1. Even if inflation creeps back up as you put it, it's highly unlikely to go up enough to make I Bonds worthwhile at this point. Treasuries, CDs and even money market funds are paying more than I Bonds and are much more liquid. 2. Fitch is full of it. Despite all the problems the US faces it is still the most creditworthy country on earth and there's no reason to downgrade it. The US dollar is still the reserve currency. If the US isn't AAA, no country is.

Great question, Rose, and I think it deserves a lot of nuance. Personally, I'm not too worried about decreases in a country's credit ratings. It is true that the Big Three (S&P, Moody's, and Fitch) are major players in assessing credit risk, and sometimes they do bring to light valid concerns about a company or country's behavior. That said, they were infamously criticized for their favorable pre-2008 ratings of subprime mortgages & companies like the Lehman Brothers, so many people have lost trust in what they have to say even if they are still present financial powerhouses. They can still make mistakes. An AA+ rating is not necessarily significantly detrimental either. For example, I believe Apple & Alphabet are labeled as AA+ under S&P, and I'm sure most people would believe that these companies will continue earning loads of free cash flow and pay off any debts. For instance, as of March 2023, Apple was sitting on $55 Billion in cash on hand. Similarly highly rated countries include Australia and a few in Europe. I think such companies & countries are still in a good spot, and I believe these examples showcase that an AA+ rating is still very favorable. So while I wouldn't get hung up on a AAA to AA+ downgrade, I think it's still important to assess whether Fitch's overall sentiment on US debt is reasonable. They argue that "down-to-the-wire debt ceiling negotiations" and "steady deterioration in standards of governance" will affect investor sentiment, and that is largely objectively true. Every few years, there are constant partisan battles in Congress about national debt. And although we've always raised it in the end, it's not without stuffing as many partisan bills & drama until the 11th hour. The growing political divisiveness is not particularly helpful, and such procedures do increase investor or debt holders' uncertainty. Another valid concern is fiscal deterioration. It is also true that the US added around $8 trillion of debt since the pandemic, and we've largely operated on an ever increasing budget deficit. Of course, one could argue that these are one-time events, but the overall trend is still our national debt increasing while still having a budget deficit. Debt is not necessarily a bad thing since it could be a reflection of a growing economy. As Warren Buffet argued, the most important ratio is the debt-to-GDP ratio. As long as GDP outpaces the national debt, we're still reasonably fine. Unfortunately, the debt-to-GDP ratio has increased drastically over the decades, and we're well over 100% (see here: fred.stlouisfed.org/series/GFDEGDQ188S) So while I wouldn't care about a credit downgrade, I think overall concerns regarding the nation's ability to conduct reasonable actions are understandable. Much like what Murray mentioned, the US is still one of the powerful countries in the world and has a strong credit history. That said, a more cooperative government, a more sensible national budget, and a more productive economy would do wonders towards improving investor sentiment, and I'd largely agree with that take. I think most Americans would be happy if politicians played less partisan games and actually worked for a living 😆

@@murraypassarieu9115 Thanks for the reply. The national debt being so high does concern me though.

@@EricTangOfficial Thank you for the detailed reply Eric. The stock market took a hit today and may continue it's sell off in the coming days. I don't know. Maybe a correction was needed and this was the catalyst. The very high national debt does concern me though. Although it has for a long time. Our debt is higher than our total GDP too. That can't be good. But I am surely no economist.

@@rosenasser5943 it concerns me too but unless the government is willing to raise taxes and actually collect them on the rich, there's no way to get it into balance; as long as rich people can hide their money in the Cayman Islands, I don't think anything is changing.

Thanks!! 🙂

Glad to hear it!

Glad it was helpful!

Absolutely a wonderful point, Doc! Those higher education tax benefits could be really helpful for a select group of investors out there!

I advise you to seek professional advice since building a strong financial portfolio is more challenging. Your long-term objectives and budgetary preferences can be catered to in the ideas you get after that.

The best market strategy at the moment is working with a respected investment coach. I've been in touch with a coach for a time now, mostly because I lack the depth of understanding and mental toughness to deal with these ongoing market conditions. During this recession, I made about $700k, proving that the market is more complicated than most people think.

@@harod033 How does the coaching process work, mate?

@@godof-ou1dw It's amusing that you brought it up since I completely understand. Look up Ruth Loralann Brennan; she garnered a lot of coverage in 2020. I'm not sure whether I can mention this. My portfolio is also managed by her.

@@harod033 I just looked up this person out of curiosity, and surprisingly she seems really proficient. I thought this was just some overrated BS, I appreciate this.

Definitely! A few of my friends cashed out some I-Bonds just yesterday to take advantage of this month's interest rates!

Hope it all goes smoothly for you 😆

Nice one! Hope you were able to redeem those I Bonds earlier this month!

@@EricTangOfficial Yes, I did. I noticed the entire amount from the bond transferred over. I thought there was a 3 month penalty for withdrawing before 5 years. Was I wrong about that? Or is that going to come up in my taxes? Thanks again!

Good question! The 3 month penalty was already calculated & automatically removed prior to the redemption. This is reflected by the balance of the bond. You might notice that when you first purchase an I-Bond, you'll see no interest earned within the first 3 months. This would hold true for the first 5 years. After the 5 year mark, the 3 month penalty is gone and it will be reflected in the balance (some viewers notice a sudden spike in interest earned).

@@EricTangOfficial Got it! I just subscribed, hope to see more like this one!

Great question & sorry for the late reply! 1) Nope! Your Treasury Direct account can still be active even with a $0 balance. 2) If you keep your I-Bonds there, it'll still continue earning interest for up to 30 years. Best of all, the interest you earn can be deferred from taxes until many years later. So you can withdraw whenever you want (and whenever is most profitable for you)! 3) Generally speaking, Treasury Direct will send you a tax-form come end of January (or at the start of tax season). You can use these forms to input in your taxes.

Great question! If you redeem the entire balance, the redeemed security would have a remaining balance of $0. However, the Treasury Direct account itself will still be active, and you'd still be welcome to buy other Treasury Securities or even more I Bonds in the future!

Great question! The 3 month simple interest penalty is already deducted from the redemption value. In other words, the real value of the I Bond is greater than $280 (likely around ~ $300). However, TD automatically deducts 3 months worth of interest, so only $280.20 will enter my bank account.

Great question & sorry for the late reply! Because we are selling bonds early (within the first 5 years), there's a cash penalty where we lose the last 3 months worth of interest. Ideally, we want to minimize this cash penalty as much as possible. Therefore, it's generally better for most investors to lose out on 3 months of 3.38% APY compared to losing out on 3 months of 6.48% APY.

Great question & sorry for the late reply! For I Bonds bought in May 2022, it seems like they're offering 3.38% APY today given the 0% fixed interest rate. Personally, if I was a short term saver, I'd agree that Treasury Bills would be a lot more interesting right now. The breakeven point if one was to take the 3 month penalty & invest in Treasury Bills (5.38% APY) instead would be a little over half a year. Given that rates seem to have stagnated for the rest of the year, this could be an attractive choice. For longer term savers though, it's kind of up in the air. Who knows what might happen with inflation, and some investors do seem to deposit $10,000 each year regardless of their rates. If they withdraw some I-Bonds bought in 2020-2022, it's unlikely for them to be able to deposit money again given yearly purchase limits. For those investors, getting a 3.38% yield is decent enough to not feel bad. Hard to say!

For I-Bond redemptions, a 1099-INT will be issued by January 31st come tax season. TreasuryDirect does not provide paper savings bonds or paper account statements. If you do want a paper copy of your account information though, you can use the browser's toolbar to print the relevant pages in your account that show your holdings.

Yes & sorry for the late reply! Treasury Direct offers "Treasury Hunt," an online search tool to find missing Treasury securities or interest payments. You can find more about them here: treasurydirect.gov/savings-bonds/treasury-hunt/

Great question! If I remember correctly, Gifted I-Savings Bonds can only be redeemed when they are delivered to the recipient's Treasury Direct Account. In the case of minors, they would need a Minor Linked Account under a parent or legal guardian's Treasury Direct account. Once the gifted I Bond is delivered, the recipient should be able to redeem their I Bonds as usual.

Thanks Eric, you were exactly right! @@EricTangOfficial

the next rates will almost certainly be lower, possibly much lower, than the current ones. As soon as you are 3 months past the date when your I Bonds stop paying over 6 percent, get out. Treasuries are paying more than I Bonds now as are CDs.

I haven't officially decided yet, but there's a strong likelihood I'll be expecting from my $10,000 I Bond from November 2021. As Murray mentioned, there's just a lot of better alternatives for the time being. Of course, for longer term investors, one could make the argument that a high enough fixed interest rate (remember that I Bonds have two rates) could also be somewhat attractive. That said, I haven't contributed for 2023 yet, so I can always buy back in as necessary!

Great question! Assuming you have held the I-Bonds for at least 12 months, the number on TreasuryDirect will have the 3 month cash penalty already calculated in. So the $280.20 current value is exactly what will be deposited into your bank account.

Great question, Regina! You can redeem the I Bond into a Zero-Percent Certificate of Indebtedness (Zero-Percent C of I) which acts as a no limit Treasury checking account. This way, you can redeem all Treasury securities without it returning to your bank account. However, it does not earn any interest. Therefore, most individuals would still redeem the I Bond back into their bank account and later re-deposit into a Treasury Bill, Note, or Bond at their choosing. Less paperwork!

Good question! You can always change your payment destination very easily during the "Redemption Request" page (3:24).

So sorry to hear that you're running in trouble, Ed! I haven't been in that position before, but here's a tip I've used to ensure a smoother process: I have much better luck copy & pasting the OTP from my email to the account compared to manually typing it. Given that some of the passcodes are rather long and filled with upper and lowercase letters, it's really easy to get mixed up. Hope that helps! Since you're getting an OTP message to your email, it seems like your Account Number is correct. Additionally, if you use a Mac (Apple's computer system), KeyChain is a password manager that allows you to keep accounts & passwords saved locally on your device and protected via a system password or biometric key. It's generally regarded as a safe way to quickly & accurately log into accounts. That way, you're always (at least) entering the right Account Number (and later the right password).

@@EricTangOfficial Thank you so much for your thoughtful reply Eric.

@@EricTangOfficial I just redeemed the last acct. using your suggestion. It did work, but this unforgiving TD site made me change the password AND answer 3 security questions. I have to put all of this in a book. There is a lesson here and a video here too about when and why things go wrong. Be well young man .

Great question! You'll be issued a 1099-INT by January 31st of the following year in which you redeem the I-Bond.

Great question! The 3 month penalty is already calculated & reflected in your I-Bond balance. For example, if you observe the balance of a recently deposited I-Bond, you'll notice that it "does not earn any interest" for the first 3 months. At the 5 year mark, you may notice a "sudden spike in interest" because the 3 month penalty is lifted, increasing your nominal I-Bond value significantly. The government wants to insure you pay your penalty, so they'll take it automatically instead of waiting for us nice folk to report it on our taxes!

@@EricTangOfficial I see. The government is more steps ahead 😆. Thanks for your reply.