New I Bond Rates Are Out--Here's What Pays Even More

The treasury department released the new I Bond rates today. They came in at 4.28%, which included a fixed rate of 1.30%, unchanged from the previous six months. treasurydirect...
30-Year Tips Yields: www.cnbc.com/q...
Savings Accounts: www.doughrolle...
No-Penalty CDs: www.doughrolle...
Join the Newsletter. It's Free:
robberger.com/...
Financial tools I use:
I track all of my investments, performance, fees, and asset allocation with Empower. It's Free:
robberger.com/...
My retirement plan comes from New Retirement, the most robust retirement planner available at a reasonable cost:
robberger.com/...
I used Capitalize for my last 401(k) rollover. They did all of the work, and it's Free:
robberger.com/...
My budgeting tool of choice is Tiller. It downloads all your banking data to Excel or Google Sheets:
robberger.com/...
We save and invest our credit card rewards. Here are some of my favorite credit cards:
www.allcards.c...
My Book (Retire Before Mom and Dad):
amzn.to/4d9qbhA
#retirement #investing #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
LET'S CONNECT
KZbin: / @rob_berger
Facebook: / financialfreedomguy
Twitter: / robert_a_berger
DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.

[@shivamvishnu5539]

There are a couple of advantages with I bonds - No taxes until you redeem like a CD. TIPS incurs a tax penalty on the inflation adjusted principal every year even if you don't sell. Savings accounts issue 1099-INT every year. I bond is more like a long term CD with inflation adjusted return and tax deferred withdrawal after 1 year. You can buy I bonds in your child's name and spouses can gift each other I bonds saving even more on taxes. I bond value will never go below face value. In other words no negative returns. TIPS, treasuries, CDs may lose value over time based on interest rates unless held to maturity. When you try to sell these in secondary market such as fidelity, you may get a market rate lower than face-value. I bonds on the other hand can always be redeemed with the treasury after 1 year at full face value + interest. Because of tax deferral, full liquidity after a year and interest rate that stays above or equal to inflation makes I bonds excellent option as emergency fund IMO.

[@TonyCox1351]

Agree I use ibond as my emergency fund

[@slumdogmusic1]

very clearly articulated

[@thepecourts4836]

I believe you can actually deduct the OID from the annual TIPS interest earned in a taxable account (obviously doesn't matter in an IRA). It's called bond premium amortization and the calculation of the deduction is not very easy. But that way I read that you wouldn't pay taxes on the OID until the TIPS matures (or is sold).

[@slumdogmusic1]

@@thepecourts4836 Thanks. Didn't know that.

[@animeboi3939]

@@thepecourts4836 A deduction eases the pain but doesn't make you whole.

[@martinomovies]

Vanguard MM fund VMFXX is paying 5.288%. Seems like less trouble to leave it there than go around and buy US Bonds

[@erdrick22]

Is that something I can get access to outside of a Vanguard brokerage account?

[@murraypassarieu9115]

If you live in a high tax state, treasuries are probably better. If your state has no income tax I agree.

[@rightangletriangle3188]

For quick cash access, I agree MM funds are good choices. But T-bills does offer slightly higher yield and for a big amount of money it makes a difference, and you don't pay State tax for that income is also helpful in the taxable account.

[@jeanne-gord7685]

Looked in to this but "This fund is closed to new investors." is the message that came up on Fidelity

[@erdrick22]

@@jeanne-gord7685 thanks

[@andrewsmith8222]

A very popular ETF among bogleheads currently is USFR. Could you do a video about various ETFs that track US government notes, bills, and bonds? Thanks Rob.

[@keithmachado-pp6fv]

Good video. I have many I bonds with several with zero fixed rate that now will be under 3%. I will start cashing those in but will still keep others with a fixed rate including some I bought earlier this year. The 12 month combined rate of 4.77% compares to a 1 year CD of 5% given the fact that there is no state tax on the I bond plus the interest can be deferred until cashing out. I do agree TIps are the better inflation hedge and I have some in my retirement account but for my taxable account I don’t want to create any more ordinary income.

[@mere_cat]

I use I-Bonds for my emergency fund. The rates are a snore right now, but I don’t care because long term, it protects me from inflation and I don’t incur taxes until I redeem it.

[@JohnnyCashBack5X]

I purchased some i-bonds before May 1st and the reason why was because there are no tax implications until you sell them and also because of the 1.3% fixed rate. I'm not saying it is the best investment, but I am slightly diversifying my retirement money away from Roth, 401k, and t-bills. In theory, I won't see a tax bill on the i-bond until 30 years from now or until I sell them.

[@aniljang]

100%. I think this should be emphasized by Rob. If you are on a high federal tax bracket, it makes no sense to buy other fixed income, as you could get taxed heavily on a high bracket year. I think I-bonds are great for emergency fund (especially with the higher fixed rate). I got this year's batch in April also, hopefully November rates will be better.

[@MILGEO]

If you want interest on a checking account, Vanguard's money market account offers check writing and was yielding well over 5% the last time I checked!

[@BadPhD777]

I keep it simple with Fidelity money market funds and CD's that are at least 5%

[@alcw625]

I park my quarterly tax payment money there to make sure I am ready to pay Uncle Sam.

[@vrobinson7897]

Thanks for comparing the options and providing recommendations. I’m a fan of T bills as there are no state taxes.

[@Tony-dx3eo]

Remember folks--those I-Bonds we already purchased when the Fixed Rate was 0% are now only paying us a paultry 2.98% over the next 6 Month period.

[@erdrick22]

Thanks yep sold them

[@MeltingRubberZ28]

Is that what it was in 2021?

[@MeltingRubberZ28]

Yeah I just looked it up. I'm making just about nothing because of that. Selling ASAP. Thanks for the heads up!

[@hanwagu9967]

not if you sold them🤣

[@MeltingRubberZ28]

Just sold all the I bonds. Thanks again!

[@John-wx2ce]

I agree Robb, We sold our i-bonds some time ago. For CD’s they often have a call feature, so I rarely buy them except for maybe 3 or 6 month term. If you want to deal with a call feature, Agency Bonds offer a higher yield. T-bills are the way to go for parking short-term cash up to a couple of years. Immediate cash, high yield savings accounts can’t be beat. Longer term cash that we absolutely don’t need, we just bought a 5-year deferred annuity with yield of 5.2%.

[@bobbydazzler8051]

We park our cash in USFR etf to keep it fluid and it currently pays approximately 5.4% after .15 expense ratio. More fluid than T-bills directly. This is our nest egg and next home savings so we need it fluid. However, if you don’t need access to your money at will, direct is a great option to avoid any fees. Glad I can share this channel with my kids to show them that good advice doesn’t come in “emergency/got-ya/must view headline” videos! So much poison out there

[@FatherGapon-gw6yo]

BOXX

[@ericj9011]

I like the I bonds for a safety net account. Although the rate is higher with Tips, they are a huge tax headache in a taxable account, so I only keep them in tax-advantaged accounts.

[@Username_CC_]

Why is the tax different than I bond

[@animeboi3939]

@@Username_CC_ TIPS are complex, the principal goes up or down with inflation rates instead of the interest rates, and you get taxed on this. Its one of the few cases you will get taxed on unrealized gains.

[@mspear01]

@@animeboi3939 The higher real yield (almost 2x) is worth the "phantom tax" in my opinion. Also, don't forget, the tax bill on an Ibond held for 30 years is going to be a whopper.

[@herbertprice200]

You are ignoring the value of tax free compounding.

[@hanwagu9967]

there's no tax free compounding with i-bonds.

[@walkerneo]

​@@hanwagu9967 but there is though....

[@noreenn6976]

I cashed mine out and put into a CD.

[@mikesurel5040]

The hassle does not bug me much. Like others have mentioned above, i think they are a decent spot for some short term cash. I know i can get higher yields elsewhere but as long as the fixed rate is 1% or more i will continue to buy some. If you told somebody 4 years ago they could get > 1% on their cash and defer the taxes they may have thought you were high. I am not hopeful about rates getting that low again in my lifetime, but you never know. The fact that TIPS can go negative irks me more than the craptacular treasury direct interface. It seems as the rumblings of stagflation start some people are saying i-bonds are good in that type of environment.

[@mspear01]

But if you're worried about stagflation, you don't have to worry about negative inflation hitting your TIPS.

[@rxfh]

Another good video. I would say though, I Bonds provide one unique protection that is worth mentioning. Unlike TIPS and such, they cannot go negative. So, they provide deflation protection and can be part of a diversified portfolio in that way. On the cash stash front I honestly think it's fine to just leave your cash in something like VG settlement account. It's VMFXX under the hood, you get a really good rate (5.28% right now) and it's easy to deal with. One more thought on your CD page - it would be nice to have an option to sort by callable, or at least inform people of what callable CDs are. It's one of the more confusing aspects of CDs for most folks especially when trying to create a longer term ladder of some sort.

[@Kingtut61484]

Watch out for Recallable CD’s before you signup. Chase is big on those.

[@hanwagu9967]

callable not recallable

[@ericj9011]

The most concerning part to me is that they've stated an inflation rate below 3%. I haven't been able to figure out how they did that calculation exactly, from CPI numbers, but it seems too low.

[@patrickparamore3031]

Just an FYI to the announcer, T Bills can only be purchased for 4, 8, 13, 26, or 52 weeks, not 2 years or more like you said in your video.

[@user-jk9wo2yr3m]

I found using treasury direct is as simple as using my brokerage account - quite simple and fast once you have an account set up. Also, you didn't mention that had you bought ibonds before May 1st, you would be enjoying a 5.27% rate. Ok, so maybe not a great investment now, but worth keeping an eye on as rates evolve.

[@mspear01]

If you bought before May 1st, but still with the 1.3% fixed, you're still staring at an upcoming 4.28% composite rate. Don't hold anything less than the 1.3% fixed.

[@emdeedub]

MMMFs at Vanguard, Schwab, Fidelity make as much sense as those options right now.

[@emdeedub]

@@RickMartinKZbin Longer than you think.

[@aconsideredmoment]

I Bond rates and social security increases seem based on rate decreases that do not materialize and undercounting of inflation while ssa taxability threshold continues to make more and more taxable. Really undermines trust. Also, Treasury Direct reliance on USPS and processing times (13 wks or more) make them less liquid than advertised. Never again. I advise everyone to stay away from Treasury Direct.

[@witzviewer]

I bond interest can be tax free if they are used to pay for higher education in the year redeemed and you file married filing jointly with AGI $145k or less. The education expense needs to be for a dependent on your tax return (or you/your spouse) and the bonds need to have been purchased when you were 24 or older. If you qualify, they seem a reasonable place to save when your child is 5 years or so from entering college. You defer tax on the interest which can be completely eliminated and if plans change you aren’t restricted as much as in a 529 plan.

[@richp5064]

I use my whole life policy for my bond allocation/cash bucket, IRR is around 4.5%...add this to the ability to use the money while it keeps growing plus no taxes if done right.

[@GoKU-xx2vg]

Whole life? Noooooo

[@richp5064]

​​​​@@GoKU-xx2vgeducate yourself on the infinite banking concept it's not a regular whole life policy it is set up for high cash value and growth. There is a lot of wrong information out there on this so you need to to your research...I can tell you my real world experience has been very good. And don't forget this is guaranteed to go up and never go down, having an asset like this in your portfolio is wise imo Ohh one more thing don't discount the death benefit that goes tax free to your beneficiary.

[@bftpmk]

I just subscribed to your channel. We appreciate all the work you do on KZbin and on your website! I'm sure you'll teach this old dog a few new tricks. Thank you.

[@Harry_16710]

Really appreciate the info on TIPS. I use (and recommend) your websites constantly for savings/CD rates. This channel will be at 200k followers soon!👏👏

[@barbaratampa]

Help! I bought an I bond ($10,000) when it was at 9% (end of 2021). I can't figure out whether to cash it in because rates are now low. Do I continue to get benefit from the time it was 9%?? Thank you!

[@user-mo9od7cs1t]

Excellent information. Thank you so much!

[@JohnDoe-iv7yu]

Coupon rate folks, LOOK INTO THIS BEFORE BUYING A BOND! Its basically APY vs APR but these bonds have a $1000 minimum buy in so they are factoring in compounding which may NOT be possible. Therefore the coupon is around 4.5% which is your actual rate. Just do your calculations is all I am saying. CD's in the same time bracket are still #1

[@robstein67]

In 24, I'm not buying the 10K allowance but have been flipping the older 0% to 1.3%... but trying not to fall asleep :-/

[@JosephDickson]

I'd buy the I-Bonds if I wanted to hold the cash 5-30 years. They're not for short term.

[@lilmsgs]

1-3 mo treasuries ETFs: BIL or SGOV. I'm doing SGOV and it's doing better at 5.1% than that CIT HYSA.

[@jeanne-gord7685]

have never bought TBills. I am on Fidelity. How the heck do these work and how do I buy them? Maybe a short video?

[@jackcarlos]

Treasury Direct - it's the government website to buy T-Bills, Notes, I-Bonds, etc.

[@bobby350z]

Google KZbin is your friend. Diamond egg nesters has a video on how to buy T bills at different brokerages.

[@brandon8531]

@@bobby350zshout out to DNE followers! 👍 love her advice on these topics and ibonds!👍

[@patrickparamore3031]

You can buy t Bills on Fidelity. Google it in You Tube, How to buy T Bills on Fidelity. You're welcome.

[@eileencornell625]

I have a substantial amount in 0 fixed rate I bonds, can I sell them and buy treasury notes on Treasury Direct? Is there a waiting period between selling the I bond and buying a Note at auction?

[@richardbudzic6289]

I Bonds, TIPS and T bills. Are they all appropriate to invest in my Roth IRA account?

[@alcw625]

you lose any tax advantage

[@hanwagu9967]

you can't buy i-bonds in a roth ira, after-tax brokerage, or traditional ira. You can only buy i-bonds directly from treasurydirect. you would normally put lower return assets in traditional IRA such as bonds, cd's, and treasuries. You want your higher appreciating assets in roth ira because they are going to grow more and so would the taxes, which you won't have to pay with the roth ira.

[@BiggMo]

11:10 Bob, how taxes calculated between iBonds and Tips, how are gains taxed? Taxes can level out any posted interest rates

[@steveharbin5650]

If I want to avoid taxable interest but want the safety of treasuries, what are your opinions on something like BOXX? Wouldn’t that be taxed as cap gains when cashed-in?

[@burningbush2322]

Since you mentioned CDs as a short term option, I’m surprised that you didn’t mention MYGAs which are very competitive right now.

[@StanHasselback]

All great info Bob. If you could go over the pluses and minus of buying TIPS and a TIPS EFT that would be appreciated. Almost 200k now congratulations, do they send you a second silver play button?

[@JA-zh6ew]

Great content as always! Thanks. Brokerage money market accounts have great rates also!

[@user-cw4rd3sw2z]

More of a question, when I invest on a treasury zero coupon I in essence get the interest up front which I can then invest in other opportunities such as equities or index funds, for example I’m retired so I’m on a 60/40 equity/bonds investment strategy doing it myself so I just invested 150K on a 17 weeks t-bill @5.4% giving me 2k to invest in other opportunities in either bonds or equities. Am I looking at this wrong or does this make sense?

[@markymark9197]

Why not just buy 5% CD instead of stock market?

[@davlogic]

That’s what I’ve been doing, even 2 year non-callable CD’s are at least 5%. I will buy some T-bills since he said they are exempt from state income taxes.

[@investingwithpurpose5404]

Is their a reason you don't mention the Vanguard Money Market fund, VMFXX, that has a 7 day yield of 5.27%? Would this be a good place to put cash for short term or do you feel short term treasuries would be better?

[@clark6g]

Living in California how can you beat for your cash component the Vanguard Treasury MM fund? Yield over 5.2% and state tax free.

[@murraypassarieu9115]

None of Vanguard’s funds that pay that much or their regular MM are state tax free. Their muni funds and muni MM pay much less but can be a good deal depending on your tax rate.

[@Michaeldotcom33]

Difference between tips and ibonds is the fixed rate doesn’t change with ibonds.

[@scott1441]

VMFXX- Vanguard money market - 5.3% , expense ratio .11%

[@karlbe8414]

+$475 just posted today. Did I miss the part where Rob even mentions MMA's, at least for this year as the most liquid and convenient place to park cash?? Go VMFXX !

[@scott1441]

@@karlbe8414 Agreed

[@MeltingRubberZ28]

​@RickMartinKZbin they will fluctuate with the feds rate. At the lowest I see that dripping to 4.5% by the end of the year assuming 3 rate cuts. I doubt that will happen though so probably still paying around 5% by the EOY.

[@jmcmob608]

Thank you very much...

[@pstratt1294]

Rob, do you ever invest in GSE’s? I see the rates are at 6%

[@bobby350z]

Using it as part of my emergency fund. If not needed then will use it for retirement before SS or for kids education. Earnings are supposed to be tax free for that purposes. Already bought quite a bit of TIPS in my tax deferred for part of my expenses before claiming SS. To me rather than either or, you can do both. TIPS help to maturity and I bonds to sell when you need the money.

[@jayneorum3676]

I have money in SNOXX and SNSXX. those are US treasury money market funds which I thought might be state tax exempt, but I'm not sure.Seems like I should put that money in Tbills. Do you agree?

[@terrylewis8397]

You've talked about TIPS ladders in the past. Is it a good time to initiate one of those? your previous discussion brought up a variety of current rates that I didn't quite follow then and so I can't equate them to what is going on now. Thanks.

[@mspear01]

Yes, yes, yes! A great opportunity this past week (before today, May 3, though still good).

[@hanwagu9967]

i hopped off the i-bond bandwagon last year. It was fine for the one year it averaged above everything else, but since then I'd rather just go with rolling t-bills i can control maturity. even for 1.3% fixed, i bonds haven't historically performed over 20-30yrs for it to be worth $10k and all the goofy actions people are trying to take with them.

[@gary62or45]

Rob, why wouldn’t you purchase T Bills from Treasury Direct during auction? Isn’t the T Bills purchased from Brokerage houses priced at different prices, and not actually getting the original rate at auction? Please advise, thank you Rob

[@bobby350z]

Same prices at brokerages when buying at auction. Even secondary mkt the difference are tiny unless you buying in millions.

[@hanwagu9967]

you get the same non-competitive rate. Depending on the brokerage you may find it easier to automatically roll into new treasuries than TreasuryDirect (TD), and may prefer your brokerage's website UI over TD's. You do not have the ability to buy and sell treasuries on the secondary market through TD. TD, though, is the only place you can purchase i-bonds.

[@patrickparamore3031]

​@@bobby350zyou are 100% correct.

[@zunildagrullo729]

Awesome info.🙏

[@AboundHomestead]

I know you said that T-Bills are generally very liquid (easy to sell), but what is the chance that I may have to sell at a loss? I've never bought T-Bills, so don't know much about how they work. Looking for a place to park my emergency fund (maybe a 2-year T-Bill). Thank you!

[@hanwagu9967]

Two characteristics of an emergency fund: liquidity and costless to access. 2-yr treasury is called a t-note (or just Note). t-bills are one year and under.. 2yr Note can be liquid by selling on secondary market, but you will do so at a loss since no one is going to pay you more than current auction prices. There is a narrow situation of reissues which may yield higher on secondary than reissue, but that's atypical and you need huge amount to make it meaningful to time and chase. If you buy treasury marketable securities (e.g. bills, notes, bonds) directy from treasurydirect (TD), there is no secondary market option through TD. You'd have to transfer them to a brokerage that offers secondary market feature. you can ladder bills and/or notes, so maturities happen at a frequency you want. Many brokerages offer auto-roll (vanguard doesn't), where you can setup auto-roll to repurchase once matures to reladder if you don't need the money for emergency. I would recommend heading over Jennifer's channel Diamond Nestegg, since she has several very detailed videos on bills/notes/bonds, laddering, secondary market, and how to's using various brokerages. I don't know her personally or have any link to her. She simply has some of the best, easy to understand videos tutorials on the subject.

[@patrickparamore3031]

Lol, 2 year T Bill is not a thing. 4, 8, 13, 26, or 52 weeks are the terms.

[@AboundHomestead]

@@patrickparamore3031 , just a difference in terminology is it not? I meant to say t-note... Thanks for the constructive and valuable feedback 🙄

[@dwood6285]

it's certainly possible to have a capital loss when selling a treasury bond before maturity. more common during times of rising interest rates. if a loss is realized and the treasury bond is being held in a taxable account, the loss can offset any capital gains that occur in other taxable investments or, for someone with no taxable capital gains, up to $3000 of ordinary income in a tax year. so there is a tax break of sorts if a loss is incurred when selling before maturity.

[@AboundHomestead]

@@dwood6285 , This is helpful information! Thank you!

[@Zues64]

I believe you can purchase an Ibond with your tax return as well, Rob.

[@greengeaux4294]

Bask Bank 5%

[@CaptainBenjamins]

VOO pays more

[@brandon8531]

Maybe maybe not? It’s not guaranteed.

[@jamesbrower4012]

I Bonds are currently paying 4.28%, with a 1.3% fixed rate. 10 year TIPS are paying 2.289%, just above 1/2 of what I-bonds are paying. Are TIPS a better deal if you think that inflation will flatten out and bring the I-Bond rate back down when it adjusts again in 6 months?

[@BIOHAZARD_V2]

I bonds vs tips for Taxable emergency fund?

[@bobby350z]

Prefer no tips in taxable. Also tips can loose value if sold before maturity unlike I bonds.

[@hanwagu9967]

@@bobby350z well, there's the pesky 3 month interest penalty on i-bonds before 5yrs. i-bonds can also pay you 0%.

[@888ricardo888]

Hi Rob, do you have a comment on Fidelity’s short term annuity offerings? Thru their network they offer 3, 6 & 10 year annuities with 4-5 percent interest compounded annually.\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\

[@jaymetheaccountant]

Will you be coming to Minneapolis in September for the Boglehead Event?

[@watzup8700]

Wow. Rob has 199,000 subscribers. Who will be the 200,000th?

[@GoKU-xx2vg]

Buffett will

[@watzup8700]

@@GoKU-xx2vg Jimmy?

[@jaycee4528]

@@GoKU-xx2vg 😂😂😂

[@CC-kl4nh]

Bought I bonds at 9%. Held for one year then redeemed when it went down to 3%. It fluctuated back down to 4 to 5 %.

[@originalk9111]

What is the best bang for your money guys long term ?

[@MeltingRubberZ28]

VOO if you're just leaving the money and not touching it

[@brandon8531]

@@MeltingRubberZ28I like the VOO as well, but it’s not a guarantee like these current fixed rates.

[@MeltingRubberZ28]

@brandon8531 long term = probably double the gains of these fixed rates. It really comes down to how you define long term though. To me I deem anything long term money I'd put in the stock market. Short term would be guaranteed funds.

[@brandon8531]

@@MeltingRubberZ28I don’t disagree but your keyword there is “probably.” Some people don’t want to risk money on “probably.” Also, people who are successfully retired would rather have the “guaranteed” 5+%. I guess everybody is different.

[@MeltingRubberZ28]

@brandon8531 well. Probably is because investing involves risk, and time mitigates that risk. Statistically VOO will make more money over the long haul is really the appeal.

[@bizzfo]

Tbills aren’t really an emergency fund

[@hanwagu9967]

sure they are...explain why not. You can easily setup a t-bill ladder. Even if you lose your job, you don't need all 6month's worth efund on day 1 or even the first month.

[@brandon8531]

@@hanwagu9967100% agree with you hanwagu. 👍

[@brandon8531]

Why not?