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Re: ee bonds

Posted: Fri Jun 30, 2017 6:53 pm
by jhogue
sophie wrote:
grapesofwrath wrote:jhogue - thanks for the reply and taking the time to dig up those links to previous discussion on I and EE bonds. It would be interesting to know if the participants in that discussion are still around and if their views and enthusiasm have changed given the real rates for these products have sunk while nominal bill returns are inching up.
jhogue - thank you for that great summary and the research!

IMHO, Treasury bills are the way to go right now, especially with the Fed still planning to bump up interest rates. They provide about the same yield as 1-2 year CDs but can be sold without penalty (apart from slight reduction in value if interest rates go up). I'm still hoping the I Bond fixed rate will go up in November so I'm waiting until then before buying this year's aliquot.
@Sophie:

1. It is possible that the liquidity of plain vanilla short term Treasury bills might win out over the next year if the Fed jacks up short term rates. Who knows what they will do? However, the I bond/ 1 year Treasury rate spread now stands at + 0.69% (see my chart above). Over the 30 year life of $15,000 (one year’s purchase limit of I bonds), that would amount to $3,105 in additional tax differed earnings, compared to 30 consecutive 1 year Treasury bills at the same spread. And don’t forget that taxes on T bill earnings will be due each year. Unfortunately, T bills do not have tax deferral and annual I bond purchases are a “use it or lose it” proposition.

I too am hoping that the I bond fixed rate goes up in November. Regardless, if you are thinking about buying I bonds in November, be sure to see the blog, tipswatch.com, for an excellent forecast of the fixed and variable rates for new I bonds.


2. Are you still employing the STT strategy you outlined in your post “Tax trickery with short term treasuries” in 2012?
https://gyroscopicinvesting.com/forum/v ... t=trickery

I tried it last year because we sold our house and had to park a big slug of cash in our Fidelity brokerage account. Buying high coupon, maturing T bonds was easy to do and I found it to be an ingenious use of the differential tax policy on federal vs. state/local taxes that also captured the tax loss. Yet another “free lunch”! (or at least, “free desert”).


I also loved WildAboutHarry’s embedded Groucho Marx story:

“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"

Re: ee bonds

Posted: Fri Jun 30, 2017 7:20 pm
by jhogue
dualstow wrote:Thanks for the refresher/reminder, jhogue!

For some reason I thought the doubling occurred at 17 years ??? EDIT: It may be because they're pre-2005.

I bought my first EE bonds (and I bonds) around the year 2000 at my dad's suggestion. I was out of work for a while and the purchase was a substitute for contributing to a retirement account. Ended up buying some more over several years, just because. I think I have a bunch due to ripen in the next few years if not this year. Time to get on that clunky TreasuryDirect website and see what's going on with those.
@dualstow:

My wife’s parents were big fans of EE bonds as gifts for their grandchildren. I think there have been something like 5 iterations of them, including those issued after 1989 that were completely tax exempt for education.

Twenty years ago I bought a variable annuity because I was in graduate school and did not have access to a tax deferred account other than an IRA. I wish we had bought savings bonds instead.

Five years ago we started purchasing I bonds, after maxing out ORP, 403b, 457b, and Roth IRAs. Like Medium Tex, I enjoy watching our stash of I bonds grow bigger every year.

Re: ee bonds

Posted: Sat Jul 01, 2017 12:53 pm
by barrett
dualstow wrote:I think I have a bunch due to ripen in the next few years if not this year. Time to get on that clunky TreasuryDirect website and see what's going on with those.
Dualstow, The only drag about the Treasury Direct savings bond tool here https://www.treasurydirect.gov/BC/SBCPrice is inputting the dates and serial numbers of your bonds. Once you have everything input and saved, it's a piece of cake to check their value whenever you want to.

Re: ee bonds

Posted: Sat Jul 01, 2017 12:56 pm
by dualstow
Yup, I have a link saved someplace. I just haven't used it for a while.

Re: ee bonds

Posted: Sat Jul 01, 2017 2:33 pm
by barrett
dualstow wrote:Yup, I have a link saved someplace. I just haven't used it for a while.
Just to be clear, I am talking about saving your entire savings bond inventory. Once you've input everything, all you have to do is change the date and everything updates.

Re: ee bonds

Posted: Sat Jul 01, 2017 2:52 pm
by dualstow
Yes. I had a link on my computer called BondMap. It may have been an internal link to an Excel file that pulled data. That was back when I used Windows. Or, it may have been a weblink to TreasDirect that showed something worthwhile after password entry.

Last I checked I would log in and see half the bonds saved, either the paper or the digital, and I had to input the other half manually.

Why didn't I save everything after doing that? It's a mystery, even to me. O0
I *really* don't like their website, and don't visit often.

Re: ee bonds

Posted: Sat Jul 01, 2017 5:50 pm
by sophie
I tried the savings bond value wizard, as it really is a pain to log into TD to do it. It's great, and incidentally you don't actually need the serial numbers, just issue month/year. Thanks for the pointer!

Caveat: the app is Windows specific, and doing it online on a mac requires Safari. Annoying that it doesn't work on Chrome.

Re: ee bonds

Posted: Sat Jul 01, 2017 8:28 pm
by dualstow
Ah, yes, that must be why I gave up on it. Mac & Chrome here.

Re: ee bonds

Posted: Sun Jul 02, 2017 7:54 am
by sophie
jhogue wrote:
sophie wrote: 2. Are you still employing the STT strategy you outlined in your post “Tax trickery with short term treasuries” in 2012?
https://gyroscopicinvesting.com/forum/v ... t=trickery

I tried it last year because we sold our house and had to park a big slug of cash in our Fidelity brokerage account. Buying high coupon, maturing T bonds was easy to do and I found it to be an ingenious use of the differential tax policy on federal vs. state/local taxes that also captured the tax loss. Yet another “free lunch”! (or at least, “free desert”).
Ha, I haven't used that in a while! I thought with T bills rising in yield, it wouldn't be worth the effort unless you could find a very high interest rate bond, which takes some persistent hunting through the secondary market. Sounds like you didn't find that to be a problem. It is indeed a "free lunch", yes, and glad you found a good use for it with your big wad of cash. My main goal with it was to erase the difference between Treasuries and CDs, at the expense of a little extra diddling online.

Re: ee bonds

Posted: Sun Jul 02, 2017 12:09 pm
by barrett
I'm going to beat the Treasury Direct savings bond horse one more time as I really don't get the antipathy towards their calculator.

I haven't "logged on" to their website in years (well maybe if I want to delve into a discussion about length of time for certain EE bonds to double or some other minutiae). I just have my bond inventory (both EE and I) saved on my desktop. When I want to see what the bonds are worth (or will be worth a few months down the line), I just open that TD file.

It's also a great tool for someone my age (almost 59) for tax planning as I'll have a bunch of the EEs hitting the 30-year mark from 2021 to 2023 when I am also planning to be doing Roth conversions and will be trying to stay in a lowish tax bracket.

I just always figure that I am the most tech-averse person on here. If the TD savings bond tool were tough to use, I would be the one struggling with it.

Sorry, I get worked up talking about savings bonds! Years ago I used to be paid frequently in cash and my trick for not blowing it was to go straight to the bank and buy savings bonds with the intent of holding them until maturity. Self-employed people can be well served by these little mental gymnastics.

Re: ee bonds

Posted: Mon Jul 03, 2017 12:10 am
by jhogue
barrett, I share your enthusiasm for savings bonds!

1. Paper savings bonds have a special attraction for me, even though it is pretty clear the US Treasury would simply like to get rid of them. They don’t sell paper EE bonds any more, but you can still get $5,000 in paper I bonds as part of your annual tax refund. I have found that filing the necessary extension and refund forms to get them is pretty simple with Turbotax software. While I have tried to make a rational financial case for buying I bonds as part of “deep cash” in the PP, being able to hold paper bonds in your hands has what some here have described as a “fondle factor” as well. As long as Treasury is selling paper savings bonds, I will be buying them.

2. The Treasury used to sell forty year series E bonds, but reduced that to 30 years, pretty much in tandem with their standardized auctions of 30 year Treasury bonds. Note too that Treasury has, in effect, made new issue EE bonds less attractive by reducing the interest paid on EE bonds that are past the 20 year doubling mark. President Trump’s Secretary of the Treasury, Steve Mnuchin, has recently come out in favor of creating 50, and possibly 100 year ultra long Treasury bonds to help refinance the national debt and pay for Trump’s infrastructure initiative. I am kind of surprised that this has not triggered more commentary and response from this forum and elsewhere. So far, Wall Street has shown little interest in ultra long bonds, but if that initiative should come to pass, it could present some interesting new wrinkles to both ends of the PP barbell.