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Earn 9.62% Interest On Your Savings GUARANTEED - I Bonds Explained - YouTube
Channel: Jay Fairbrother
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how's it going everybody welcome back to
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the channel my name is jay and today i'm
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gonna tell you how you can get up to a
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seven percent return on your savings
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with zero risk is that something you
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might be interested in
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i thought so so let's get right into it
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if you've been paying attention over the
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last couple of months to a year you'll
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have heard a lot about inflation it
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seems to be at the top of everybody's
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mind inflation rates are rising and when
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inflation rates rise the value of your
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cash sitting in your bank account
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deteriorates that has people pouring
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into riskier and riskier investments
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going all in on bitcoin or growth stocks
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or whatever else in a desperate attempt
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to outpace inflation and preserve their
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wealth but thankfully there is a safe
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and secure way where we can still
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outpace inflation and keep our savings
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safe that's why i've taken a large chunk
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of my savings account and recently put
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it into eye bonds now what are i bonds i
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bond is simply a series i savings bond
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from the us government and i know what
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you're thinking now wait a minute
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savings bond aren't those boring things
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i used to get on my birthday from my
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grandma
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and the answer is no these things are
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series ee savings bonds and we're
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talking about series i savings bonds
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we'll get a little more into the exact
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differences later but the series i bonds
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we're talking about in this video are a
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savings bond issued by the u.s
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government
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but the interest rate on the bond
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adjusts along with inflation i-bonds
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have a maturity period of 30 years
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that's essentially the amount of time
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the bond will pay interest to you over
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if you do invest in eye bonds it's
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important to note that eye bonds cannot
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be cashed in within one year of the
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purchase so you gotta hold these things
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for at least 12 months also if you hold
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them for five years or more there is no
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penalty for cashing them in after that
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amount of time if you cash in the bond
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between years two and five all you're
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gonna do is you're gonna pay a penalty
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of the last three months worth of
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interest so it's not a terrible penalty
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if you have to do it but if you're going
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to get into these you should probably
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plan on holding for at least five years
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what are the benefits of ibonds and are
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they safe and the main benefit of ibonds
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as we've kind of already established is
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to protect your cash savings against
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inflation and yes they are safe and
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safety is also one of the major benefits
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i-bonds are backed and guaranteed by the
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u.s treasury so there is essentially
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zero risk if you want to argue about the
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u.s treasury collapsing or defaulting or
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whatever if that happens we have much
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bigger problems to worry about than the
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value of our bonds and with so many
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people flocking into crypto or over
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exposing themselves to stocks in order
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to outpace inflation i-bonds offer a way
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to do that without taking on the risk
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that those other investments carry along
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with them and obviously another perk is
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eye bonds carry a much higher interest
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rate than things like high-yield savings
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accounts or cds or any other bank
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account you're gonna find out there the
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places where you would normally think
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about storing your cash savings and it
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does so without adding any additional
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risk to those more traditional areas of
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savings so now you might be sitting
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there okay i'm listening what are the
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drawbacks the main drawbacks we've
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already mentioned if you buy them you
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cannot cash them in for 12 months and
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you have to hold for at least five if
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you don't want to pay that penalty of
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three months interest for cashing out
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between years two and five another
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drawback is you know this is a bond this
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is a conservative investment even though
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it is designed to outpace inflation
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but any money you're putting into eye
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bonds you're probably not going to
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outperform things like crypto or the
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stock market or other risky investments
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and really it's not meant to do that in
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the first place
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it's meant to be on the conservative
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side of your asset allocation just
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another place you might want to hold
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your cash savings where you're going to
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earn more than 0.5 interest or whatever
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a high-yield savings account is paying
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next let's get into how i bonds are
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taxed and i probably should have
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mentioned this along with the benefits
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because i bonds are exempt from any
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state and local taxes so that means i
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bonds offer an additional benefit if you
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live in a high-tax city or state like
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new york or california something like
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that do you have to pay federal tax on
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the interest but you only have to pay
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that tax when you redeem the bond so if
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you buy an i-bond and you hold it for 10
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years you don't have to pay tax on the
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interest you're earning
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until you cash it in after 10 years and
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i-bond can be 100 tax-free federal state
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local whatever if you use the bond to
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pay for college tuition or fees so
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ibonds can also be a great way to save
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for college alongside a 529 plan or
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something like that how do i buy ibonds
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and it's easy enough to buy eye bonds
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but there is only one place you can buy
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them from and that is direct from the us
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government at the treasurydirect.gov
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website so you can't just walk into your
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bank and buy eye bonds you can't get
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them through your broker like you can
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other kinds of government or corporate
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bonds you have to get them through
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treasurydirect.gov there's a minimum
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purchase of 25
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and a maximum of 10 000 per person that
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you can invest in any calendar year so
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if you're married you can buy ten
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thousand dollars worth of eye bonds and
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your husband or wife can also buy ten
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thousand dollars in any given year you
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can also buy ten thousand dollars worth
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in december
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and then wait till january and buy ten
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thousand dollars more if you want to do
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things like that and the only way you
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can invest more than ten thousand
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dollars in i bonds in any given year is
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the second way you can purchase i bonds
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and that is with your tax refund if you
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buy ibons with your tax refund they'll
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let you buy an additional five thousand
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dollars worth per year bringing the
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total up to fifteen thousand dollars
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worth of eye bonds you can buy in any
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given year when it comes time to redeem
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your bonds you know when you want that
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money to go do something else with it
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you can again you can redeem them
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straight through treasurydirect.com
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where you bought them from or if you
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happen to purchase the paper version of
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ibonds you can go to any bank in the us
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and you can redeem the paper version of
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the ipods at any bank finding this
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useful so far if you're getting
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interested about eye bonds please hit
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the thumbs up down below it helps me and
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the channel out and i really appreciate
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it so we know that eye bonds are a type
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of savings bond from the government and
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they're designed to outpace inflation
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well how exactly do they do that how do
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they calculate the interest rate so
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we're sure that we're actually outpacing
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inflation unlike a cd or a typical
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savings bond that you're probably more
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familiar with and i bonds interest rate
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is variable the interest rate for an
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ibot is a composite rate that means
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there's a fixed rate over the life of
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the bond that's set whenever you
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purchase the bond and then there's an
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inflation rate component to the interest
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rate and that changes every six months
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so as i sit here recording this the
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composite rate for i bonds for the prior
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six months has been 3.54 but starting in
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just a week or two the composite rate of
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i bonds is going to adjust based upon
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the past six months of inflation data
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and the new composite rate for the six
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months starting november first will be
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7.12
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so that means if you buy your 10 000
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worth of eye bonds on november 1st
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you're guaranteed that that 10 000 will
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be earning a 7.12
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interest rate over the next six months
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at that time it will adjust again
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if interest rates keep going up slowly
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the interest rate will probably go up if
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they come down the interest rate will
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probably be slower lightly but you can
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see by having that adjusting rate every
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six months that's how i-bonds keep
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placed with inflation and you can be
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assured that the value of your money
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isn't withering away while sitting on
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this investment and i mentioned these
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guys a little earlier these are your
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typical savings bonds that you're
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probably more familiar with you probably
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got a few of them when you were a kid
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like i did i actually just found these
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in a drawer
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i'm embarrassed to say what the date on
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these actually is because it'll make me
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look really old but these are series ee
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bonds and i bonds differ from series ee
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bonds in a couple of important ways with
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these series ee savings bonds interest
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rate you get when you purchase the bond
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is fixed for the life of the bond so
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whatever the interest rate is when you
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buy these that's what you're going to
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get forever well with ibond like we just
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saw that interest rate will change every
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six months to pace with inflation the
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series ee bonds however do have a
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guaranteed return that doubles your
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initial investment if you hold them for
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20 years i bonds don't make any sort of
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guarantee like that there's another type
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of bond investment out there that's also
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designed to keep pace and protect your
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money from inflation and those are
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called tips or treasury inflation
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protected securities now tips and eye
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bonds are similar but they differ in a
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lot of key ways while eye bonds you have
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to hold them for at least a year and at
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least five years if you don't want to
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take any kind of interest rate penalty
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and eye bonds can only really be bought
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or sold through the treasurydirect.gov
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website tips have no minimum holding
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period and tips can be bought and sold
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like a security you can go on to
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fidelity or charles schwab or td
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ameritrade right now and you can buy and
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sell tips just like you would a stock
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treasury inflation protected securities
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are also available in etf form i think
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the one from vanguard is actually ticker
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symbol tips tips however like i
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previously mentioned the interest on
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i-bonds is only taxed when you redeem
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the bond if you buy tips you have to pay
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taxes on the interest on those every
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year so tips are getting taxed regularly
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eye bonds only when you redeem them
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while eye bonds are great for your
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savings i wouldn't put your entire
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emergency fund into ibonds but if you
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have some money you're looking to save
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for a down payment on a car or a house
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or a wedding or something like that you
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don't want to risk it in the stock
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market i-bonds are a great way to earn a
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high level of interest on your savings
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with zero risk so let me know if these
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are something you're going to put any
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money into leave a like down below if
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you enjoyed this video check out these
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videos over here if you want to see more
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from me i hope you enjoyed this one hope
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you enjoy those and i'll see you in the
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next one
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