Enough with the Savings Bonds (earn 6% interest)

Update: Series I fixed interest rate was set to 0%, so buying these bonds (after May 1) is no longer a Rob deal.  Those who bought before May 1 have locked in a good deal.

(interest rates will reset on May 1)

My apologies for sounding like a broken record (see my previous posts here and here), but I--along with the Wall Street Journal--suggest you buy U.S. Government Savings Bonds before the end of this month.

Recent inflation numbers just published by the BLS let you lock in a 6.06% interest rate (4.83% inflation + 1.2% fixed interest rate) for the period November 2008-May 2009 if you purchase before April 30.  From May-October 2008, you will earn 4.28%.  After April 30, the fixed interest rate component will likely go down from 1.2% to ~0.6%, reducing all numbers below by a little more than 0.6%.

What does this all mean?

• If you hold onto these bonds for more than 5 years, for the first year you will earn ~5.3% (state-tax free and tax deferred makes it tax-equivalent to about 6.5%) when most CDs currently pay less than 4%



• If you cash the bond in 1 year (the soonest you can), you will earn ~3.7% (state-tax free and tax deferred makes it tax-equivalent to about 4.2%).  You can do no worse than a 4.2% yield (compare this with WaMu at 3.3%)

Where to buy them?  Just go online or walk into your bank account and ask to buy a "Series I" Savings Bond.  You can buy $5,000 of Series I bonds online and another $5,000 at your bank.

Disclaimer: Rob Deals gets no benefit from your savings bond purchase except for the pleasure of having the U.S. government subsidize your savings account