The lowly I bond may be the Cinderella of fixed income securities. It’s almost always left out when folks diversify their portfolios. But these days, the I bond could become the “belle of the ball!” I bonds have a feature lacking in many other fixed income securities: built-in inflation protection, something that’s becoming increasingly important. 
<ul><li>An I Bond, or Inflation Bond, is an interest-bearing U.S. government savings security. They have a 20-year initial maturity, plus a 10-year extended period for a total of 30 years. They’re used as a hedge against inflation.</li><li>There are drawbacks to the I bond, especially if you were looking to rebalance a significant portion of your portfolio with them. You can only buy up to $10,000 worth of I bonds, per person, each year.</li><li>You can’t redeem an I bond until a full year after purchase and there’s an early withdrawal penalty. Also, you can’t put them in a 401(k) or a traditional or Roth IRA.</li><li>You can purchase another $5,000 worth each year with your tax refund.</li><li>To purchase these, go to <a href="http://TreasuryDirect.gov">TreasuryDirect.gov</a>
and look for the link for “How To Buy Series I.”</li><li>The reason you probably haven’t considered I bonds in the past is because of their terrible track record over the last 20 years or so. However, they’re now considered quite the hot commodity in investing circles.</li><li>Buying I bonds for your portfolio is not investing. These bonds basically have zero risk, so the return is appropriately low.</li><li>Compare buying these to buying gold, which some people also do to fight inflation. The difference is that with gold you have absolutely no guarantee that your holdings will keep pace with inflation. In fact, you can lose money with gold. There’s no chance of that with an I bond.</li></ul>On this program we also answer several of your call-in questions:
<ul><li>You’ve said that your mortgage payment should never be more than 25% of your take-home pay. Should this principle apply to both spouses or to just one? We’re both working.</li><li>What’s wrong with buying a lottery ticket here and there?</li><li>We have a 4% interest rate on our mortgage and we owe $110,000. The home’s value is around $230,000. We pay an extra $400 per month on the principle. We’re considering refinancing. Should we just pay the house off? We’re not sure what we should do.</li><li>I have an old HSA from a previous employer. However, I’m about to have elective surgery and I’m wondering if it’s better to go ahead and use that account right away or just to pay for the surgery out of pocket and then take the distribution at a later date to let the money grow in that account. </li></ul>Remember, you can call in to ask your questions 24/7 at (800) 525-7000 or email them to <a href="mailto:questions@MoneyWise.org">Questions@MoneyWise.org</a>. Also, visit our website at <a href="http://MoneyWise.org">MoneyWise.org</a> where you can listen to past programs, connect with a MoneyWise Coach, and even download free, helpful resources like the free MoneyWise app. Like and Follow us on Facebook at MoneyWise Media for the very latest discussion! And remember that it’s your prayerful and financial support that keeps MoneyWise on the air. Help us continue this outreach by clicking the Donate tab on our website or in our app.

FaithFi

Faith & Finance is a daily radio ministry hosted by Rob West. The program offers a practical, biblical and good-natured approach to managing your time, talents and resources.

Faith & Finance with Rob West

The lowly I bond may be the Cinderella of fixed income securities.  I bonds have a feature lacking in many other fixed income securities: built-in inflation protection, something that’s becoming increasingly important.

The I Bonds Have It—Inflation Protection

FaithFi | Aug 6, 2021

Show Notes

Where Faith Meets Finance

You May Also Like