maximize interest credits from the beginning of the month.
Understand the fixed interest rate and inflation protection
The fixed interest rate of 1.3% on new I bonds does not guarantee that you will never earn less than that. If the inflation rate falls below 1.3%, your interest rate may decrease. However, I bonds provide protection against negative interest rates and are designed to safeguard against inflation.
Consider your financial goals and objectives before redeeming I bonds
Before redeeming I bonds, evaluate your financial objectives. If your goal is inflation protection, redeeming and purchasing new I bonds may be beneficial. However, if you were solely interested in high interest rates and do not want to lock your money for an extended period, explore other investment options like CDs or treasuries.
Learn from reliable sources for clarity on I bonds
To understand I bonds better, visit informative websites like tipwatch.com and ibonds.info. These sources provide comprehensive information, frequently asked questions, and calculators to help you make informed decisions about I bonds.
Be mindful of the time clock and penalties for I bonds
When purchasing I bonds, note the restrictions on withdrawal for the first year and the three-month interest penalty if redeemed within two to five years. Evaluate whether starting the clock over is worth it based on your investment objectives and the possible need for cash in the near future.
Utilize KT's Ultimate Opportunity Savings Account for children
KT introduces the Kids Ultimate Opportunity Savings Account offered by Alliant. It's a valuable tool for teaching children about saving money. They receive a $100 bonus when they deposit $100 per month for 12 consecutive months. This offer is available until the end of 2023.
Disclaimer
The information provided in this podcast is intended for informational purposes only and does not constitute financial, accounting, or legal advice. Consult with professionals in those fields for personalized advice.
This Ask KT & Suze Anything episode is all about Series I Bonds. KT asks Suze 12 of your pressing I Bond questions, so get out your Suze Notebooks for this important lesson.
