The key to increasing your Series I bond holdings


Nov 26, 2022 By Triston Martin

Unfortunately, the annual limit on Series I bond purchases by individuals is only $10,000. However, there is a way for individuals to invest in Series I bonds without being subject to this cap, and nearly no one is aware of it.

Learn the little-known strategies for increasing your Series I bond investments. (Here are the steps to buying Series I bonds if you've already decided you want to invest in them.)

If you want to increase your Series I bond investments, here's how to do it

Let's quickly review why Series I bonds are a good investment right now, and then I'll show you how to buy more than the average $10,000 per year.

Interest on Series I bonds is 6.89 percent as of the most recent payment date, with adjustments occurring every six months in May and November. The bond's yield increases due to a variable component if inflation does. The rate has decreased from 9.62 percent as inflation has reduced. In addition, buyers of Series I bonds will only be subject to federal income tax and may legally avoid any applicable state or local taxes. This is as safe an investment vehicle as there is, thanks to the United States government's support.

Digital Series I Bonds Annually

The annual limit per individual for purchasing electronic Series I bonds is $10,000. The government allows taxpayers to put up to $5,000 of their refund into the paper I bonds. Therefore, most investors believe they can only afford to put away $15,000 annually.

However, Parker and others argue that this is wrong and that investors can put in tens of thousands more.

Set up a legal framework for managing several rental properties

In other words, if you run a business, you can buy Series I bonds for your company up to the yearly limit of $10,000. A sole proprietorship or a part-time enterprise could benefit from that strategy. Trusts and limited liability companies (LLCs) are two further examples that can be included (LLCs). Most property owners today choose to set up a limited liability company as the legal structure for their portfolio of rental homes.

"There are low-cost options to set up an LLC in many states," explains Parker. The LLC is still a legal entity even if you and the LLC share identifying information like a tax ID or bank account.

Financial Consultant For His Firm

Morris Armstrong, a registered investment advisor in Cheshire, Connecticut, thinks that a tax ID for the business is crucial. He explains that although the Treasury reviews these accounts by EIN, there is no problem in theory with having several organizations and using their total limits.

In addition, "there would be nothing stopping someone from creating many trusts and doing it," as Armstrong puts it.

According to Parker, it should take less than 10 minutes to form the LLC, set up the account for the entity on TreasuryDirect, and fund the account.

Buying too many Series I bonds carries a high risk.

Investors employing this strategy should maintain thorough documents detailing any entities used to acquire Series I bonds. You'll need to keep track of everything in its place by assigning account numbers to anything you use. In addition, the Treasury may come after you if you don't create unique tax IDs for each of your businesses, even if you form an LLC.

Parker has used this strategy several times to create multiple LLCs and use each to make purchases of up to $10,000. Treasury officials saw his method and questioned how he could have purchased many Series I bonds in one year. They also questioned whether or not these LLCs even existed. Parker claims he provided them with all necessary legal documentation.

There is a return to normalcy in inflation.

And if you sell the bond before the five years is up, you'll have to fork over three months' worth of interest as a penalty. If inflation decreases, however, so will the resulting penalty. Naturally, if inflation returns to more typical levels, the Series I bonds are less appealing.

Although "I bonds" were not a significant financial asset before the recent bout of high inflation, Armstrong believes that investors are eager to buy them today.

In conclusion

Currently, Series I bonds are a good investment alternative. The high yield they are now offering is only available for a limited time, so investors who want to take advantage of it should move quickly. A low-risk government bond like the Series I bond saw its interest rate drop in November, but few investors believe inflation would suddenly stop.


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