Wednesday, May 7, 2008

Annual Purchase Limit

I hadn't noticed this one until the Bureau of Public Debt sent a reminder email. They've reduced the limit on annual purchasing of savings bonds to $5,000 per person. It used to be $30,000. The last time the limit was $5,000 was in 1973.

I'm not even going to try to guess the real reason they did this. But what it means is that one of the best places to keep cash without losing purchasing power to inflation, the I Series bond, is not as useful as it was.

I like I Bonds. The rates are continually adjusted to keep ahead of inflation. Right now, they are at 4.84%. They are sold at face value, have a minimum ownership time of 1 year, and only a 3 month interest penalty if sold before 5 years. You can buy directly from the Treasury Direct website for free, so there are no account fees or transaction fees to reduce the return. The interest income is even exempt from State income taxes.

Of course, I'm being a bit silly, because I've never bought $5,000 worth of I Bonds in one year. But I had planned to use them as the major cash component of my portfolio. They'd certainly be doing better than the stock I bought last year.

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