Singles: New I bond rate is still great for savers

It’s not every day that bonds spark the kind of investor frenzy that’s often on display on Wall Street or with crypto enthusiasts.

But that’s where we were a week ago on Friday, thousands of people crashing into a Treasury website in the race to beat the midnight deadline.

People registered nearly $1 billion in I bonds on TreasuryDirect that day, yielding 9.62% for six months. And while that amazing rate is no longer available, the new rate is still great.

As of November 1, Series 1 savings bonds will pay out 6.89% for a period of six months. That’s much higher interest than a savings account, which takes in 0.16% on average, according to a November 1 Bankrate survey. And while many online financial institutions could do better, their accounts still only pay 2 to 3%.

To purchase an electronic bond, you must create an account on the website.

On October 28, nearly 100,000 accounts were created and $979 million in bonds were purchased, with the vast majority of buyers defaulting at 9.62%, according to a Treasury official.

That’s 14% of the $6.9 billion in savings bonds that management sold in the whole of October.

Here’s what you need to know about this little-known government-backed bond.

Why do people flock to bonds?

Investing means taking risks. The stock market was everywhere – up, down, down – so people are looking for a safe place to deposit their money.

Year-to-date, the S&P 500 is down 19% while the Dow Jones is down 10%, according to Bloomberg. The tech-heavy Nasdaq is down 30%.

After years of pathetic interest in savings and checking accounts, bonds, backed by the federal government, have become a beacon of financial security.

From November 2021 through the end of October, the Treasury sold more than $35 billion in electronic savings bonds.

This is a staggering amount of cash that people have been transferring from their savings and checking accounts – and in stark contrast to the financial situation of other Americans struggling to deal with high inflation. It shows that there are many Americans who have money to spare, especially since you can’t sell a 12-month I bond.

Kristen Benz, director of personal finance and retirement planning at Morningstar and co-host of the podcast “The Long View,” said usually opaque I bonds resonate with investors because they address two of their biggest concerns right now.

“It provides safety in a year when both stocks and bonds have fallen, and helps maintain purchasing power in an inflationary environment,” Benz said.

How long will the bonds pay out 6.89%?

The price is good until April 30, 2023.

If you buy an I bond, the rate will apply for the first six months after the issue date.

Can I still get a higher rate if the site keeps kicking me out?

The Treasury has been warning people for weeks that unprecedented interest in I-bonds may delay buying.

Even if you waited until the last minute and couldn’t buy, it’s not your fault. TreasuryDirect is an old site that needs an overhaul. The site also crashed in May when 9.62% was announced.

How Much Bonds Can I Buy?

You can buy an I bond for any amount between $25 and $10,000. You can specify a specific amount for a coin. So you can buy an I bond for $49.99.

Be careful not to exceed the $10,000 per calendar year limit for electronically purchased I bonds. If your purchase is declined, it may take weeks for your money back.

But if you expect a big tax refund next year, you can use it to purchase an additional $5,000 of paper bonds, bringing the potential bond total to $15,000 per person.

To purchase paper savings bonds, you can use the IRS Form 8888.

Is it still worth buying Anna bonds?

Yes, the current price is still superior to other conservative options.

But don’t confuse the integrity of my links with the need for liquidity, Benz said.

Benz noted that bond investors cannot redeem their bonds within the first 12 months, and if they cash out before five years are up, they will lose three months’ worth of interest. “But bonds could be an excellent fit for safe reserves that investors don’t need to easily access.”

Singletary is a personal financial columnist for The Washington Post.

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