Getting a Tax Rebate Today? Consider Investing in I-Bonds
The big news that kicked off the weekend was that tax rebate direct deposits are coming early — some people will find an addition to their bank accounts today. The question of what to do with the tax rebate is one that many people are contemplating, even if they won’t get theirs until sometime between now and July.
If you get your tax rebate today, there is still time to lock in the current rate on I-bonds. And this means that you could be well-placed for a safer, inflation-beating investment.
Investing in I-bonds
I-bonds are issued by the United States Treasury. They get their name from the fact that they are known as Series I Savings Bonds. The yield is calculated twice a year (May 1 and November 1) using a formula that includes semiannual inflation. Wisebread offers a look at the formula, as well as the implications for getting in before May 1st:
[Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
The fixed rate is currently 1.20%, but it is expected to drop on May 1st. However, the inflation rate has gone up so the variable rate will be higher than before. If you lock into the current fix rate, it is expected that the next composite rate would be above 6%.
Even if you aren’t getting your tax rebate today, it is still possible, if you have a little extra, to consider investing in I-bonds through Treasury Direct. These can make a great addition to your portfolio, and right now, with the interest rates so low, they are handily beating even the highest of the high-yield online savings accounts. The returns aren’t exactly sexy, but right now that’s not what’s really important. Adding a little more security to your investment portfolio is.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss.
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investment portfolio, tax rebate, stock market news
