I-Bonds and T-Bills
We have $90,000 in I-Bonds which are now paying less than T-Bills (4.3% vs. 5.5%). After holding them past the one-year minimum period we plan to close them out and buy T-Bills with the proceeds. Even with the 3-month interest penalty I think we will come out ahead in less than one year and will be better in the long run, assuming the T-Bill rate will continue to be higher than the I-Bond rate. Does this sound reasonable or is there something we might be forgetting about. Thank you!
Terry Says
That’s making a big assumption — and we will see, in time, how that works out!!
PS Don’t forget that you’ll have to pay federal taxes on the interest you earned, in addition to the penalty, when you cash them in.
And, on second thought, you had to be buying I-bonds over the years, since you can only buy $10,000 of I-bonds in any one year. Do check the guaranteed base rate on those older bonds, before cashing them in. You can do that at TreasuryDirect.gov. You may –or may not — have some hidden treasures among them, with higher guaranteed base rates, that you would want to hold onto in case inflation drops, and T-bill rates drop along with it.
