Todd's Tax Service LLC
Treasury Direct - U.S. Government Securities
With the recent uptick in interest rates, U.S. Government issued I Bonds and Treasury Notes have suddenly become a very attractive place to invest your money.
Here is a link to the Treasury Direct Website.
A treasury direct account offers great advantages for the average person trying to save $ or save for retirement or other purposes: Account Record Sheet to record your password etc.
No complex investments.
100% Money Back guarantee by the U.S. Government Treasury when bonds/notes held to maturity.
Competitive interest rate , often much higher than that paid by a bank on CDs or savings accounts.
No tax penalty when a bond or note is redeemed, just federal tax on any interest earned.
Easier access to your money when compared with tax deferred IRAs and other retirement plans which often come with a 10% penalty and federal and state tax on 100% of the distribution amount when funds are withdrawn prior to age 59 1/2.
Including U.S. Treasury securities in your overall saving and investing plan represents a low risk approach for a portion of your investable assets. Each investor needs to assess their tolerance for risk in forming an overall portfolio allocation that should also include other asset classes.
The initial account setup process can be a bit intimidating. Have your information ready and concentrate on account setup to avoid any data input errors.
Treasury Direct Account Info:
Website for information and account access: www.treasurydirect.gov
Current I Bond Rate Date:_________ Rate_______% see link above for current interest rates.
The interest rate credited is based on rate in effect on the date of purchase. That rate applies for 6 months from the date of purchase. The rate for the next months is based on the rate in effect on the renewal date. Rates change on May 1 and Nov 1. Check the website for current rates.
You can view your holdings at any time by logging into your account.
I Bonds cannot be cashed in for the first 12 months.
There is a 3 month interest penalty during the first 5 years of ownership.
There are absolutely no fees associated with a Treasury Direct Account.
You can never lose principal. You can only lose 3 months interest as mentioned above.
I Bonds and other treasury securities are issued by and backed by the U.S. Government.
You can have multiple “account registrations” within your account. Example: You can buy 4 I Bonds for $2,500 each and have a different registration (beneficiary) for each of the 4 bonds.
The bonds pass without probate to your beneficiaries. Probate may be required if you do not designate beneficiaries or update beneficiaries in the case of a death.
You can buy up to $10,000 of I Bonds per taxpayer annually.
You can buy up to $5,000 of I Bonds from your federal income tax refund. This amount does NOT count against the $10,000 limit.
After 1 year, you can cash an I Bond simply by logging into your account and moving the funds to your checking or savings account.
You can also buy Treasury Notes (no limit) within your treasury direct account. Notes are auctioned off at the end of each month. Log in during the last 10 days of the month to make a purchase on the last day of the month. The interest rate will vary depending on market conditions. 2 year Notes purchased on October 31, 2022 are paying 4.375%.
The customer service # is 1-844-284-2676
There is no “paper trail” of your account. No statements are mailed out. Keep your account info with your important papers. Once a year, print a hard copy of your holdings from the website and retain it with your financial records.
Interest on I Bonds accrues on a tax deferred basis until the bonds are cashed in. There is NEVER any state income tax on the interest earned (only federal tax).
A Treasury Direct account cannot be used for an IRA.
There is a lot of information at the website. Gradually become familiar with the website and all it’s offerings. The website is in the process of being upgraded and improved.
If you own paper savings bonds…here are a couple of tips:
Check in with me before cashing in large amounts of bonds. All of the deferred interest may become taxable when you cash them in. Sometimes it is wise to cash them in over a period of time.
If you have bonds that are not earning interest, you should probably start cashing them in. (See note above).
You can “enroll” your paper bonds into your Treasury Direct account. See the website for forms and details on the procedure on how to do this.
Make sure your beneficiaries are up to date on your paper bonds.
Make sure your heirs can locate your paper savings bonds.
Link to USA Today - I Bond Articles
Bonds purchased during the 6 month period ending 10/28/22 earn an annualized rate of 9.62% for 6 months.
Interest accrues from the 1st day of the month of the month in which the bond is purchased. The fixed rate is 0% + the interest rate of 9.62% for a total yield of 9.62% (annualized).
Bonds purchased during the 6 month period ending 4/28/23 earn an annualized rate of 6.89% for 6 months.
Interest accrues from the 1st day of the month of the month in which the bond is purchased. The fixed rate is .4% + the interest rate of 6.49% for a total yield of 6.89% (annualized).
Bonds purchased during the period ending on 10/28/22 will renew at the 6.49% rate for 6 months. (The additional .4% only applies to bonds purchased starting 11/01/22. The renewal date is 6 months after the purchase month.
I Bonds aren't the only government security available that can be used to protect against inflation.
See Wall Street Journal Article
TIPS (as discussed in the above link) are a bit difficult to understand. But they're worth looking into if one of your primary objectives is to protect your money from the corrosive power of inflation.
TIPS can be purchased at Treasury Direct. And unlike I Bonds, they can be purchased inside your brokerage account. They work well inside traditional and Roth IRA accounts as part of a diversified portfolio.
One of my favorite financial programs is Wealthtrack, hosted on public television by Consuelo Mack.
Invest an hour of your time and watch the following interview and follow up with Robert Kessler. Mr. Kessler gives some advice that I happen to agree with...tune in and stay with the program until the end.
The Financial Markets are Perilous, warns Robert Kessler Nov 4 2022