my bond and your retirement


Last year saw a 9% I-Bond frenzy sweeping the nation, and while the interest rates were attractive, buyers, like any investment, should be careful. In 2022, both the stock and bond markets fell by double digits, but I-bonds delivered decent returns, making them one of the best performing asset classes after the energy sector.

While all this seemed great at the time, this attraction had some drawbacks. The first is the liquidity and expected term and the second is the relatively small amount you can invest in an I Bond. In many cases, the average investor does not realize that he can only invest $10,000 or only $15,000 per person if he uses the tax refund to get an I Bond. . The final downside, and perhaps most important, is that the fee resets every six months for him.

Rate reset and my bond and your retirement

In May 2023, the I Bonds interest rate will be reset. The new rate will last for six months and is estimated to be 3.8% per annum, roughly half the previous rate. Why is there such a large decrease? Probably due to inflation. For comparison, you’ll get a high-yield savings account for around 4% payouts without liquidity issues and with fewer restrictions than I Bond.

What does this mean for your retirement savings and investments? In general, it is not an investment strategy to run away from stocks in hopes of chasing the next great thing while they are falling. . This is a lesson that selling low and buying high is not an investment strategy, the only investment strategy is to actually have a sound investment strategy and stick to it even when the market has its ups and downs.

investment is long term

If you are a long-term investor and want a stock-like return, you should look for the asset class that is most likely to provide a stock-like return: stocks. They have historically made 8-10% profit per year, but rarely do they deliver 8-10% profit in any given year. What does that paradox mean? This means that you need to be persistent over the long term, weathering market ups and downs, good times and bad times, to get insight into your profitability. The market cannot be predicted. These historic returns are long-term, so you need to approach your investments from that perspective.

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