Advice: Interest on iBonds has weaned. Sell early in the month.
Posted By RichC on August 11, 2024
Investors who bought US Treasury iBonds when inflation was raging may see the lower May 2024 rate reduction as no longer attractive; the rate is currently 4.28% (it adjusts every 
6 months).
The interest rate has steadily fallen as month to month inflation has eased from its high and investors may be able to find a better use for their dollars (inflation may have “eased from its high,” but property taxes, insurance and nearly all household expenditures have NOT eased).
Beware though, selling iBonds before the 5 year holding period does come with a penalty, that is losing the 3 last months of interest and facing Federal taxes on the gains in the year they are sold.
Also for those making them a part of your long term saving, there are limits to what you can invest each year.
A point to keep in mind is also when to sell, whether you have held iBonds for 5 years (no loss of interest) or are planning to sell them before 5 years (give up the last 3 months of interest) … would be to do it early in the month (see below).
It is recommended to sell I Bonds early in the month to maximize your rate of return. This is because I Bonds do not accrue any value between the first and last days of the month. Additionally, selling at the beginning of the month ensures you receive the same amount of interest as if you sold at the end of the month, but you’ll get your money sooner.
Key Points:
- I Bonds do not accrue interest between the first and last days of the month.
- Selling at the beginning of the month ensures you receive the same interest as selling at the end of the month.
- You’ll get your money sooner by selling early in the month.
- No Penalty for Early Redemption
Note that selling I Bonds early in the month does not incur a penalty, unlike selling within the first five years, which results in losing the last three months of interest.
By selling your I Bonds early in the month, you can optimize your returns and avoid potential penalties.
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