“I would go ahead and sign up for the April rate and get six months at that rate and then get the six months of the May-to-November rate because you’re pretty much guaranteed at least 12 months of seven-plus percent of return,” said John Crumrine, founder of Brunswick Financial in Ocean Isle Beach, North Carolina.
He doesn’t expect inflation to drop dramatically six months from now, but he also doesn’t rule out the possibility that the November adjustment takes the Series I variable rate down to 3% or 4% if suddenly the U.S. Federal Reserve acts more aggressively and does manage to bring inflation under greater control.
Don’t Raid Your Emergency Fund
Tempting as it might be — and tight as the timeframe is to lock in that 12-month rate guarantee — advisers say investors should avoid using cash they might need for unexpected expenses to buy I bonds.
“There’s no sense in taking advantage of some of these investments to the point where all of a sudden you’re cash poor, and then you have to start selling things right at the wrong time,” said Sterman of Huguenot Financial Planning.
One reason is that I bonds must be held for at least one year, and cashing them in before five years means you’ll forgo the last three months of interest earned.
“This is money that you really don’t need anytime soon,” said Sterman. “This is really a long-term investment.”
That website? It’s not just you.
A number of investors and advisers who have attempted to purchase I bonds on TreasuryDirect.gov, the department’s website, have made a similar observation.
“The site itself just feels very 1990s,” said Sterman.
The design calls to mind a vintage Lycos or an AltaVista search engine page, with bulleted lists that look a bit like Craigslist.
“I’d say half the people that I recommended [I bonds] to hated the website and got out of them the first chance they got, because the website was so clunky,” says Buz Livingston, founder of Livingston Financial in Santa Rosa Beach, Florida, who has been buying the bonds since 2001.
Livingston says new investors shouldn’t be deterred by the site’s design. He reports sometimes being kicked off after pressing the “back” button, which he thinks may be a security feature. Some of his clients have also reported struggling to link their bank accounts to the website, and are sometimes confused about why they have to do so. But Livingston says this makes buying and later redeeming the bonds easy.
With yields this high, advisers says using the clunky site is a worthwhile price to pay.
This article was provided by Bloomberg News.