Series I Treasury Bond: Is It Right For You?
You might have seen this headline in the financial news on Friday, “October 30th: Treasury Department announces new Series I bond rate of 5.51% for the next six months.” I sure did; CNBC did a nice job covering the announcement.
I’m always looking for higher yields to keep my tiered savings. I purchased a Series I Treasury Bond when yields were over 9% around the pandemic. I’m not ready to dive back in yet to buy more at 5.51%. Here are my three reasons why:
The minimum holding period is one year. That yield isn’t high enough to take on that kind of liquidity risk, which is the risk you take by not converting an asset into cash.
The early redemption penalty applies if you cash in before holding the bond for at least five years. If you do, you will forfeit the last 3 months of interest. So let’s say I cash in just after a year; after the penalty, I earn 3.8625%. That’s the anticipated inflation rate, meaning I couldn’t touch my money for a year, and in return my money isn’t any more valuable.
You can’t own a Series I Treasury Bond in a Roth or Traditional IRA. So I’ll pay taxes on the yield.
Now, if I were retired, my goal was wealth preservation, and I had so much cash that I’m willing to hold the asset for five years outside a tax-sheltered retirement product, I’d buy it right now. Later in this post, I’ll share how.
Emergency Savings
I go through Raisin for our emergency savings; it’s a slick business model. They serve as a marketing arm for 100+ FDIC-insured community banks and NCUA-insured credit unions who can’t afford to market on their own, but they can through Raisin. However, they offer much higher yields than anything else I can find online.
I am always hunting down higher yields for my emergency savings account. The highest yield with zero liquidity risk I can find is at Centier Bank at 4.12%.
Western Alliance Bank is offering an outstanding promotional rate of 4.3% for first-time Raisin users. Because I’ve used Raisin for years, I don’t qualify.
Click here to learn more about opening a Raisin Account and taking advantage of high yields with no liquidity risk.
Series I Treasury Bonds
What is a Series I Treasury Bond?
A Series I Treasury Bond (I Bond) is a U.S. government savings bond designed to protect your money from inflation. I Bonds earn interest through a composite rate that combines two parts, as shown in the image below I pulled from the Treasury website:
How do I open a Series I Treasury Bond?
I created the handout below to help people understand what it takes to open a Series I Treasury Bond. Before you begin, you will need your Social Security number, email address, U.S. mailing address, and bank account and routing numbers.
Click here to go directly to the U.S. Treasury website to learn more or open an I Bond.
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