I Bond question

[TallBill]

I plan on freezing a certain amount of money the next time I deploy for at least 12 months (while continuing to save the whole year).

Anyways, the money I freeze up wont necessarily have to be cashed in at 12 months.

So I'm looking at CD's or I Bonds. Obviously if I go the I bond route and cash in before 5 years, I lose 3 months of interest. However, the 6.79% rate still gives me more return then a CD at 4.06% with no penalty.

So the way I'm looking at it, an I Bond would be the way to go over a CD, and just take a 3 month penalty if I absolutely need the money.

Right?

 

[Ramma2]

Sounds good to me. I just started getting I bonds here at work, and I'm pretty excited about it. I'm going for the long term though.

 

[upsciLLion]

Plug in 1.0679^(x-3) - (1.0406)^x into a graphing calculator. Where the graph is positive is where the bond (even with the early withdrawal penalty) will be worth more than the CD. Oh, and x is the number of months you'll have your money invested.

 

[TallBill]

Originally posted by: upsciLLion
Plug in 1.0679^(x-3) - (1.0406)^x into a graphing calculator. Where the graph is positive is where the bond (even with the early withdrawal penalty) will be worth more than the CD. Oh, and x is the number of months you'll have your money invested.

Well with the I-bond, you have to leave it for a minimum of 12 months anyways, but I get your point.

 

[Gunslinger08]

Originally posted by: upsciLLion
Plug in 1.0679^(x-3) - (1.0406)^x into a graphing calculator. Where the graph is positive is where the bond (even with the early withdrawal penalty) will be worth more than the CD. Oh, and x is the number of months you'll have your money invested.

Incorrect. That would be for 81.48% and 48.72% annual interest rates.

He needs to take the rates and divide by 12.
1.005658 vs 1.00338

 

[upsciLLion]

Originally posted by: joshsquall

Originally posted by: upsciLLion
Plug in 1.0679^(x-3) - (1.0406)^x into a graphing calculator. Where the graph is positive is where the bond (even with the early withdrawal penalty) will be worth more than the CD. Oh, and x is the number of months you'll have your money invested.

Incorrect. That would be for 81.48% and 48.72% annual interest rates.

He needs to take the rates and divide by 12.
1.005658 vs 1.00338

hah, whoops. Good catch. 😉

 

[DaveSimmons]

You could split your money, put the bulk into i-bonds and put a small emergency fund into an INGDirect.com savings account for instant access.

 

[TallBill]

Originally posted by: DaveSimmons
You could split your money, put the bulk into i-bonds and put a small emergency fund into an INGDirect.com savings account for instant access.

I'll already my USAA savings account which gets 3.20%