Interesting I-bond decision — buy now w low base rate but 6.89% — or wait for higher base, but lower adjustment rate!!
Hi, I bought Ibonds last 2 years on your advice. Do you think they are still a good deal with rates coming down?
if so i was looking at ” gift” option to lock in higher rates now for next year’s purchase.
should i buy before 4/28 at 6.89 % rate or wait until may & buy assuming fixed rate will increase from .4 to 1%?
appreciate your thoughts.
love your column & wgn tv apperances
Thank you,
Terry Says
I bond rates will drop sharply on May 1st. And that will happen despite the possibility of an increase in the fixed “base” rate.
So your question is an interesting one. If you buy before May 1, you will get 6 months of the current 6.89% — on a bond with a very low base rate.
If you wait, you may get a higher base for the life of the bond — but a lower starting rate, probably just over 4%.
The real question is will we enter into a deflationary era (like we had for over a decade) where you would be glad to have that higher base rate — despite lower semi-annual adjustments?
Or do you think there will be enough inflation, despite the Fed’s good intentions, that the low base rate won’t matter over the next 5 years during which you must hold the bonds to avoid a penalty?
Well, I’m thinking that if the 6-month adjustments go so low that you hate the bonds, you’ll just take the 3 months loss of interest and sell them. With that in mind, I’d buy now — to get the 6.89% for six months!
Hope we are around in 5 years and in hindsight can figure out which would have been the better strategy! Thanks for giving me a brain twister today!!
