I bonds are a very popular investment asset, especially in a time of market volatility – the guaranteed variable return is attractive in a time when other investments seem too risky. There’s only one major downside – you are limited to purchasing $10,000 in I bonds each year (with some notable loopholes.) That may be changing, though – the Senate is considering raising the limit under certain conditions, according to reporting from ThinkAdvisor.
For more help with planning your retirement, consider working with a financial advisor.
I Bonds Basics
I Bonds are issued by the U.S. Government. They carry a zero-coupon interest rate which is adjusted twice annually for inflation. The rate will be 9.62% through October 2022, at which point it would be adjusted.
As of right now, you can purchase $10,000 in I bonds digitally each year, plus $5,000 in paper I bonds. The bonds’ duration are different from other bonds, ranging from one year to 30 years. They are also sold at face value, unlike other U.S. savings bonds – if you buy a $50 bond, you’ll actually pay $50 for it.
There are a few loopholes to get around the $10,000 limit. You can have your spouse purchase up to $10,000 as well, and if you have a business or trust you can also purchase up to $10,000 in the name of that entity.
New I Bond Legislation
While I bonds will see the interest rate adjusted as usual in November, an even bigger change may be coming to the security – allowing people to buy more of them annually under certain conditions.
The new legislation – introduced by Sen. Deb Fischer (R-Neb.) and Sen. Mark Warner (D-Va.) – is known as the Savings Security Act of 2022. It would raise the limit to $30,000 in I bonds purchased each year if the average six-month annual Consumer Price Index for all Urban Consumers exceeds 3.5%. Americans would still be able to purchase up to $5,000 in paper I bonds.
The Bottom Line
I bonds are a strong investment choice for those looking to get around difficult and volatile markets. They have a guaranteed interest rate and can last for various lengths of time. Currently, you can only purchase up to $10,000 in I bonds each year. New legislation, though, could increase that to $30,000 when inflation is at certain levels.
Retirement Planning Tips
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For help with integrating I bonds into your retirement portfolio, consider working with a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Regardless of purchasing bonds, it makes sense to save money for retirement in a workplace retirement plan like a 401(k). If your company offers an employer match program, make sure to take advantage of it.
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Source: finance.yahoo.com