Retirement Weekly: How to buy I bonds with your tax refund

by | Mar 31, 2023 | Stock Market

With a little more than two weeks to go until taxes are due, more of you are asking questions about using your income tax refund to purchase I bonds. It’s complicated, as it often is when it comes to investing for retirement. The answers to your questions depend on a variety of factors such as whether you’re planning on requesting an automatic extension of time to file your taxes and what you think the consumer-price index for March will be when it’s reported on April 12.

These complexities aside, however, there is little doubt that I bonds themselves can be desirable additions to your portfolio. I bonds are U.S. savings bonds whose interest rates are based on the Consumer Price Index. Unlike regular bonds that are vulnerable to inflation, I bonds are guaranteed to beat inflation. The specific return you earn with an I bond is a function of a fixed rate, set when you purchase and which doesn’t change for the life of the bond, and a variable rate, which is reset every six months based on the consumer-price index. Read: Why I abandoned my 529 college savings plan and switched to Series I bonds instead I-bonds are also different than TIPS, which are otherwise comparable. That’s because an I bond’s value doesn’t fluctuate as interest rates rise or fall. This is a valuable feature, as illustrated last year by the big losses suffered by intermediate-term TIPS. The iShares TIPS Bond ETF
lost 12.1% in 2022, even more than the 10.7% loss of non-inflat …

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