What Is The Best Month To Redeem I-Bonds | When To Redeem I-Bonds
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- Опубліковано 25 тра 2023
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Here's what we'll be covering:
1. What's the exact month to consider redeeming your I-Bonds depending on whether you bought your I-Bonds at the annualized rate of 7.12%, 9.62% or 6.89%
2. How to set your federal income tax withholding with TreasuryDirect before you redeem your I-Bonds so that you’re not hit with a surprise bill from the IRS come tax time
#jenniferlammer #bonds #fixedincome
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I never thought you could have taxes withheld at time of redemption for the ibonds! Thank you for this important information.
I didn't either. You would think the govt would send you a thank you letter for buying I bonds. Government coercion and taxation without representation real.
Thanks for the info on when to redeem my I-bond. You saved me from losing more interest than I would have if redeemed today. Your info is arranged in such an easy and organized way that it makes complete sense. Thank you!
Jennifer, love your videos. You are so thorough and appreciate you showing the details of all the calculations and even screenshots on how to make changes in the account. I so appreciate you and what you do. Thank you very much.
Great information! Thank you. I've changed my withholding, and marked my calendar for redemptions.
Thank you so much for this. I'm a young investor and just wanted to 'park' my money somewhere. And now I know when to redeem to benefit me best
This is so clear and emphatic! Gave me full confidence on how to proceed. Thank you!
damn i love this woman's channel. it spells everything out for you. this would've been so hard for me to figure out what the best date to redeem was.
This is great. Not full of fluff like many of these. Very to the point and practical information. Soooo helpful. Thank you!!
Thank you very much for what you do this video is really really good. I did not know treasurydirect allows partial I Bond redemptions and Federal withholding! Thank you very much for this information. I have got old paper i-bonds with the 3% real rate so these are not new to me but I did not know this so thank you again! I really enjoy your videos.
Very helpful. you found a way to help all of our individual situations!
Thank you so much for your very valuable guidance. Your charts, tables, and clear instructions are extremely appreciated! 🙏🏻❤️
Incredibly helpful thank you.
Thanks for the informative video. Your information is always clear, concise and pragmatic.
Truly invaluable information, as always. Thank you.
Thank you. Once again a great video with information. Got some T-Bills at over 4% . Have been passing your videos around. Thanks.
Excellent work, thanks
Thank you!!! Treasury Direct should hire you to make training videos for them!!!
True, indeed.
Great video and shows me, having purchased our I-bonds in Apr 2022, that Jan of 2024 will be the best time to redeem them. Thx for such a thorough and excellent explanation of how I-bonds work.
Excellent information presented in a concise format.
This was extremely helpful - thanks!
Very informative and helpful. Thanks!!
Thank you SO much. I had no idea you could even have Treasury Direct withhold taxes! This will help a LOT.
You're welcome!
Great info! It's time for me to create some calendar reminders.
Thank you for the clear explanation 🙏
very helpful. Thank you!
Thanks to your concise info I just cashed two I-Bonds that were purchased 12/2021. Before doing so, I edited my profile so as to have 20% withheld for tax purposes. As soon as my account is reimbursed the money will be going into 17 week T-Bills.
Thanks for showing how to change the tax withholding! ❤
Thanks so much for this info. I can't tell you how many times I've gone back and looked at older videos to refresh my memory on something that may not have applied at the time but does now. I'm sure I'll be revisiting this video in a couple of months. when my first round of i-bonds hit the best month mark.
Great video! Thank you for the info.
Thanks for the information about setting up tax withholdings within your TreasuryDirect account.
In my case, since I am in the middle of doing substantial ROTH conversions, I am looking for ways to do more tax withholdings outside of the funds from the conversion vs. estimated tax payments paid quarterly.
In a quirk of our tax code, estimated payments must be done in the quarter in which the income was reported/earned to NOT have penalties and interest accessed. BUT federal tax withholding can be done up to the last day of the calendar year even for income that was reported/earned from the first day of the calendar year.
When I set up the withholding within my TreasuryDirect account (several months ago) I did find out that the maximum amount of withholding is only 50%. I would gladly do 100% to fit more into my tax-paying strategy during these years of ROTH conversion(s)
Thanks so much for this info
Great explanation. This was exactly what I was looking for when I asked about the best time to redeem in another video. Treasury doesn't make it clear at all.
such a great video!
Incredible video. Thank you for making this confusing subject crystal clear. Without this video I would have redeemed to early and lost a full month of interest because of redeeming late in the month.
Wow. I looked up this video today because I was wondering when to cash out some I-bonds. You posted the video 3 hours ago 🤯
Me to
Thank you! You're a gem 💎
I am so thankful for you. I was just about to redeem my Ibonds without setting a tax withholding! Eekkkkk
Thanks for this video. Extremely helpful. I am waiting an additional 3 months to redeem my i bond due to my his video so that I will only lose 3 months at 3.38%z. Extremely helpful and clear!
Glad it was helpful!
Thank you so much for sharing your wealth of information
Thank you for the video! I really don't understand the tax withholding though 😢
Great video as always. I’m not sure I heard if you were keeping or redeeming your I-bonds for greener pastures or not, as in redeeming them and purchasing more favorable T-Bills?
5.4% I-Bonds | Should I Buy I-Bonds In 2023?
ua-cam.com/video/hwBPBWRht3I/v-deo.html
In my financial journey it makes sense to me to pull the whole amount without paying taxes (yet) and stick it in a high interest savings account. That way I can be earning interest on the whole amount and just be prepared to pay taxes on it at the end of the year. I'd rather the money be in my account (for as long as possible) than theirs.
I may go this route too. I only bought $5K worth of bonds. I made $342. I know it will get taxed now, but I don't expect to get taxed as if I bought 1 million shares.
When did u purchase and when are you thinking of selling
@@joy2come119 purchased May of 2022, plan on redeeming in August of 2023. I've got a high yield savings account paying over 4% so I'll put it in that for awhile.
@@joy2come119 I purchased May of last year. I'm thinking of selling at the 18th month, August.
I prefer to leave mine alone. I dont have that much and i like the idea of deferring the earnings. And compounding.
I’m currently considering redeeming 10kbin bonds I bought in 2022 that have a zero fixed rate and using that money to buy 10k in the next couple months at the current 1.3% fixed rate. Good to know about the tax rate, even though the money I get after the three month penalty is only a few hundred dollars - I’ll at least have it in place for when I cash in the bonds I plan to redeem that I’ll have held onto for much longer.
can you please explain why you are holding onto these Ibonds for the long term (you mentioned this at the start of the video). Thank you
When is good to transfer the gift between the family members ? Is the gift needed to be transferred before cash ?
I bought a number of paper I-bonds about 10 years ago. Where can I redeem them, AND is there any way to withhold income tax before I redeem them?
Jennifer, would I be able to save on federal taxes if I redeem an ibond and use it for my kids college expenses or transfer it to a 529 account? Thank you.
I've used this video as guidance for my Sept 23 - Jan 24 redemptions. But your video stopped there. I need help with my Nov-22, Dec-22, Jan-23, Feb-23, Mar-23, and Apr-23 bonds. Can you do a follow up video?
The withhold is applies on top of the profit, or all withdraw?
do you suggest leaving 25 in i-bond to keep account active
Thanks for your assistance. I purchased $9k of iBonds 3/1/23 6.79% and $1k @ 3.69% (?? Don't know what i was thinking). Anyway, I went to redeem $25 of the $1000 crappy portion and found I cannot sell any.... your video suggests I must hold one year before I can sell any off... and if under 5 years holding pay a penalt of 3 months prior rate accrued. Am I getting this correct? I've been purchasing CD's through my Schwab account and find going in and out to be very simple so far. Thanks! Nicholas
If I bought in October 2021, the best time to redeem would be July 2023 to capture maximum interest and leave at the 3.38% right?
I snagged the 21-day CMB at the recent 6.3% rate, and curious if you'll do a "short" or video discussing your thoughts on the 121-day CMB auctioning off 5/30 ... wondering if we could see ~5.5%+ investment rate
I think you mean the 161-day? If yes, I am hoping we can get to a video on it at this point.
@@DiamondNestEgg you caught me! Yes 161-day CMB.. thanks for the response/correction and impending video ;)
Im slightly confused. Your table shows that if you purchased in April 22 at 7.12 you should redeem in January 24 but if purchased in May 22 you should redeem in August.
If you deliver i bond gift in 2023 and it has maxed out your recipient’s 2023 limit, can you deliver another one to them as early as 1/1/24? Thank you in advance Jennifer!!
At 2:57 "...redeem earlier in the month, rather than later." Are you talking about calendar month or anniversary month? In other words, If my 1 year anniversary date (since purchase) is July 30, should I wait until August 1 to redeem?
i understand changing the % to ges money withheld, but 25%. ? IS THAT REALISTIC?
Excellent video (as always!) Question: If I’m not sure (at the point of redemption) what my top marginal tax rate will end up being that year, is it okay to nominate fairly high percentage of tax to withhold on the I-Bond? And then would the excess withholding basically get refunded when doing the tax return later, if it turns out I paid too much tax overall across all income?
this is a good question, why shouldn't we all maximize our tax returns from IRS, in case that money is used to add to the 10k limit to purchase another ibond?
Paying taxes on tax return works especially well when we have loss harvested. In that situation, it's hard to determine the right tax rate, too.
Hello , happy summer to you !
Please correct me of I am wrong with my understanding that you will be exempt paying federal tax if using the interest earned for college tuition ???
How to show the IRS that I am using the interest earned to help pay for this fall 2023 college tuition???
THANK YOU 🙏 ❤
www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/using-bonds-for-higher-education/
Can I just leave it there for awhile? My first time buying this I bond! Thanks so much for your info! Have a lovely weekend 🙏🌷
You can leave it for as long as you want, but it stops earning interest after thirty years.
Jax, remember your fixed rate was 0%. You'll only get the inflation rate. New I bonds have a fixed rate of 0.9%. Or you can buy other instruments at Treasury Direct at higher interest rates for the time period you want, although you'll need to pay state and local taxes on them annually.
4/2022 I bond holder here. Just redeemed per your recommendation. Thank you so much for all the great info. Especially on tax withholding part.
Gee - I just did this early this morning! Only pulled $2,000 from I-Bonds purchased in May 2022. Will take out another $8,000 in August. I am buying $1,000 of 13-week T Bills. All this was done as an experiment. Very easy. 😎 Now on Monday, I cashed my last 4 paper EE bonds. Got a notice from the bank saying they are putting a hold on part of the funds (hmmmmmmmmmmm what can we make of that). Had to wait a long time at the bank - and the process is not complete. 😐Compare that to this morning ---- maybe took 2 minutes. Also in the process of converting older paper I-Bonds to electronic - just to make redemption easier in the future. Thanks for all the great info!
I never experienced anything like that with cashing in EE bonds
Last year for me was a low tax year, so I cashed in all my EE bonds, did them 4 to 5 at a time over months, they were credited to my account and available that very day, then I would move the money to treasury direct and buy I bonds
I’ve never heard of a hold on cashing bonds, but I am not disputing what you say
You're welcome & thanks for sharing!
@@g.t.richardson6311 I never had a problem cashing any bond before that. I was wondering if the teller made a mistake, or, does the bank want to protect itself if the treasury doesn't send them the money (debt ceiling issue). I called but did not get an explanation. It's a bond, not a check. Very strange.
Hello, I have some ibonds in my gift box issued on 1-1-2023 When can I gift them over, and cash them out after 3 months of the lower 3.88% interest rate? Thank you
So should I redeem only $10,000 from my old IBonds? Since I can only buy $10,000 worth this year?
Cashing in an ibond in Oct to pay my son's college tuition, which means no federal or state taxes will apply. Yeah! My account is set to 0 taxes withheld, since I won't owe any. Does anyone know how it is that I take care of this at tax time? Is there just an irs tax form to fill out? Or do I need to do anything with Treasury Direct or anywhere else?
I-Bond redemption-
My situation is a little more complex, I have I-Bond holdings from 2001 to 2008. The current interest rates vary between 3.38% and 9.58%, whereas the current Treasury Direct indicates 4.30%. I believe that this is associated with the Fixed Rate component of the I bond rate at the time of purchase.
It would be to my benefit to redeem the I-bonds with the lower Fixed Rate component first, assuming I do not want a large tax liability in one year.
Question: How do I find the historic Fixed Rate component of I-bonds?
This may not be necessary since it would directly relate to the current rate of return on each bond. It may be interesting to other viewers to understand the benefits of holding I-bonds with a high Fixed Rate component.
If you scroll down this page, towards the bottom, you'll find the historical fixed rates: www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/
Your work is richly textured; just like a book that was rich in both style and substance. "The Art of Meaningful Relationships in the 21st Century" by Leo Flint
Why would an investor hold on to the 3.38% after the 3 month penalty period, if Treasuries and CD's are paying 5+ percent? When and if IBomd rates start earning more than a Treasury or CD, then buy IBonds.
I would think they shouldn’t in most cases, unless they thought rates were going to increase again above treasuries/CDs and they didn’t want to lock back into another 1 year commitment. They would also be maxing out their annual contribution limits again for that year for the same amount of principal.
I think her point was to LOSE the last 3 months at a lower interest rate versus losing the last 3 months at a higher rate at 6%. But if you are waiting an additional 3 months you are also losing out 3 months of interest at T bills or CDs. Because remember you are not only losing interest but you are also paying TAXES.
withholding rate 25%? What is the proper percentage, don't mind my stupid question. Thanks.
Never give the government a interest free loan
Is there a way to redeem I-bond and then directly transfer/buy T-bill in TreasuryDirect without going thru my bank?
Simple answer, yes. it's called the C of I account within your TreasuryDirect account. Have the money, when you redeem your I-bond, deposited into the C of I. Note that the C of I account does not pay interest. it's intended to be a short-term parking place for your money between investment in Treasuries.
So Jen! I followed your advice back in October of 2022. I opened a trust and then an entity account so that I could invest more money at the 9.12 percent rate. I am so glad I did. I redeemed the I-bond last week so I could put the money in t-bills, so now there is not money in the account. Should that account be closed or can I just leave it like that? I don't foresee investing over $10k in I-bonds in the foreseeable future. Any ideas? Looking forward to the Bond Project!
Hi Sandra. It's really up to you (e.g., does having unused accounts open bother you)? If it does, then I would just call them to close it - when I spoke to them last year, they said the account is closed after two years of non-usage in any case. We'll probably be calling later this year to close one or two accounts ourselves. More news on the Bond Project next week - I think we are nearly there!
Hi thank you for the video . I want to ask - so the purpose of having tax withholding is so that the money sits in treasury direct , so when tax time comes , this money is “ set aside “ to ensure i can pay, is that right ? But this withholding tax money , is there interest to it ?
If a person can well manage their tax payment and does not set any money for tax withholding, but takes all the iBond money out and reinvest , wouldn’t that be better ?
There is no interest (this is really for folks who don't want to get surprised by their tax bill at year-end / "forget" that they have to pay taxes on certain things like interest at the end of each year).
I have 20% taken out each week on my tbills.Better to pay a little now then a lot later.
Sorry, if I missed it, but why doesn't the current rate or inflation rate take into account the .90 composite rate? Or am a incorrect? Still the lower rate adding in .9 compared to previous periods. TY
Because this video is about bonds that are currently able to be redeemed which means they've been held more than 1 year. Those bonds had no fixed rate, only the inflation rate. The fixed rate was 0.
@@murraypassarieu9115 ok, right, as the previously issued bonds were not issued with a composite rate, which as you point out only applies to bonds issued in May 2023. Thx
Can i Cash out my principle amount and leave the interest? I bought $5,200 in October 2022. What if i cash out $5,200 in October 2023?
Hello! I purchased an I-Bond in 10/2022. When I go on TD website it says the Interest Rate is 6.48%. Is this due to the fact that if you pull before 5 years they knock 3 months of interest off and it's calculating current interest rate?
That might be the interest rate you got for 6 months going forward from the date of issue. Your rate was reset lower after 6 months. Not sure why it shows that. It can be tricky.
Is it possible to redeem I-bonds for a minor (my kid) after a year of holding? If so can you do a video on it. Thanks a lot!
You can - but there are certain guidelines with respect to how you should use the redeemed funds. 2nd half of this video covers it: ua-cam.com/video/YlE3Uxoeah4/v-deo.html
I bought my Ibond September 2022. I don't know whether to leave it till the 5 year mark or redeem it after a year. Can you advise?
Should I Redeem & Buy More I-Bonds, Just Buy More OR Just Redeem My I-Bonds (May 2023 I-Bond Rate)
ua-cam.com/video/7ooIgdycrfw/v-deo.html
So couple of questions. Can you hold your I Bond fir 5 years? Can I sell it after a 1.5 year timeline. Last diws vhf turbo tax look for I Bond tax forms on your computer as it does with Fidelity. Thanks and great video as always
Yes you can sell after one and a half years, you lose three months of interest
Yes, you can hold for five years or 10 or 20, if you hold for five years, you pay no penalty
The TurboTax question is a good one, and I don’t know the answer, I manually enter all my W-2s, 1099s, etc and never import anything
If I had to make a wild guess I would say no you cannot import treasury direct 1099s, but I bet someone else can confirm that has tried it
Sorry, I don't know the answer to the Turbo Tax question either. Perhaps another supersaver might be able to!
@@g.t.richardson6311 if I just leave the 10,000 in there for 5 years do I pay taxes on it each year or when I take it out
@@jimdixon6688 it’s your choice
I have always paid tax when I cashed it in
Paying it yearly is an option
Seems like half a pain in the ass
She has a video on it , I’d check that out
@@g.t.richardson6311 thanks I'll check it out. Sounds like we should just leave those two i-bonds in there till they max out. Appreciate the info.
If the worst happens and the government actually does default I have heard that I-Bonds will become virtually worthless(Principle and Interest Combined). Question 1) Has anyone heard differently? I talked to Treasury Direct and they said the I-Bonds will not be affected by a potential default, but I am still a bit apprehensive. Question 2) Does anyone know if the debt ceiling is raised at a latter date (post June 1st) will the funds in the I-Bonds be able to be realized in full or will they just be basically gone forever? Basically, will you be able to recover the funds if the default happens and then later down the line the debt ceiling is raised?
You won't lose anything. I doubt the government will default but if they did, it would be short term and you would be made whole. Trust me on this. Your I Bonds will not become worthless. The entire world is dependent on our treasury market. No way the US wants to lose that. I don't know where you heard your I-Bonds would become worthless but please stop listening to them.
I am never 100% sure either but from others have said (like the 1st reply to you hear) there is nothing to worry about as far as I-Bonds. Plus if you talked to Treasury Direct and they said they wouldn't be affected, getting it direct from them, i'm guessing there is nothing to worry about. I sure hope not personally.... and i'm rolling with the punches here myself! I don't want to redeem yet (not for another couple of months). I would say if you are that worried though just cash out, everyone has to do what they need to sleep at night! (i'm not advising to do that, just saying if you have the option you can if YOU want to)
@@murraypassarieu9115 bingo good response
Anybody having problem with TD? I'm able to log in to my account with a OTP and see the front page of my account, but that's about it. I can't buy, edit, or do anything on the site! The minute i click on the top links, "tresurydirect is currently unavailable" page comes up and kicks me out of my account. Anyone going through the same thing?
Clear your cookies for the domain, that fixed it when it happened to me over a month ago.
I bought my I bonds on May 4, 2022. It is now June 25, 2023. Is it too late to redeem? Should I redeem before the month of July starts. Technically, I am on the 13th month. I only 5K worth of Bonds. I checked and say I have accrued $342 worth of interest. Not bad. I'm Ok with that. I live in FL, we don't have a state tax.
What Is The Best Month To Redeem I-Bonds | When To Redeem I-Bonds
ua-cam.com/video/cBYD7MdXzG4/v-deo.html
Possibly a dense question but isn't it technically more worthwhile to not pay taxes at redemption and then take the "excess" funds and dump them into a high yield savings account? Basically a free loan (for 6 months or so) that I could use to accrue some interest until it's officially time to pay taxes in April 2024? Granted i understand this additional income COULD push some people into a new tax bracket but I think this is a more optimal choice for MOST people? Or is my logic flawed?
Thank you, love this content, it's always making me think more thoughtfully about my money!!!
Yes, but you have to be careful... You are supposed to pay your taxes quarterly, in the same quarter you make the income, if you wait until tax day, you may have to pay a late penalty + interest. However there is a way around this known as "safe harbor" provisions...
If your withholding during the year is enough to avoid an underpayment penalty, then you will not owe any penalty or interest, even if that withholding was not in the same quarter that you made the income.
So you could, for instance, have 0% withholding on all your maturing T-Bills from January-November, and be able to fully re-invest all the interest for most of the year, then on your December T-Bill maturity payment, you can instruct TD to withhold 50% of interest to cover the tax you owe for the entire year (or if you need more to avoid an underpayment penalty, do it for the maturing T-Bills in October-December, etc.). Withholding is considered to have been paid throughout the year, even if it is only paid at the end of the year (unlike quarterly estimated payments). This tax HAS to be withheld, you cannot make estimated tax payments at the end of the year for earlier quarter income or pay it after the year is over (either with the last quarter estimated payment, or the payment with your tax return) to avoid the penalty.
You would have to research what is needed to avoid an underpayment penalty, but in general there is no penalty if:
You owe less than $1,000 (over what you already paid during the year in withholding) in taxes.
You have withheld, for the current tax year, 100% (110% if your total income is over $150K) of what your total tax was for the PREVIOUS tax year.
You have withheld at least 90% of the total tax you owe for the CURRENT tax year.
This is just a summary, and there are some differences if you are a farmer of filing as "married filing separately" so you need to do some research.
@@SpaceClick thank you for this detailed summary. So to get the best of both worlds, I can choose to redeem i-bonds at 100% (no taxes withheld), earn interest on what would have been the tax portion, and increase my withholding rate at my W-2 job to cover for the extra taxes at the end of the year-to avoid the late penalty and interest?
@@scecily Yes, you could do that, just make sure that your job allows you to do this on short notice (or prepare ahead of time so it will take place before the end of the year) as well as find out what the maximum percentage they allow to withhold to make sure you will be able to withhold enough to avoid the underpayment penalty.
@@SpaceClick thank you for the prompt response! It looks like my i-bond interest will be less than $1k, so I don’t think I’ll have to increase the withholding too much, if at all (hah).
Can u pls help me with this question? I bought I bond as a gift on 4/22 but just gifted this 1/2/24. Can the recipient now redeem it since it was purchase on 4/1/22 ? Thank in advance jennifer!
Yes, they can Lydia
@@DiamondNestEgg thank u so much u always been very helpful. God bless!
Do u still pay taxes on the penalty smount
No
EWP on a bank CD is federally tax deductible as it is reported on 1099 INT from the bank and deducted on Schedule 1, So would the 3 month penalty be deductible as well??
I thought interest from bonds was not federally taxable
They are subject to federal tax, but not state or local taxes.
👍👍👍👍👍👍👍👍
why 3.38% ? isn't the current rate 4.30%?
How I-Bond Interest Works: ua-cam.com/video/9hfHoSijJEk/v-deo.html
The talk here is of I-bonds that were purchased over 1 year ago that didn't have the 0.90% fixed rate only the variable rate. So all those I-bonds after 1 year will be earning 3.38% variable rate.
But I live in Puerto Rico, I don’t pay federal taxes… 🥹
I'm bori too
My question is, do wey have to pay taxes to hacienda?
Yes you do, you may not pay federal income taxes, but you do pay federal payroll taxes (Social Security, Medicare, and Unemployment).
@@ericjhernandez17 Not on I Bonds.
@@SpaceClick not anymore… ☺️