Instead of Bitcoin, how about an investment that is guaranteed, pays a relatively attractive interest rate and is free from state and local income tax?
I Savings Bonds are issued by the United States Treasury Department. According to Treasury Direct, a government website, I Savings Bonds earn interest which combines a fixed rate and an inflation rate.
The fixed rate is known when you purchase the bond and it does not change during the life of the bond. The Treasury Department announces the fixed rate for I Bonds every six months (May and November). That rate applies to all I bonds issued during the next six months.
The variable, or inflation, rate changes every six months. The Treasury Department sets the inflation rate every six months (also in May and November), based on changes in the Consumer Price Index. The rate is applied to bonds every six months.
The composite rate combines the fixed rate and the variable rate. This rate applies for the next six months of the bond. The combined rate will never be less than zero. However, the combined rate can be lower than the fixed rate, if the inflation rate is negative.
The composite rate for I bonds issued from November 1, 2017 through April 30, 2018 is 2.58%. A quick look on bankrate.com reveals FDIC-insured bank savings rates of 1.30% – 1.55%.
I Bonds are issued electronically. So, there is no paper bond option. The minimum purchase amount is $25. The maximum purchase amount is $10,000 per year. If you receive a tax refund, you may use up to $5,000 of it to purchase I Bonds.
I Bonds earn interest for up to 30 years. They can be cashed in after one year. If they are cashed in before five years, the investor loses the last three months of interest.
If I Bonds are used for higher education, there is no federal income tax. They are completely tax-free investments. You can buy I Bonds at www.treasurydirect.gov.
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