FlyerTalk Forums - View Single Post - Questions on BankDirect, now Bask Bank (consolidated)
Old Jan 7, 2022 | 9:25 am
  #2331  
guv1976
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Originally Posted by redtop43
I bonds are not a short-term instrument like a Bask account it. It's apples and oranges.
I'd say more like tangerines and oranges.

It's true that I bonds are not liquid, but that's only true for the first year. Bonds held for at least one year, but less than five, can be redeemed with a penalty of the last three months of interest. Bonds held for at least five years can be redeemed at any time with no penalty. In addition, for people who live in states with a state income tax, I-bond interest is exempt from state (and local) income tax. And, unlike interest earned in a savings or money-market account, the I-bond holder can opt to defer paying Federal income tax on the interest until the bond is redeemed or reaches final maturity (in 30 years). So if one can comfortably tie up $10K for one year, buying I bonds at their current interest rate (which can change every six months) seems like a good bet.

As noted, though, the annual purchase limit on Savings Bonds is just $10K per person per calendar year. Up to an additional $5K per year in I bonds can be had if one is due for a Federal income tax refund, and opts to receive some or all of the refund in the form of I bonds. (IRS Form 8888 must be filed with one's 1040 in order to receive a refund in the form of I bonds.)
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