That Annuity Show
Brian O’Connell
March 24, 2023
For retirees, I bonds represent a robust portfolio option in 2023 – and savvy investors know it.
Take the March 2023 I bond composite rate, which stands at 6.89%. That’s a good and safe return for retirement investors, who know only too well that capital preservation is the name of the game in retirement.
Add a decent and guaranteed asset appreciation, and it’s no surprise that investors are lining up to purchase I bonds. In January 2023, I bond sales crested $4.2 billion – that’s a new record for any January since I bonds were created in 1998.
What do retirees need to know about I bonds, and how to buy them? Here’s a quick checklist.
- I Bonds Defined.
- Return Risk.
- Laddering Strategy.
- Good Tax Benefits.
- How to Buy I Bonds
- Investment Caveats.
I Bonds Defined
Known more formally as Series I U.S. Savings Bonds, I bonds are inflation bonds issued by the U.S. government. They’re especially useful for retirees, who need guaranteed income and asset appreciation in retirement.
“For retirees, they’re a safe investment,” says Rachel Christian, senior writer for The Penny Hoarder and a certified educator in personal finance. “The U.S. government has never defaulted on its bonds, so your money is well-protected. If inflation goes back up, you’ll get a higher interest rate, which can be a great hedge against inflation during retirement.”
The government offers I bonds to all investors, but especially retirees, as a personal firewall against runaway inflation.
“In a high inflationary period – like today – investment and economic risk are very real for retirees,” says Paul Tyler, chief marketing officer at Nassau Financial Group. “The tradeoff is that the rate is guaranteed only for six months versus other kinds of bonds that offer a set interest rate for the duration of the bond.”
I bonds don’t pay interest as you own them. Rather, the interest accrues and you get paid when you sell or the bond matures.
“You can cash them in after a year of purchase, but if redeemed within five years you will lose three months’ worth of interest,” says Brian Walsh, senior manager of financial planning at SoFi.
Read more: https://money.usnews.com/money/retirement/articles/are-i-bonds-a-good-investment-for-retirees
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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.
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