Looking for a way to keep your money safe but want to be sure that it outpaces inflation?
Series I bonds may be a possible solution for you.
Since the COVID-19 pandemic began, news outlets have bombarded us with headlines referring to “unprecedented times.” It’s certainly an interesting time to be an investor—market volatility is back in 2022 and inflation recently hit 8.5% (its highest since December 1981). On top of that, savings accounts and other short-term savings vehicles like money market funds and CDs are hardly paying anything.
Amid this perfect storm, one investment has become a hot topic: Series I Savings Bonds (also known as “I bonds”). I bonds are currently paying 7.12% and are expected to increase to 9.62% when the interest rate resets next month (interest rate resets semi-annually in May and November). I bonds can be purchased directly through the U.S. Department of the Treasury. Before getting too excited, there are some limitations to these savings bonds, including a maximum yearly investment. However, the investment deserves consideration from investors.
Here are six things you should know before investing in I bonds:
Series I Savings Bonds seem like a great investment opportunity. For investors who typically hold cash or CDs, this may make sense. Investors with excess cash and expenses due further than 12 months away may opt for an I bond rather than their savings account or short-term bonds. Other investors may decide “the juice isn’t worth the squeeze” seeing as you’re limited to a relatively modest amount of $10,000 per person, per year. Like any opportunity, it is important to consider it within the context of your overall investment objectives.
To purchase I bonds, go to treasurydirect.gov.
While your Beaird Harris advisor is happy to answer any questions on I bonds related to your long-term investment plan, our Client Services Representatives cannot assist with purchasing I bonds. All I bonds purchases must take place through the link above.
Education Tax Exclusion
The education tax exclusion permits qualified taxpayers to exclude from gross income all or part of the interest paid upon the redemption of eligible savings bonds, when the bond owner pays qualified higher education expenses at an eligible institution.
Who Can Take the Exclusion
You can take the exclusion if all five of the following apply:
Savings Bonds That Qualify for the Exclusion
To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse’s name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.
For more information on the exclusion, see IRS Form 8815.
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