Quote:
Originally Posted by Babubhat
Qyld and Xyld generate ten percent. Bond limits too low to be material to me
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Quote:
Originally Posted by retiredguy123
To clarify, the I bond interest rate changes every 6 months, and you must keep the bond for 5 years or forfeit 3 months of the interest. So, for example, assume that you buy a $10,000 I bond in January that pays 7 percent, and the interest rate stays the same for one year, and then you cash in the bond. Note that the interest is compounded semi-annually. You will receive about $10,534 for the bond, of which $534 is taxable income at your ordinary income tax rate. So, the actual interest rate you receive is about 5.34 percent before taxes because you forfeit 3 months of the interest. In order to receive the entire 7 percent first year interest rate, you would need to keep the bond for at least 5 years. The interest rate for years 2 through 5 is unknown because it changes every 6 months. Just doing the math.
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And that I consider a good deal. As others have pointed out it is a very small amount that is allowed to be invested. So I do it as part of a very multifaceted portfolio.
I consider this portion of my portfolio the dime hidden in the back of my wallet in case I ever needed to make an emergency phone call.