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There was record demand for Series I Federal Reserve bonds, an inflation-protected and virtually risk-free asset, providing a staggering 9.62% annualized return through October.
However, it is not easy to buy I bonds through TreasuryDirect, a 20-year-old platform operated by the US Treasury, financial advisors say.
“It’s like going to a DMV online,” said Matt Stevens, a certified financial planner with AdvicePoint in Wilmington, North Carolina, explaining how the process of buying I bonds is particularly difficult for his older clients.
Inflation increases the demand for bonds
Bond interest consists of two parts, a fixed rate and a variable rate, which are adjusted every six months based on the Consumer Price Index, a key measure of inflation.
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Since the annual rate jumped to 7.12% in November, 1.85 million new savings bond accounts have been opened as of June 24, according to a Treasury official.
“We are committed to ensuring that TreasuryDirect users have a positive customer experience,” a Treasury spokesperson said, highlighting recent changes, such as transferred resources, hiring temporary staff, and website and phone support improvements.
“We are also in the process of developing a modern and updated alternative to the current TreasuryDirect system,” they added.
How to buy I . bonds
There are two ways to buy I bonds. You can buy them electronically via TreasuryDirect, with an individual limit of $10,000 per person per calendar year. You can also buy it in paper form with a federal tax refund, allowing for another $5,000 purchase per person.
Before purchasing I-Bonds, you will need to open a TreasuryDirect account by providing your tax ID number, email address, and bank details.
Password login page on TreasuryDirect.gov.
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However, you will need to keep your account number and password securely, as multiple failed attempts may result in your account being locked. This requires contacting customer service, which is currently experiencing “a higher-than-normal call volume,” according to the site.
Another potential bump: you can’t rely on some password managers to automatically fill in credentials because part of logging in requires you to type the password on a virtual keyboard with your cursor.
Some accounts need additional identity verification
One of the main pain points is the additional identity verification, said Tommy Blackburn, a Richmond, Virginia-based CFP and chief financial planner at Mason and Associates who frequently helps clients buy I bonds.
It can be very difficult to obtain a signature guarantee from major financial institutions and local institutions.
Tommy Blackburn
Senior Financial Planner at Mason and Associates
In some cases, investors must fill out an account authorization form to prevent fraud, according to a Treasury official. This requires that the form be signed at a bank or credit union, referred to as a “signature guarantee” before being mailed back.
“In our experience, it can be very difficult to obtain a signature guarantee from major financial institutions and local institutions,” Blackburn said. However, a Treasury official said they are working to extend the certification to any notary.
There are additional steps to change bank account details
There is a similar process for updating TreasuryDirect’s bank details, which requires a bank change request form, explained Ken Tumin, founder and editor of DepositAccounts.com, who went through the process recently.
When opening a TreasuryDirect account, Tumin suggested, “You definitely want to choose a bank account that you plan to maintain and maintain for the long term.”
Bonds are not suitable for all investors
While the current bond price may be attractive, it’s important to consider whether these assets align with your goals before buying, experts say.
Stevens said there are relatively low purchase limits, with few exceptions, and no access to the funds for one year, which makes them suitable as a “supplement to your emergency fund.”