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Should I buy I Bonds? How do I buy I Bonds? - YouTube
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eye bonds can help offset inflation and
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rising prices but who are they really
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right for and how do you actually go
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about buying them that's going to be our
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topic on today's episode of friends talk
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financial planning as we talk with linda
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stratton a financial advisor at aio
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financial in tucson arizona hi i'm john
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shearer and i run trinity financial
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planning in middleton wisconsin and i'm
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bridget sullivan mermell and i've got a
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family financial practice in chicago
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illinois oh hey john before we get going
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with linda i want to just mention that
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we want to ask people to subscribe to
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fred stock financial planning it helps
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us reach more people and gets us a
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little more respect with the google
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so uh linda
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you are
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my inspiration with eye buttons or one
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of my inspirations when i was interested
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in them i started asking you and you've
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been using them for quite a while and my
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question for you is who are they good
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for like so when do you recommend these
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uh what what are the qualities of the
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people that uh
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are going to be successful with these
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well i think the ideal person who would
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love ibonds is somebody who has
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um is sitting on you know a cash stash
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and um is pretty liquid
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and is looking for a way to
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make their cash savings cash reserves a
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little bit more productive and i say a
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cash stash because there are some
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restrictions on ibonds for instance when
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you first buy
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i bonds um you can't liquidate them for
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a year
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so um you just have to be cognizant of
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that um that's the main restriction if
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you liquidate them earlier than five
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years you sacrifice three months of
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interest but that's really a nominal
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amount that's not that big a deal
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i-bonds are still very liquid and i
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consider i bonds to be
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part of your cash savings but they're
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kind of permanent cash savings they're
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emergency funds
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um it's really ideally you won't have an
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emergency so
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you won't be touching the eye bonds i
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find that the advantages of i-bonds are
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they
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typically not always but typically will
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pay a higher interest rate than money
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market funds um i've been i personally
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have had eye bonds since 05 and over 16
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years i've found that to be very true
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um
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you know it's not 100 true but it's like
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95 true
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um
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so i bonds are inflation
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adjusted u.s savings bonds um so you
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have a hedge in your cash stash against
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inflation
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by definition um also their us
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government bonds so they're super safe
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you don't have to worry about any
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default risk
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um
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people really like that in their cash
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and then they are tax deferred so you
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don't pay tax on the interest until you
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redeem the bonds so you can kind of
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control if if you're in a high tax rate
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peak earning years you just sit on the
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bonds for years they have a 30-year
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duration
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um they pay the interest for 30 years
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and then they mature so they're just a
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great
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alternative to a long-term cash savings
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plan which are they're also liquid
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should you need the cash
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and so linda when you said that it's a
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30-year bond so it lasts for it stays in
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place right i buy this kind of like if i
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had a cd or something that would stay in
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place and then is there anything to do
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or it just sort of earns whatever the
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current interest rate is it sort of is
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it from that standpoint anyway set it
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and forget it
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exactly um so your
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so another limitation is that each
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social security number each person can
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buy a maximum of 10 000 a year
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so um but you if you bought like i don't
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know you can buy any the the lowest
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denomination is 25
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so you can buy any amount you know any
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reserve cash stash it in the i bonds you
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know maybe do it year after year
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um
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but
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after so then they just click away and
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the interest since it's of inflation
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adjusted the interest rate on the bonds
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are adjusted may 1st and november 1st i
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spend like the month before waiting for
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may 1st or november just i'm really
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dying to know what the new interest is
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going to be
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um and it's pegged to the cpi index so
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the inflation adjustment happens every
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six months you know but you don't do
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anything you just you know you let your
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bonds just cook for all these years and
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then
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it like my eye bonds that i bought in 05
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will expire 14 years not expire but
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they'll stop earning interest in 14
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years so at that point i have to redeem
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them just because there's no point to
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keeping them anymore i could roll them
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over
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um
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but yeah they're just very you know long
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term
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but let them cook kind of forget about
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them but not completely forget about
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them yeah right
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and
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so
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they're not they're different from an
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ira or a 401k
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right
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because well because you can only buy
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them through the um treasury through the
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treasury and the website is
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treasurydirect.gov
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you would need to establish an account
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link the account to your
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bank or credit union
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and that's how you fund the i bonds buy
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the i bonds in the future when you
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redeem them they'd go back into that
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bank or credit union account so it seems
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like you've got to be
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decent on a computer
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for
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this to really work for you yes in the
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old days a lot of people remember
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getting i bonds as gifts from their or
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ee bonds where we only talk about i
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bonds because of the inflation adjusted
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feature um i so much prefer that to any
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other type of savings bond but there are
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no longer paper bonds um
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they're all electronic and this has been
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true for over 10 years um so yes you
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need to open an account
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um
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and then they have some security
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protocols including two-factor
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authentication um in my case my
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code goes to my email and i've got to
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plug it into the ibond login
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but yes
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yeah so they're
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security conscious at us treasury
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directs because
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i'm sure a lot of hackers would like to
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get everybody's information so that
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means it's not
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you know it's just one of those websites
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that's kind of a pain uh it's not meant
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to be save your password make this easy
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uh type of type of financial institution
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but that's what helps make them safe
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it makes it makes it safe i mean i do
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feel pretty um secure every time i go
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through the steps to log into
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to the account
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um
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you know and i think there's a kind of a
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plus side on
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the the hassle it's not a super hassle
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but it's it's harder than logging into
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my checking account um
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but it's also the plus side is that
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you're not inclined to
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mess with your savings bonds um you know
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whereas when you have a chunk of cash in
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checking it's like oh what can i do with
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that in other words where can i spend it
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um whereas
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the it's a special event to log into
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your treasury direct account and then
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you go oh wow look what i'm earning
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and how much money do i have in there
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and great it's it's conducive to the
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long-term
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keep the cash and the i-bonds plan
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so
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i thought it was a really important
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point that you made earlier linda and it
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kind of ties in with it like the
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opposite side of hey you sort of put it
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in there and just let it let it ride
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right so it's and it's kind of it's not
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easy to get into so you're not tempted
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to go oh what kind of shiny thing can i
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buy but at the same time i i you know
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you said earlier that you can access
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those they're they are liquid so it
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sounds like it's sort of one of those
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things that it in reality it's liquid
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but sort of in people's minds you have
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that envelope type theory right like oh
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it's sitting over here and it's earning
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good interest now and right so it's that
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sort of middle ground perhaps between
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locking things up for real
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and also just having you know completely
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liquid cash sitting around that you feel
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you might spend is is that
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an accurate description that's true
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that's a very good description yeah um
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you know it just it just because the
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process of holding the eye bonds
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it's it's just a
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slightly different process and it's
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almost like putting it in a separate box
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um however if you feel like let's say
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you've got ten thousand dollars of i
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bonds in your account um and let's say
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you say well you know i'm having a
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car repair emergency
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i i would like to use some of the bonds
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so provided you're past the one year
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period on your older bonds you can you
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don't have to redeem all 10 000 you can
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just say oh i'm gonna like redeem a
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thousand
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and you will have that money i believe
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the next day when you transfer it to
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your
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checking account and that process is
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super easy within the treasury direct
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account
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so i've got one more question and that
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is about like so this separate box it
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seems like it's something that you still
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need to be able to remember and
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communicate to other people so that they
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know you have them like if you die you
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want somebody else to know you've got
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this thing like it's not something
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that's going to be showing up in your
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email every month
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or that they're going to be sending you
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a lot of obnoxious marketing emails
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uh you don't want it to become the money
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in the wall that the you know somebody
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knows about somebody fine like
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what's this money doing in the wall or
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money buried in the garden you know
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nobody was like money in the computer
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money in the computer
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it is i mean it's because it's
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electronic and as you said bridget they
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don't send you statements you're not
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getting a report you have to um go in
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there yourself and see what's going on
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um so yes somewhere in your estate
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planning file
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you nee it's you need to you know let
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your successor know how to get in here
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um it's also important to
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title
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the account when you buy the bonds
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you can type you can choose how to title
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them and if you're married i recommend
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really you know having a joint bond or
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having your spouse be the the
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beneficiary of the account or somebody
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being the beneficiary of the account um
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because that can be hard to extract in
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the case of the owner's death um so just
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me you know that step makes it
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it much easier like as
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most account titling decisions go um i
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bonds are no different and they do give
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you options you know multiple options on
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how to title bonds and i believe if you
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have a trust i think you can still
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i think you can title them as a in the
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name of the trust but i'm not positive
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about that awesome so i think with that
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uh we can wrap this up i'm bridgette
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sullivan mermell and i've got a fiona
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financial planning practice in chicago
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illinois and i want to mention that we
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also we are all members we know linda is
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through acp or the alliance of
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comprehensive planners
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it's a group of tax-focused
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comprehensive financial planners that
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serve people in all over the country you
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can check out acp.org
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that's right so if you enjoy the things
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we talk about here do check out acp.org
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and also as a final reminder subscribe
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to friends talk financial planning and
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help other people find these this good
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information linda thanks so much for
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being on this is really great learned a
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lot today i appreciate your time it's my
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pleasure it was fun thank you yep thanks
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you guys
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