Buying Savings Bonds at the End of the Month

by Michael on Jan 30, 2013 · 3 comments

Photo of U.S. Treasury Department Building

I’m a big fan of Series I Savings Bonds. They’re not sexy, but they provide a degree of inflation protection and some tax advantages.

It should thus come as no surprise that my wife and I typically buy our limit — currently $10k — via TreasuryDirect each year.

As you may recall, the option to buy paper savings bonds went away at the end of 2011, with one small exception for up to $5k in paper savings bonds as part of your tax return.

Anyway, one tidbit that you may (or may not) be aware of is that, no matter when during the month you buy your savings bonds, you get credited for owning them for the full month. Thus, you might want to wait until the end of the month to buy.

The reason I say this is that you can squeeze out some extra interest by leaving your money in the bank until the last minute and then snatching up your I-Bonds. Sure, the payoff is pretty small in the current interest rate environment, but hey…

Money is money. You might as well grab it if it’s there for the taking. Amirite?

Another minor benefit is that you’ll be able to break your I-Bonds 11 months and a day after purchase vs. a full 12 months if you buy at the end of the month. I don’t recommend breaking your bonds on a whim, but why not take advantage?

Note that you don’t have to wait until the last minute to set up the transaction. Rather, you can schedule the transaction by clicking the “Buy Direct” link in your TreasuryDirect account instead of using the “Purchase Express” option.


1 Adrienne February 3, 2013 at 8:57 am

If you won’t have a $5k refund, can you just make an estimated payment by January 15th in order to “cause” a larger refund?

2 Michael February 3, 2013 at 3:12 pm

Adrienne: Yes, but it can be hard to predict the necessary amount that far in advance. Also, January 15th has already passed. And by doing this in January, you’re losing interest on that money until you get around to filing.

An alternative that I’ll write up in more detail is to figure your taxes, then file for an extension along with a payment large enough to create a $5k overage. As soon as the payment clears, file to claim your refund in the form of $5k worth of I-Bonds.

3 Adrienne February 8, 2013 at 9:14 pm

Thanks for the tip, by doing the extension you can decrease the time between the filing/paying and refund, smart! I am aware the deadline has passed for this year, but was thinking for in the future.

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