hello everyone and thanks for tuning into the financial investor channel my
name is Brent today is going to be the second part of our series of three the
first one was covering EE Bonds today is covering I bonds and the next one will
be a comparison between both bonds which one is best for you so we did already
cover the AE bond and how it does double after 20 years to the face value so the
main differences on the eye bonds here is that they are still considered a
lending investment whoever you borrow or whoever you lend your money to say a
corporation or the government they're still borrowing your money and using it
the government would use it for roads schools dams Wars and other uses
corporations might use it for sort of similar things repairs and such so the
most common one of course is the government issued bond so you can make
your way to Treasury Directgov I will have this in the description below so
you guys can check this website out you guys can make purchases on bonds through
this website and we're gonna be checking out the AI savings bonds inflation
adjusted bonds so just like the name describes these are safe and low-risk
products that help protect you from your savings from the inflation of course
these can be used to supplement your retirement retirement income meaning
that you don't want to have all of them in bonds all of your retirement income
and bonds you want to have it sort of split some of your money in stocks some
of your money and bonds for the long term you can still give these that as a
gift and you can use them to pay for your education and if you are using
bonds EE or I bonds to pay for your education they can be excluded partially
or all depending on the specific Asian how it's done of course
what is an i bond a security that earns interest based on combining a fixed-rate
in an inflation rate so this combines two things instead of a fixed amount
this is a thick straight plus an inflation rate and
we're gonna do a comparison in the next video
so what interest does an eye bond earn the combination of a fixed-rate in the
inflation rate that caning usually does change twice a year of course we know
that this year our interest rate or the inflation rate of the year I think is
2.76 I could do a Google search but I'm not worried about it right now it's over
2% for the inflation and again is a taxable yes it is taxable at the federal
level not at the state and you can use the money earned to pay for higher
education and keep you from paying federal tax on those savings bonds so
really important note I had mentioned in the earlier video in the evideo that if
you purchase bonds say if you're planning a really good reason for
purchasing bonds especially EE bonds is you know you're going you're you bonds
are guaranteed to double after 20 years so if you do have a child who is you
know an infant stage or just you know below the 13 it's a good time to say you
purchased a face value of twenty thousand each bond and you pay ten
thousand dollars on it it's guaranteed a double into its face value at twenty
thousand after twenty years so by the time they've reached you know twenty the
age of twenty now they have a 20 thousand dollar savings bond that they
can go out use for higher education they can cash it out and use some of it to
pay for their higher education and not have to pay taxes on it same thing about
the eye bonds but these have a different set of rules and that's what we're going
to be covering here so maximum purchase is still ten thousand dollars per
calendar year meaning you can only buy up to ten thousand dollars and up to
five thousand dollars in paper i bonds so let's see here $10,000 each calendar
year for each security number you may buy up to ten thousand dollars in
electronic eye bonds and up to five thousand dollars in paper eye bond so
actually fifteen thousand dollars you can buy per year you can buy ten
thousand dollars of electric bonds which is you can you buy those through the
website or you can buy in addition to five thousand dollars and paper
I have some paper bonds I think that's primarily what I have available bonds
any amount so same same rules as the EE bonds you can have any amount between
$25 and $10,000 up to the penny and I bonds are meant to be a long-term
investment they continue to earn interest for up to 30 years same rules
apply you can cash them after one year you must if but if you cashed them
before five years you lose the last three months of interest and if you cash
them ion's after eighteen months you only get
the fifteen months of interest and of course how do you buy a bond you can go
and create your account here on the Treasury Direct website yourself all you
need is your tax number your emailed your bank account information you can
route money in decide on the savings bond you want to buy and then buy it and
you would be issued a an electronic savings bond they don't do any more
paper bonds everything is electronic these days let's go back here to right
here and we did cover a lot of this information so ia bonds have two rates a
fixed rate of return and then they have the variable inflation rate which we're
going to just jump in right to now so right now the composite rate for the I
bond issued from May 1st to October 31st is 1.96
now this percent blows out EEE bonds out of the water EEE bonds their current
rate is point one zero meaning that if you invested $20,000 for 10 years you
would make $200 but of course if you wait those 10 additional years it would
automatically double to $20,000 that's basically in $18,000 gained eighteen
thousand eight hundred dollars just by waiting ten additional years on the
other hand this one 1.96 if we put whoops
if we put $10,000 at 1.96 1.96 after 10 years you would have about $12,000 and
of course if this continued for 30 years it would be I would say maybe around
20,000 I can't do the math on this because if I click and drag this right
now it comes up with some funky numbers I had to manually go through and add my
calculations in there so am I making another video this is important you guys
would like to check out for the long term 30 years of this I could work on
that but right now I just want to get through a quick video I don't want to
have it too long we're at 7 minutes down so let's continue here and of course how
do you bonds are an interest so here they compound semi-annually so same
rules as the EE bonds they do compound semi-annually every six months the bond
issue date all interest on the bond has earned in the previous six months is in
the bonds new principal value of interest is then earned on the new
principal value so if you have $10,000 I'll have a good example here so
semi-annually you have 1% 1% semi-annually 1% of $10,000 is $100 in a
year but SMI annually it's $50 so semi-annually you would get $50 in the
end of the year you would include that original 10,000 $50 and it would give
you 50 dollars and 25 cents instead of $50 because that would compound on top
of your previously earned interest and let's see here so that's that rule
and of course the interest on the eye bond is combination of fixed rate and
the inflation rate and they do have a savings bond calculator and it breaks up
what what the fix rate is and what the inflation rate is and there's a good
little graph right here that shows the fix rate right now is point zero zero
percent and the semi semi annual inflation rate is point nine eight
percent so they have like a breakdown of the calculation and the composite rate
and the composite rate in decimal form and then they break it into a percentage
form so if I the fix rate is zero zero percent right now that that wasn't
always the case the semi inflation rate is what changes but when you purchase
the iya bond you purchase it at a fixed rate it's a semi inflation rate that
changes
and they have it right down here so if you purchased bonds in 2010 before that
they had decent fixed interest rates then you had a fixed interest rate
guaranteed no matter what plus they added their own inflation rate right now
there is no inflation fixed there is no fixed rate it's you know it's very low
zero percent but they do add an inflation rate of 0.98 percent so I
actually have an example of this that I can showcase this is 2017 these are some
of the savings bonds that I currently have and if we look at these I ones here
you can see that on the right hand side all of mine have some sort of an
inflation let's see here the lowest one of course of mine ours 1.96 so this one
right here was purchased in 2008 if May so if we go back and we look at May of
2008 the interest was 0% so right now they have a good inflation number but if
the inflation number was really bad a year which I have an example right here
we can take a look at that same exact one we can see that in the year where is
it here in the year 2015 I believe 17 16 15 14 and 2014 I had no fixed rate I was
mainly just on the inflation rate and because it had no inflation issued on
May 2008 actually err no interest that year on that specific bond throughout
the whole year not having any interest on that bond kind of killed it off but
it did pick up in 2015 and 2016 it kind of went down again it still had semi you
can see these low numbers here but the inflation rate and the fixed
rate that you buy it are the most important things to look at when you're
purchasing iPhones you can see that right now in the year 2017 I do have a
couple I bond that are over four percent these are ones that were purchased in
2006-2007 so we'll say six seven let's go take a
look at our chart six and seven 2006 in 2007 the fix rate was 1.4 1.3 1.2 so a
good decent range plus the inflation rate is added on to that so the
inflation rates like 1.96 right now on top of the 1.4 which is what gets me
about 4 percent interest rate so good returns right there on the I bonds will
they be able to match the EE bonds say in 20 years the denim for these Ivonne's
are a thousand dollars meaning that I paid five hundred dollars for them I
won't go into actually I can do this in my next video I'll break it up because
we're gonna do a comparison so this will actually be saved for the next video
when we begin comparing our EE bonds and I bonds if you guys want to take a look
at your comparison yourself you can do that or you can just wait for my next
video so that is it for this video I don't want to make it too long again
hopefully you guys have learned some information on savings bonds I think
that both of them serve a good common they both serve a purpose you just have
to know which one to buy for whatever you're trying to use it for and you want
to look at both of the fixed rates because both of them do you have a fixed
rate but one the I bond has an inflation rate that adjusts with the year
inflation so it's important to look at that too so that is it for this video
and of course I want to thank everyone for watching up until this point if you
did like the video hit the like button if you like these sort of videos
remember to subscribe because I will be putting out additional information on
financial and investment type videos how to get financially set for the future my
resource space the resource page does have a lot of free stock tools to get
used to use to get information to screen for
socks so check that out there will be a link on the left side like a little icon
you can click if you have any questions about any aya bonds
Yvonne's or stock market questions go ahead and leave that in the comments
below and I will always reply thanks for tuning in and I will see you next time
bye
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