Want to stash I Bonds in a ‘gift box’? Do it by Wednesday.

With this strategy, you can bypass the $10,000 per person purchase limit, but there are potential drawbacks.

By David Enna, Tipswatch.com

Throughout this year, I have read with — at first, disbelief, and later, fascination — as devotees of U.S. Series I Savings Bonds discovered and successfully exploited a TreasuryDirect “gift box strategy” to accumulate I Bonds beyond the $10,000 per person yearly purchase limit.

Although the strategy is legit and perfectly legal, I haven’t written about it and I don’t intend to use it. But a lot of people have asked me about it. If you intend to use this strategy, I’d advise completing the process on TreasuryDirect by Wednesday, Oct. 26, if you are aiming to lock in the current 9.62% interest rate for a full six months, and then 6.48% for the next six months.

Update: The TreasuryDirect site was overwhelmed by I Bond demand Wednesday and almost all users experienced very slow loading pages, or no loads at all. I recommended making your I Bond transactions on Wednesday for this very reason, to avoid this sort of pitfall. Making a purchase on Thursday will be fine, and Friday will also be likely to be OK. Let’s hope the site returns to normal.

Friday morning: TreasuryDirect’s opening page is now loading. It took me two times but I was able to log into my account. Good luck to all.

Harry Sit of the TheFinanceBuff.com was the first to write about this strategy on Dec. 27, 2021, in an article titled “Buy I Bonds as a Gift: What Works and What Doesn’t.” When people ask me about the gift box, I point them to this article, which was well researched and thorough. So, go read that article if you don’t know about the strategy.

Another article was just posted this week by Jeremy Keil, a financial adviser who was an early advocate of the current I Bond surge (and has written a guest post for this site). His article is titled: “Buy more than $10,000 in Series I Savings Bonds through gifting with your spouse“. Keil, who recently completed an I Bond gift box purchase, includes links to TreasuryDirect content explaining how the gift box works. He details a strategy for a couple purchasing $60,000 in I Bonds before the end of October, with $20,000 being delivered in 2023 and $20,000 in 2024.

• Confused by I Bonds? Read my Q&A on I Bonds.

Some basics of the gift box strategy:

  1. When you place an I Bond into the gift box, it begins earning interest in the month of purchase, just like any other I Bond, and continues earning interest just like any I Bond. However, this money is no longer yours. It belongs to the recipient of the gift.
  2. The purchase does not count against your purchase limit for that year. It will count against the purchase limit for the recipient, in the year it is granted.
  3. Gift purchases are limited to $10,000 for each gift, but you can make multiple gift purchases of $10,000 for the same person. But the recipient can only receive one $10,000 gift a year, and that gift counts against their purchase limit for that year.
  4. You must provide the recipient’s name and Social Security Number when you buy a gift. The recipient doesn’t need to have a TreasuryDirect account … yet. Only a personal account can buy or receive gifts. A trust or a business can’t buy a gift or receive a gift.
  5. “I Bonds stored in your gift box are in limbo,” Harry Sit notes in his article. “You can’t cash them out because they’re not yours. The recipient can’t cash them out either because the bonds aren’t in their account yet.”
  6. The recipient will need to open a TreasuryDirect account to receive the I Bond. Once it is delivered, the money is the recipient’s, who can then cash out or continue to hold the I Bond.

Here is TreasuryDirect’s video explaining the step-by-step process to complete a gift box purchase:

In his article, Harry Sit also provides a very useful step-by-step guide to completing a gift-box purchase.

Would this strategy trigger a gift tax?

Sit notes there is no limit on how much you can give your spouse as a gift, so this strategy works especially well for cross-gifting: Spouse 1 to Spouse 2 … and Spouse 2 to Spouse 1, each using their separate TreasuryDirect accounts. Rules are more complicated for gifts to a non-spouse, so refer to Harry’s article for more detail.

What are the potential negatives to this strategy?

Placing $10,000 in the gift box puts that money in limbo, awaiting future delivery. It is no longer your money, and it really isn’t the recipient’s money either until the gift is delivered. So if you stack up multiple $10,000 purchases for gifting well into the future, the potential downside is that your circumstances could change.

Also, what if the I Bond’s fixed rate rises dramatically in November 2022 or May 2023? You would probably want to bypass delivering the gift I Bond beyond 2023 to take advantage of the higher fixed rate, which is highly desirable. That means you would have to wait until the next time the I Bond’s fixed rate falls to 0.0%.

Sit also warns about forgetting about the gifts. His advice: “If you’re intentionally pre-purchasing gifts to take advantage of temporarily high interest rates, tell the recipient you’re holding a gift. Set recurring calendar reminders to tell yourself and the recipient you still have undelivered gifts in the gift box.”

What if the gift recipient dies?

When you register the gift, you can name a second owner or beneficiary for the I Bond. Sit says, “If the gift recipient dies before you deliver the gift, the designated second owner or beneficiary will inherit your gift. You can’t name yourself as the second owner of the gift but you can name yourself as the beneficiary of the gift.”

If you die before granting the gift, the recipient still owns it and will be able to claim it through TreasuryDirect.

Why didn’t I use this strategy?

I admit to being quite skeptical at first that TreasuryDirect would allow multiple, stacked $10,000 purchases in one account. But by all accounts, it has been working fine (except for a brief outage recently after a site update). I thought about doing this, but opted to just stay with my plan of buying $10,000 a year in our two accounts, every year, and hoping for a higher fixed rate in 2023 and beyond.

But is it a sound strategy? Yes, I think it is, especially for short-term investors interested in locking in a high rate of return over the next 12 to 15 months (taking into account the three-month interest penalty for redemptions within 5 years).

Why complete the gift purchase by Wednesday?

Thursday would probably be fine, but you want to make sure to complete any I Bond transaction early enough to ensure that TreasuryDirect logs it as an October 2022 purchase, which means you will receive 9.62% for a six months, and then 6.48% for six months. It’s wise to give TreasuryDirect a couple of business days to complete any transaction.


If you decided to use the I Bond gift strategy, feel free to post about your experience and thoughts in the comments section below.

* * *

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he discusses can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.


About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
This entry was posted in I Bond, Savings Bond, TreasuryDirect. Bookmark the permalink.

84 Responses to Want to stash I Bonds in a ‘gift box’? Do it by Wednesday.

  1. MW says:

    Thank you for all of the information you provided on your website. I am a big fan of your detailed instructions and the topics that you cover!!!

    I wonder if you might know the answer to this question or write a post on this topic.

    My husband and I set up individual Treasury Accounts to max out the I-Bond purchases last year while the interest rate was high. We purchased I-Bonds as gifts to each other and we also purchased I-Bond under our Joint Trust Account under our Revocable Living Trust. As I understand it, the Trust cannot be a secondary owner or beneficiary. I learned that however, one can transfer I-Bonds from the Individual Accounts to the Trust Account to provide protection in the case that the trustees/co-owners die or become incapacitated at the same time. We named each other as the second owners of our individual accounts.

    Here are my questions:
    • Can I make the transfer from the individual accounts while there are undelivered gift I-Bonds? It will take us more than a couple of years to deliver the I-Bonds.
    • Based on Form 5511 Tax Liability Statement, it seems since my husband and I are the Co-trustees of our Joint Revocable Living Trust, we can defer the interest accumulated on the I-Bonds, will that be correct?
    • Should we be making the transfer to the trust account only when we do not want to purchase I-Bonds for more than the $10,000 limit in the individual accounts? I was not sure if the individual accounts would be closed once the transfer is done.
    • Any Dos and Don’ts or other ways to handle this situation will be greatly appreciated.

    Thank you very much for your response.

  2. randy renzor says:

    I have a two part question. Does the timing of the gift delivery effect anything other than the “purchase limit” in the calendar year? In other words, I want to understand if I’m planning to deliver a gift in 2023 are there any considerations as to when in 2023 is best to implement the delivery? Second, I understand that by using federal tax refund dollars I’m able to increase my “purchase limit” in a calendar year to $15,000, but it seems that I have to buy paper bonds with my refund if I’ve already reached my $10,000 “purchase limit” of electronic bonds. Is this also true if I’ve reached that $10,000 limit as a result of receiving a gift and not actually having purchased the bond in that calendar year? As always, Thanks for your help and insight.

    • Tipswatch says:

      Q1: Delivery of the savings bond affects only the purchase limit for the receiver. The terms of the savings bond were set when you placed it in the gift box, so nothing changes. Still has the one-year holding period, still has 3-month penalty for early redemption.
      Q2: The paper I Bond limit is $5,000 per tax return and it isn’t affected by other purchases or gift deliveries.

  3. Lisa D says:

    If one is buying I-Bonds as a gift to others but holding them in their account, can they begin to pay taxes annually on the interest so that when they actually give the gift, taxes have already been paid on any interest already accrued? If so, how does the gift recipient inform the IRS that a certain amount of taxes has already been paid by the gifter?

    • Tipswatch says:

      I don’t know the answer and I am not a tax expert. But when you put an I Bond in a gift box, it is no longer yours. It is the recipient’s. So I doubt you can pay taxes on that I Bond.

    • Michael says:

      Lisa D. You cannot pay taxes on gifted or any I-Bond until the I-Bond is redeemed. Please refer to the TreasuryDirect website for information.

      • Tipswatch says:

        I don’t know about paying taxes on a gifted I Bond, but you can pay taxes on annual interest for an I Bond you are holding. TreasuryDirect says: “You have a choice. You can put off (defer) reporting the interest until you file a federal income tax return for the year in which you actually get the interest, or report the interest each year even though you don’t actually get the interest then.”

        • Tony F says:

          How does one determine the exact amount interest they earned in 2022 in order to pay taxes on as annual basis rather than when you cash it it? Since
          T.D.does not send out an annual 1099, and their website subtracts the last 3 months of interest on IBonds held less than 5 years, what does the IRS use as proof? Or do you just take your best estimate and, when you finally cash them in, subtract what you have previously reported from the 1099 total that TD sends you?

          • Tipswatch says:

            You can use the site Eyebonds.info to see the total I Bond balance in each December, including the last three months of interest. You would need to keep meticulous records of each year’s payments.

  4. Tony Filardi says:

    Why is the last 3 months of interest deducted when delivering a gift as the I-bond is not being sold, simply delivered. shouldn’t the full interest amount be delivered and the penalty be applied when the bond is eventually sold, perhaps a year after when the interest rate might be 1% rather than its current 6% plus

    • Tipswatch says:

      It isn’t “deducted” and it has been earned. But TreasuryDirect — no matter what — will not show you the last three months of interest until the I Bond reaches 5 years. The penalty applies to the last three months of interest *when the I Bond is redeemed*. In other words, all is normal here.

      • Tony Filardi says:

        Thank you. So that means if I deliver a bond today, the amount transferred to the recipient will exclude the last 3 months of earned interest but every month from that point on that it’s held in their account, interest will continue to be credited with the penalty getting lower as interest rates fall making the 3 month penalty a smaller amount?

      • Tipswatch says:

        The interest isn’t really excluded. It is there and earning compounded interest all along, but TD won’t show it to you until the 5-year mark. TD does this to avoid confusion when an I Bond is redeemed before 5 years.

  5. randy renzor says:

    My wife and I have taken advantage of this gifting strategy over the last couple of years. We will be filling out FAFSA for the first time this year and I’m looking for clarity on reporting those gifted, but not delivered, assets. In other words, if I bought for my wife but have not delivered, whose assets are they currently? Hope this makes sense and thanks for all the great information.

    • Tipswatch says:

      Hello Randy, this is beyond my expertise. Technically the gifted I Bonds belong to the recipient, not the donor, even before they are delivered. But I don’t know the reporting requirements for student aid.

      • randy renzor says:

        Thanks for the response. Your answer that the ownership is technically the recipient even though the bonds haven’t been delivered answers my question.

  6. MW says:

    Thank you for your article and knowledge sharing.

    Can the gift I-Bond be redeemed after 12 months from the issuance month regardless of when the gift is delivered?

    For example, I purchased a $10,000 gift for my spouse in June 2022. He also purchased $10,000 in June 2022. I cannot deliver the I-Bond gift until January 2023 if my spouse does not purchase any I-Bond in 2023. Is it correct that I can deliver the I-Bond in any month during 2023 and he can redeem the I-Bond in July 2023 (after 12 months), but subject to 3 months interest penalty?

    Does the interest rate shown in my account for my I-Bond reflect the current interest rate or the interest rate at the time of the purchase?

    Thank you.

    • Marc says:

      Just chiming in to say the Gift I Bond can be redeemed 12 months after purchase — as long as you deliver it first (any time in 2023 is fine) with the understanding that the recipient would forfeit the last three months of interest. A wiser move would be to wait three additional months after the rate drops to the May 1 rate to lessen the penalty.

      Since you bought the I Bond in June 2022, you receive the 9.62% annualized rate from May 1 for six months through November 2022, and you are now earning the 6.48% annualized rate for six months through May 2023.

    • Tipswatch says:

      Yes, you can deliver the $10,000 give any time in 2023. It can’t be redeemed until June 2023. That I Bond earned 9.62% from June through November, and then began earning 6.48%, which will continue through May 2023. On June 1 2023 you can redeem but you will give up three months of the 6.48% rate. If you want to avoid that, redeem in September after three months of a potentially lower variable rate.

  7. Diane Ireland says:

    I have been stashing away i bonds at $10000 a year for my adult kids for years. It seemed like a good way to move money to them in a safe investment without them knowing they have extra spending money. My plan was to give them a large sum later – like $100000-200000 when they were married and more mature and needed a house. From reading this recent info that the Ibond $10000 annual limit applies when the bonds in a gift box are delivered rather than when they are purchased, am I correct that my plan really doesn’t work? I’ll have to deliver these bonds $10000 a year!!!!?

  8. Penny says:

    I bought an I-bond as a gift for my husband and forgot to add myself as the beneficiary and now it is sitting in the gift box. Is there anyway I can get into my gift box and add myself as a beneficiary? I haven’t seen anyway how this can be done. Otherwise, I guess I will have to wait until I gift him the I-bond and then he can add me as a secondary owner or beneficiary.

    • Tipswatch says:

      I don’t know the answer to this and I don’t have a gift box item to test out. I agree you should be able to change the registration (with you as beneficiary) after you grant the gift.

    • Marc says:

      You have to wait until you deliver the gift if you didn’t add anyone to the POD when purchasing the I Bond, and then your husband as the recipient can add you as the beneficiary at that time (if he is so inclined lol).

  9. dolph says:

    I like I bonds, but not enough to try tricks like this. It smacks of a little desperation for yield.

    How much do you want to bet the mania for I bonds will die if rates decline. I’m not saying where rates will go, just watching with amusement.

    • Marc says:

      Gifting I Bonds is not a trick. It is a completely legitimate strategy to maximize I Bond purchases above and beyond the $10K per person per year purchasing limit, and lock in a state-tax-free 8.2% interest rate over the next 12 months. This rate of return is double the return of many treasuries, CDs and Money Market accounts.

      Of course, interest in I Bonds will wane as inflation declines and rates normalize. Most people didn’t even know I Bonds existed when inflation was almost non-existent and the stock market was strong. But a certain percentage of those people will have learned from this that fixed rate inflation protection should be a part of a diversified investment portfolio.

      • Rob says:

        We don’t know yet where inflation is going.

        • Marc says:

          That’s true, Rob. The future isn’t written. But we can look at indicators. We know which way the I Bond rate is going for the next six months which is based on inflation, and it is declining by 3.14% over the previous six months. We also know the Fed is raising interest rates at a historically quick pace to reduce inflation. We can also see the impact of that in the housing market where mortgage rates have topped 7%. Other sectors like food and energy are still stubbornly high for a variety of reasons, but we know inflation will come down closer to historic norms, we just don’t know how soon. It’s an interesting time.

  10. Drama says:

    So question is.

    If one buys a gift and doesn’t not deliver it. What happens when the giver dies before delivering the gift. I know the recipient can let TD know and have the gift delivered into their account.

    “If you die before granting the gift, the recipient still owns it and will be able to claim it through TreasuryDirect.”

    At that point in time is the 10K limit per year still applicable. Basically if recipient already purchased 10K in the year technically they can’t have another 10K bond gift from the dead giver that year. What happens to the gift? So do you just notify them of the death the year you don’t buy the 10K bond to claim it? or it doesn’t matter and this is the exception and you aren’t subject to the 10K limit.

    I’m wondering for those folk that bought more then 10K in gifts for an individual and then dies before they can deliver the gift. isn’t this an unintended way to move funds to someone with a gift that is in limbo and basically undisclosed anywhere because no one really has it so it is not listed as asset to anyone. 10K is simple/immaterial but what happens if the person has over 100K of bonds undelivered. (presuming they buy the max every year for 10years). Also what is preventing someone from buying gifts for someone else and naming themselves as the beneficiary. If they never deliver the gift and the receiver dies before the gifts are delivered isn’t that the same as if they bought the bond for themselves but not subject to the limit because it is an inheritance now?

    • Tipswatch says:

      I think — who knows? — that the Treasury won’t allow you to claim the gift if you have already bought $10,000 in I Bonds. So you’d probably have to wait a year to claim it.

      • MW says:

        I came across this YouTube video by Diamond NestEgg regarding if the Recipient of the gifted I-Bonds dies before the I-Bonds are delivered (Purchaser as beneficiary). It may answer the question, but it did not talk about if there is a limit specifically such as if one has $50k undelivered I-Bond gifts.

        • Fill out FS Form 5511 – Transfer Request with Death Certificate to transfer the gift back to the purchaser of the gifted I-Bonds.
        • This will not affect the annual purchase limit because it is considered as a transfer of assets, not a purchase, according to the TreasuryDirect Rep.

  11. Pingback: Study of ibond | Timeless Investor

  12. John Endicott says:

    “If you die before granting the gift, the recipient still owns it and will be able to claim it through TreasuryDirect.”

    Another good reason to let the recipient know about the undelivered gift. The recipient can’t claim a gift if they don’t know it exists.

  13. Henry Fung says:

    I thought above giving money for a family member to give me a $10,000 gift for 2023, but decided against it. First off, I have high interest opportunities through the Ally 1% bonus deal, and I don’t want to muck things up with my money sitting in other peoples’ accounts. I also want to see if a fixed interest rate will happen in November. The Ally deal results in a 7.35% APY for the 73 days you are holding it, and the period conveniently expires in mid January where the 2023 window is open.

  14. pankr003yahoocom says:

    I did the gifting thing with my wife recently knowing that we may face Medicaid spend down in about 4 years. This may or may not happen but I don’t want to get too personal here with more details. Some of the I-bonds I bought back in 2006 now are paying over 11% so using gifting is new but consistent with what I have been doing over time.

    I asked Treasury Direct if I could get at the money because of the $10,000 limit per year and got the following reply:

    “Hello Bruce,

    In the event you make a purchase and you would need the funds in the future for a potential hardship situation, you can send an email from within the account request early redemption due to the hardship situation. Making your request in this manner provides us the information we need to extend, while assuring us the account holder is making the request.

    To send an e-mail from within your account, access your TreasuryDirect account and click on “Contact Us” located in the upper right-hand corner of your screen.

    I trust this will be of assistance.

    Thank you for your inquiry and interest in TreasuryDirect.

    Treasury Services”.

  15. UrsaTaurus says:

    One minor, but still worth mentioning point:

    The accumulated interest/inflation is included with delivery of gift I-bond, but it DOESN’T count against yearly purchase limit. Only the face value of the bond counts.

    Thus, if you bought a $10,000 gift in, say, Jan 2022 you could deliver the whole thing worth about $10,800 in Jan 2023 and still fit under the $10K 2023 purchase limit. Those who bought several future years worth earlier this year might be delivering $12K+ worth in 2024, 2025 and still be within yearly purchase limit.

    A consequence of this is that it makes sense to use a “rolling” strategy with the gift box. Each year deliver the oldest and most valuable I-bonds in your gift box towards your yearly allocation. Any new purchases are done as gifts for future years. So in essence you’re rolling out [of the gift box] the old and rolling in the new.

    If you’re certain you’ll be holding long-term it may not make any difference. But if not, it gives you the most flexibility because get more dollars-worth of I-bonds moving through the penalty windows sooner.

    • Pete says:

      yep, that’s what I am doing. Only applies to spouses or family members. We have enough money saved and earning little interest in our savings account. We can roll our gift bonds and don’t care about the individual purchase limit; we just will buy the gift.

    • hoyawildcat says:

      My wife and I will be delivering our gifts (purchased in April when the variable rate was 7.12%) to each other in January, and then buy each other new gifts at the November 6.48% variable rate at the same time, to be delivered in January 2024. (Hoping for a fixed rate of at least 0.5% on the November bonds!)

  16. Tips Investor says:

    Why do you advise completing the process by Wednesday, Oct. 26 instead of Monday, Oct. 31?

  17. Lou says:

    Like Tipswatch, I have decided to not gift before the end of the month. I have a slightly different reason for not doing it. I worry about having to redeem the spousal gifts in late 2023 when rates could be very low. At that point, I will need to find a new home for the funds, but everything, including treasuries and CDs, will also be equally unattractive. My approach is to wait a little bit and hopefully invest the funds in a 3 or 5-year 5% or higher CDs. Today, brokered CDs are around 4.7% so I don’t think this a stretch. Yes, I will lose some interest income in year 1 but may do significantly better in year 2 and 3.

    • hoyawildcat says:

      That’s possibly true, but only if they raise the fixed rate in November, and even then it’s dubious. If the fixed rate remains at 0%, then you would be better off to purchase bonds in October, and lock in the 9.62% annualized rate for the next six months, whereas if you wait until November to buy, then you will miss out on the current 9.62% annualized rate and will earn only 6.48%. David made this argument in a previous blog posting, in which he pointed out that even if the November fixed rate is increased to 0.5%, it will take more than nine years to breakeven if you purchase in November rather than October. If the fixed rate is not increased in November, then you will never catch up.

      • Lou says:

        No, it has nothing to do with whether or not they raise the fixed rate in November.

        • hoyawildcat says:

          It doesn’t matter when you redeem spousal I-Bond gifts, just so long as you don’t buy any I-Bonds directly in the same calendar year and exceed the $10K per-person calendar-year limit. You will still earn all of the interest from the month the gifts were purchased, regardless of when you redeem them.

          Am I missing something here?

    • Pete says:

      don’t forget CD’s you have to pay state and fed taxes.

  18. In 2005 My wife and I each purchased 10K in I bonds. My wife purchased 10K for me as a gift and transferred them to me – immediately. There has never been an issue. I have not had any problems with the treasury failing to pay or forcing disgorgement etc.
    I learned that this was not the intent of the gift box and I did not return the “favor” but …

  19. Al says:

    The current I-Bond interest rates are very attractive right now which is why one might want to purchase more than $10,000, but we are also hoping for a ‘fixed rate’ which might pay off more in the long run. If you buy $10,000 now as a gift for your spouse, does the year of delivery have to be specified at the time of purchase? If delivery occurs, say, in 2024 could that I-Bond gift be immediately sold by the spouse and another $10,000 purchased that same year?

    • hoyawildcat says:

      The year of delivery does not have to be specified when you purchase a gift, and you can purchase more than $10K as gifts in a given calendar year.

      You cannot deliver the $10K gift to your spouse in the same calendar year that she purchases $10K in I-Bonds outright. Delivered gifts are applied against the $10K calendar year maximum.

      Delivered I-Bonds + Purchased I-Bonds <= $10K in a calendar year

    • Tipswatch says:

      The year of delivery does not have to be specified. If you deliver $10,000 as a gift in any year, the recipient will have reached their limit for that year. If that person redeems, they cannot buy another $10,000 as a replacement, in that year.

  20. Priscilla says:

    I purchased an ibond gift for my daughter this year, but she has not set up her treasury account, yet. Is the gift limit triggered the year she receives it or when I purchased it?

    • hoyawildcat says:

      There is no gift limit. You can buy more than $10K as gifts for a person in a single calendar year. The gift will be applied against her $10K per-calendar-year limit when you deliver it to her, so if you buy her three $10K gift bonds this year, it will take at least three calendar years to deliver them to her.

    • Tipswatch says:

      The limit on her purchases would take effect in the year the I Bond is delivered.

  21. hoyawildcat says:

    My wife and I bought each other $10K in gift bonds back in April, so we locked in the then-current rate of 7.12% and the subsequent 9.62%, etc.. We also bought a $10K gift for her sister (who sent us a check for the amount).

    Regarding fixed rates, I believe they apply only to bonds purchased during the six-month period when the fixed rate is set and then for the life of those bonds. That fixed rate is not applied to bonds that were purchased earlier. I confirmed that using the TreasuryDirect calculator based on hypothetical bonds purchased in October 2015 (0% fixed rate, currently paying 9.62%) and November 2015 (0.1% fixed, currently paying 9.72%). Also, you’ll see it in the I-Bond Rate Chart PDF — click the “all the rates together in one chart” link on the TreasuryDirect “I bonds interest rates” web page.

    • Tipswatch says:

      The fixed rate is permanent and is applied under terms of the month of purchase. So in Oct 2022, the fixed rate is 0.0% for I Bonds purchased conventionally or for those deposited in a gift box.

      • hoyawildcat says:

        Yes, but my point is that if you purchase I-Bonds in Oct 2022, the fixed rate (if any) that is applied to I-Bonds purchased between Nov 2022 and April 2023 will NOT be applied to the I-Bonds purchased in October.

        • Pete says:

          if there is a new fixed rate for Nov 2022 that is appealing, then I will buy them as a gift for my spouse and she will do the same for me. In Jan 2023 I & she will deliver May 2022 Gift bond we purchased for each other. This will not work for single persons but only married couples or some family members. I’m going to roll over the gift bonds.

  22. D. CROTS says:

    Great info! You are the original OG educating the public on the benefits of I-Bond before they were cool! Thank you!

  23. samjlord says:

    I think you should clarify that a gift counts toward the recipient’s limit. This is more front-loading than it is truly getting around the purchase limit.

    • Tipswatch says:

      The article does say that the gift counts toward the recipient’s limit. And, it is front-loading, snatching an 8.2% one-year rate of return that probably won’t be available in 2023 or 2024.

      • Lou says:

        7.1% 0ne-year rate of return after taking into account the 3-month penalty.

        • Marc says:

          Lou, you make a valid point reminding people that the expected interest rate will be reduced by the penalty if selling an I Bond prematurely after one year of ownership. TD even takes the penalty into account when showing the interest one earns on an I Bond prior to five years of ownership.

          However, I think it is misleading to reduce the annual interest rate by the penalty when discussing how much one has earned on an I Bond because it assumes one or more things that may or may not occur.

          The 12 month rate of return on an I Bond purchased today is indeed 8.2%. If you sell that I Bond in five years, that is indeed the rate of return you earned for the first year of ownership of that bond, not 7.1%, because there would be no penalty at that time.

          Another possible way one would earn the full 8.2% in the first year of ownership of an I Bond purchased today is if interest rates drop to 0% before Year 5 and you decide to sell the I Bond 3 months later. In that scenario, the penalty will likewise be 0% (the last 3 months of interest at 0% is 0%). Once again, you will have earned 8.2% on the first year of ownership of the bond, not 7.1%.

          I’m just bringing this up to clarify for other readers that paying the penalty is not a foregone conclusion.

          • Lou says:

            Your penultimate paragraph is not 100% accurate. If you hold the bond for 15 months and in the last three months you earn zero interest, I don’t see how your annual yield would be 8.2%. In this scenario, the annual yield would be under 7%. Remember, you had to hold the bond for 15 months to receive 12 months of interest.

            The other problem is you would probably want to redeem the bond if the inflation rate is zero. Unfortunately, you now have the funds without an alternative investment because all fixed income investments, including treasuries and CDs, will also have very low rates.

            • Marc says:

              Maybe you don’t need an alternative investment. Maybe you redeem the I Bond at that time and use the cash for an upcoming expense.

              My comment was about the semantics of how the first year interest rate is described. If you hold for 15 months or more, but less than five years, with the last three months at 0%, you still earned 8.2% in the first year of ownership, compounded twice. It’s true that the total rate of return upon redemption would be reduced by holding the bond for three additional months at 0% even with a 0% penalty.

              I’m not entirely sure there would be no fixed rate investment alternatives in a 6-month 0% inflation scenario. The stock market would be soaring if inflation dropped that far that fast so a dividend-yielding stock (for example, IBM, which earns about 5% fixed plus any capital appreciation) would probably be doing quite well. Stock dividend rates are admittedly not guaranteed in the same way as a bond’s fixed rate, but in a 0% inflation environment, are likely to be reliably maintained.

              Interestingly, we just came out of a period where inflation was 0% in July, 0.1% in August, and 0.4% in September which is a 2% annualized inflation rate, yet interest rates remain much higher than that because of what happened the prior and the anticipated actions of the Fed. There’s an initial lag between inflation and interest rates which I Bonds (and other investment options) exploit when inflation is decreasing, even if it remains historically elevated from its norms.

            • John Endicott says:

              Lou, your final paragraph is not 100% accurate. If inflation drops to zero, alternative investments don’t immediately drop to zero as well. there’s always some amount of lag time between economic indicators and any action on interest rates. And even if every alternative investment magically did drop to zero overnight, there’d still be the token above zero bank account interest in the 0.1 to 0.01% range that the big B&M banks had been offering during the recent ZIRP era of interest rates. In short, if inflation drops to zero, you can still find places to put the money that offers more than 0%.

  24. Don says:

    It’s the smartest equivalent to a CD present day. One year minimum to hold is not bad. Cash out when inflation rate isn’t worth it and lose last 3 months interest.

    • Eric says:

      Maybe, but if inflation continues a TIPS with a 2% real yield0as several 1-2 year TIPS are paying, may exceed it.

      • Marc says:

        Eric, the current 5 or 10:year TIPS yield is indeed superior to an I Bond held for 5 or 10 years but a bit riskier as inflation is already declining and not guaranteed to outpace it unless you hold the TIPS to maturity. In 1-2 years, you could still be better off with an I Bond, especially since they are more straightforward to own than TIPS and because of the 6 month lag in the interest rate.

        With an I Bond purchased now, you are guaranteed to beat the next I Bond rate of return by 3.14% over the first six months of ownership (9.62%-6.48%). It is likely (though certainly not guaranteed) that the May 1, 2023 I Bond rate will be lower than the November 1, 2022 rate of 6.48% due to declining inflation and you will once again beat the then current inflation rate for the next six month period.

        Meanwhile, your TIPS principal will be declining along with inflation, lowering your interest earned along with it, even if inflation remains elevated over its historic norms. At least that’s how I see it.

        • Pam says:

          TIPS principal declines only if there is actual deflation, not if the rate of inflation declines. I hope the owner of this blog will explain further.

          • Tipswatch says:

            I don’t think that Eric meant that your TIPS principal would decline if inflation is declining, but your rate of increase would certainly decline. And in many cases — the last two months for example — you could see some deflation lowering your principal balance, even if annual inflation was solidly high.

  25. Eric says:

    Any speculation to why this gift idea was set up?

    Similarly confusing as to why “we” as in our government, allows multiple accounts with the same tax id number, and business accounts.

    While pretending there is an annual purchase limit.

    • Tipswatch says:

      There has been a long tradition of people using Savings Bonds as gifts, so that’s probably why it is there. And it was never an issue until the six-month annualized yield soared to 7.12% last year. And it probably won’t be widely used in the future, so I think the Treasury decided to leave things as they are.

  26. Jim says:

    A lot of people think of I Bonds only in $10,000 increments. But there is much more flexibility. You can buy bonds in smaller quantities. And you can present a portion of a principal gift in a given tax year, any amount above $25. This allows the recipient to purchase a bond within their $10,000 limit, if the fixed rate, or the composite rate, is more attractive. That is why gifting must be coordinated with recipient’s planned purchases. Also, when you redeem savings bonds, you can redeem them in portions greater than $25 of principal, with proportionate interest, to fit the tax-deferred interest income into your overall plan.

  27. Richard Inserra says:

    Ok received message

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