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The government has apparently decided that I-Bonds might help protect some of us from the ravages of inflation. Can't have that.
Annual Purchase Limit For Savings Bonds Set at $5,000
The annual limitation on purchases of United States Savings Bonds will be set at $5,000 per Social Security Number, effective January 1, 2008. The limit applies separately to Series EE and Series I savings bonds, and separately to bonds issued in paper or electronic form. Under the new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds of each series in a single calendar year, or a total of $20,000, in single ownership form. If paper bonds are issued in co-ownership form, the limit applies to the first-named co-owner. All limits are based on the issue price of the securities.
The reduction from the $30,000 annual limit in effect for both series since 2003 was made to refocus the savings bond program on its original purpose of making these non-marketable Treasury securities available to individuals with relatively small sums to invest. Approximately 98 percent of all annual purchases of savings bonds by individuals are for $5,000 or less. The minimum purchase price for Series EE bonds is $25, whether purchased electronically or in paper form; the I bond minimum purchase is $25 for bonds issued in electronic form and $50 for those in paper form.
Savings bond purchases have been subject to an annual limit since Series E Bonds were first issued in 1941. Over the years, limits have been adjusted by the Treasury Department several times and have ranged from a low of $3,750 (at issue price) for Series E bonds from 1941 through 1947 to the $30,000 (issue price) limit that most recently applied to both Series EE and Series I bonds. The limit was last set at $5,000 (issue price) in 1973.
In my opinion, anyone who thinks the government lowered the limit based on the reasons given is whistling in the stagflationary graveyard. 1973 sure rings a bell though.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
10 comments:
You just can't make this stuff up.
MAB,
I suppose it could be worse, and probably will be.
wtf
wtf
If you should happen to have British kin, you could see whether they could buy our Index-Linked Savings Certificates to hold in trust for you. We're allowed £15000 in each issue of 3-year certificates and the same in 5-year. There's probably an average of about a couple of new "issues" per year. They are tax-free and currently pay 1.35% pa above our old Retail Price Inflation index, which itself is currently 2.1% pa above our shiny new CPI.
I-bonds issued today are paying 1.2% above inflation. Why on earth do they need purchase limits on top of that? I could understand purchase limits if the I-bonds were paying, say, 3% over inflation, I'd probably max it out in that case, but 1%???
abby normal,
Hit me like a ton of bricks, it did.
dearieme & dirtpoor,
It was the 30-year tax deferred part that made them such a good deal long-term.
If interest rates hit 20% (because inflation hit 20% one would think), taxes would really start to hurt.
Picture a life's savings of $100k earning 3%. That's $3,000 a year. You'd be paying modest tax on that (less than $1,000 say). If inflation is also 3% you are falling behind (~1%), but not by much.
Now picture a life's savings of $100k earning 20%. That's $20,000 a year. You'd be paying serious tax on that (perhaps $6,000). If inflation is also 20% you are falling behind by quite a bit each year (~6%).
To add insult to injury, the latter example could very easily push you into a higher tax bracket as well.
Mark,
1) I agree lowering the I-bond limit is rather foreboding news.
2) Taxing the inflation portion of TIPS and I-bond interest disgusts me to the point of rage. It's best for me not to think about it too much.
3) But it doesn't matter because I-bonds are lousy investments. I start by asking what purpose do they serve? Obviously capital preservation. By saving and foregoing many immediate luxuries an industrious man of modest expectations could theoretically save $5 million in I-bonds and $1 million in gold and forever free himself of thinking, worrying, or stressing over filthy lucre ever again. Such a man is covered by any eventuality from thermo-nuclear war to hyper-inflation. This is an entirely admirable goal. But, between the (old) $30k limitation and the tax on inflation gains, that is not possible in reality. The system is rigged for the risk-takers and the industrious. Yes, it upsets me the savers, the modest, Walden types have no recourse, but it was never there in the first place.
This means like it or not you have to stay engaged and occasionally play some offense. Probably not that often, by my counting we've had a Y2K bubble, a dot-com bubble, and now a mortage-credit bubble in the course of 10 years. Before that we had an S&L implosion and a oil gusher run dry. Not sure how gamable the last two were, but I suspect there was some money to be made there once it became obvious the wheels had come off. Them's a lot of pickings for a modest man to maintain a modest living from.
Like they say, the best defense is a good offense.
AllanF,
I-Bonds may make lousy investments, but they make decent savings compared to the alternatives (especially in this environment). That's all I'm looking for. I don't expect to make a penny off of them and most likely will lose a penny (per dollar, at the very least).
AllanF,
Like they say, the best defense is a good offense.
I feel the need to add the following.
I played offense from 2004 to 2006 by owning gold and silver directly.
I'm now purely in defense mode. I get the feeling I'm in the Coliseum. I just strurck my opponent with my flail. It was a solid hit. Maybe it was even a lucky hit. Who knows? In any event, now I'm awaiting the counterstrike from behind my shield.
At some point the lions will be set loose if we don't keep fighting though. ;)
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