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9/7/2023 The Best Time to Redeem I-BondsPreviously, we wrote abut the benefits of I-Bonds in an inflationary economic environment. So when is the best time to move your funds away from I-Bonds? I-Bond investments hit an all-time high in 2022. With inflation on the rise and at decade-highs, I-Bonds became very attractive since the earnings rate is directly tied to inflation.
But with inflation cooling and I-Bond rates moving from 9.62% highs down to 3.38%, investors are considering potential moves out of I-Bonds and into other options. Key Points to Understand
Because of the 3-month interest penalty, investors would be wise considering the timing of their exit. For example, if you purchased I-Bonds last August when rates were at 9.62%, your rate didn’t drop to the next 6.48% reading until this past February, and your rate didn’t drop to the 3.38% lows until August. So you’d actually want to keep your I-Bond 3 months after it dropped to the lows, so you only lose the lowest rate when sacrificing the last 3-months interest. So be sure you don’t exit when you may sacrifice 3 months of the higher rates. Another consideration is that I-Bonds don’t accrue partial months’ of interest. So it’s best to cash out at the beginning of a month since cashing out at the end won’t give you any more interest, and it has you wasting that time when you could’ve moved to another investment like a CD or even online savings account. With the above being said, lowering I-Bond rates doesn’t automatically mean you should exit. It’s best to consider your overall investment strategy and work with your financial advisor to determine the best moves for you! Comments are closed.
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