I Bonds are considered to be one of the safest investments in the world because they are backed by the full faith and credit of the U.S. government, and they have no interest rate risk or credit risk. So, here I have discussed 2 smart ways on “How to buy I bonds?”.
Topics Discussed In This Article:
- What is I Bond?
- Why are I Bonds so Exciting?
- What are the Benefits of Purchasing an I Bond?
- How to Buy I Bonds Online?
- Where To Buy I Bonds In Person?
- Can you Exchange your I Bond?
- What are Some Other Investment Options That Offer Tax Benefits?
All these above listed topics are explained and discussed in detail below. Let’s first have basic understanding about I bonds.
What is I Bond?
An I Bond is a U.S. government savings bond that provides you with a fixed rate of interest and protection from inflation.
The maximum amount you can invest in an I Bond is $10,000 per person, per calendar year.
I Bonds are issued electronically, so there’s no risk of losing your money to theft or natural disaster.
You also get the benefit of tax-deferral for as long as you hold the I Bond, meaning that you don’t have to pay any taxes on your interest earnings until you redeem the bond or it reaches maturity (which can be up to 30 years).
The annual interest rate for an I Bond is determined by two things: 1) whether you buy it before or after May 1; 2) how long you hold it once you buy it; and 3) what kind of I Bond you buy (e-I Bond, paper I bond).
Why are I Bonds so Exciting?
I bonds are so exciting because they are a low-risk, safe investment for your money. They offer a fixed rate of return over the life of the bond.
I Bonds are safe because they are backed by the US Treasury and have no risk of default.
The interest is compounded semiannually, which means that you will earn interest on your original investment and all of the interest that has been added to it.
I Bonds can be purchased in any denomination up to $10,000 per series with a maximum limit of $30,000 per year.
3 Major Benefits of Purchasing I Bonds
1) I-bonds are an investment opportunity for individuals and families that want to preserve their wealth. They offer a guaranteed return and a safety net for the future.
2) The purchase of an I-bond is made with paper money, but the interest is earned electronically.
This means that when you purchase an I-bond, you are not giving up any of your hard earned cash. Rather, you are investing in a government backed security that will pay you interest every six months until it matures or you cash it out.
3) I-bonds also have the advantage of being tax free if they mature after five years which means they can be used as a way to reduce your taxable income by investing in bonds with short maturities.
How to Buy I Bonds Online?
I Bonds can be bought in paper form at a financial institution or online at TreasuryDirect.gov, which is the official website for the U.S. Treasury Department and its agencies that includes I Bond purchases online.
I Bonds can be bought from 1 month to 10 years in duration, with terms ranging from 3 months to 30 years and varying interest rates depending on the length of time you choose to invest your money for.
You can buy I bonds from TreasuryDirect.gov in the following ways:
1) Apply online at treasurydirect.gov;
2) Call 800-4US-BOND (800-487-2663);
3) Write to us at: Department of the Treasury, P.O. Box 7150, Minneapolis MN 55440-7150; or
4) Use your tax refund to buy I bonds by completing IRS form 8888 and mailing it in with your payment to: Internal Revenue Service, P.O. Box 12192, Philadelphia PA 19116.
The Treasury Department offers “I” bonds in paper form, but not in person. To buy “I” bonds in person, you need to purchase them online or by phone.
Can you Exchange your I Bond?
So, I bonds are issued by US Treasury in the form of savings bond. You can exchange your I Bond for another type of savings bond or cash at any time, but there are some restrictions on when you can cash your I Bond.
You cannot redeem an I Bond if it has less than five years until maturity (the date when you will be able to redeem it).
What are Some Other Investment Options That Offer Tax Benefits?
Tax benefits can be achieved by investing in stocks and bonds, as well as real estate.
A stock is a security that represents ownership in a company, and the value of the stock fluctuates according to how the company performs. A bond is a debt security issued by companies or governments. Bonds pay interest periodically and repay the principal at maturity.
Real estate investments also offer tax benefits, such as depreciation deductions for residential property, which allows taxpayers to deduct part of their property’s cost each year.
So, this is all for “How to buy I bonds?”. I bonds are a great investment for people who want a guaranteed return. They also offer a higher rate of return than other savings accounts. But if you’re not going to hold the bond for at least five years, it’s not worth it because the interest will be taxed as ordinary income.
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