The savings bonds interest rates are set every 6 months in May and November. Here is the I-series bond interest announcement from this month’s news release.
I Bond Earnings Rate of 4.60% includes Fixed Rate of 0.00%
The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 4.60% earnings rate for I bonds bought from May 2011 through October 2011 also will apply for the succeeding six months after the issue date. The earnings rate combines a 0.00% fixed rate of return with the 4.60% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 218.439 in September 2010 to 223.467 in March 2011, a six-month increase of 2.30%.
4.6% is quite a respectable rate considering all other options available. It is definitely time to buy I-series bonds for the next 6 months. The rate of inflation adjustment changes rates on older I-bonds as well. Some of the I-bonds that were purchased 10 years ago are yielding 6.65% (as they have higher fixed rate of 2.05%) with this month’s adjustment.
A well known trick to squeeze a few more pennies… Buy the I-bonds towards the end of the month but, the interest is paid for the whole month as if the bond was bought on the first of the month.
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I have heard this every week for at least 10 years, probably more.
Cartalk is a production of Dewey, Cheetham and Howe.
It is very embarrassing to admit that it took me all these years of listening to Cartalk to figure out the joke. Gah! Really feel like chump.
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Just love how Nigella Lawson talks and also her choice of words. Heard her interview on NPR this morning where she was talking about recipes for Royal Wedding watching…
“everyone is giving a show of enormous bored nonchalance and indifference in this country, however, I think everyone’s going to watch it.”
“I can’t make myself feel it’s a pivotal experience in my life, but I think it would be an affectation to ignore it.”
Another point to note is that she started off with two recipes for drinks. Gotta admire British for their love of booze. The only reason to fly on British Airways despite their otherwise horrible service, is that they provide more than generous amount of alcohol to the passengers without charging extra.
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Breakfast conversation this morning…
Ashwini: I am going to marry someone who has a sister.
me: Why?
Ashwini: That way I can marry the boy and Adit could marry his sister.
Adit: But… I don’t want to get married.
Ashwini: Come on, Adit. It will be fun. We will be one big family.
Adit: OK. I’ll marry her if she plays with me.
Ashwini: I am going to have an Indian wedding.
Me: Why is that?
Ashwini: Because, I don’t like all that kissing in the American wedding.
Me: What if the groom wants an American wedding?
Ashwini: Hmmm…. Then, we’ll have to do both. I like the white dress but, I like Indian wedding more.
Me: That’s a good idea. You can do Indian wedding in the morning and other one in the evening.
Ashwini: No, no, no. I’ll do the American wedding in the morning. I want to get done with kissing and then have fun at the Indian wedding.
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Over the years, I have had good luck with “Dollar cost averaging” as an investment strategy. Basically the idea is that instead of making one big one-time investment, break it into little bits over time. So, through the ups and downs of the market, the average buying price is lower.
At one point, I used to apply this principle whenever I could, such as buying gas. Instead of filling up the tank, I used to put $25 worth of gas every time I needed a fill, trying to capture more gas when price was lower and fill less when the price was higher. It is an easy way to pinch some pennies. I should get back to doing this again considering the current gas prices.
Anyway, the point of this post is to say that dollar cost averaging doesn’t work all the time. I came into some money last year and I wanted to put that in the kids’ college fund. Being a follower of dollar cost averaging, I decided not to make a purchase on one fine day in July 2010 and to make 12 purchases, twice a month from July to December.
After doing a retrospective analysis of this whole deal, it turned out to be a wrong decision. If I had plunked down all that money into one purchase in July, I’d have bought about 10% more shares as the stock market kept on climbing from July to December. The returns on this investment could have been 10% higher than what they are right now.
I think this example is just an exception that proves the rule. Six months is a short period of time and I have had good experience with dollar cost averaging for other investments over longer time frame – several years up to 10 years.
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Excellent reporting by Propublica about Pakistani connection to attack on Mumbai on 26 Nov 2008.
Pakistan and the Mumbai Attacks: The Untold Story
by Sebastian Rotella ProPublica, Jan. 26, 2011, 9 a.m.
This story was published as part of Amazon’s Kindle Singles program, and is available for reading on that device [1].
On a November night two years ago, a young American rabbi and his pregnant wife finished dinner at their home in the mega-city of Mumbai.
Gavriel and Rivka Holtzberg had come to India on a religious mission. They had established India’s first outpost of Chabad Lubavitch, the Orthodox Jewish organization, in a six-story tower overlooking a shantytown. The Chabad House offered a synagogue, a cyber-café, two floors of guest rooms, India’s biggest Hebrew library and a dining room that could seat 50 for festive meals. The Holtzbergs’ guests that evening were two American rabbis, an Israeli grandmother and a Mexican tourist.
Read more…
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Roth IRA is an excellent vehicle for sheltering money for retirement. There is no upfront tax break but, there are no taxes to pay when the money is taken out in retirement. Also, there are no required minimum distributions like traditional IRA and 401k accounts. Heirs who inherit Roth IRAs don’t have to pay any taxes either, so, this money can grow for a long long time.
But, there are restrictions on participation based on income. In a family with 2 workers it is easy to go over that limit and be shut out of this great investment opportunity. An indirect way into a Roth IRA is a conversion of traditional IRA account. Till 2009, these conversions were not allowed if your AGI is more than $100,000. But, this AGI limit was taken away in 2010 and anyone can convert their traditional IRA into Roth IRA. This rule change was part of a law that was passed back in 2006. Many people took advantage of this rule change. Money was put aside in a traditional non-tax-deductible IRA account from 2006 to 2010 and that account was converted into a Roth IRA last year.
Here is a quote from IRS publication 590 that deals with retirement accounts.
Conversions to Roth IRAs Beginning in 2010, the modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated. Also, for any 2010 rollover from an IRA other than a Roth IRA to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.
This Roth IRA conversion rule change is still in effect for 2011 and the backdoor entry into Roth is still possible. People who are shut out of Roth IRA due to their income can fund a traditional non-deductible IRA account and convert into a Roth the very next day.
If one owns a mix of tax-deductible and non-deductible IRA accounts, the conversion is a little messy. Check out this article from Morningstar.
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Overall, 2010 was a good year. Here are some brief highlights.
- January: A trip to India. Hiked Kulanggad. Observed a partial solar eclipse after a long time.
- February: First ski lessons for kids.
- March: Ashwini turned 7. More skiing.
- April: Mexico vacation with the Desais. Fun, fun and more fun.
- May: V and I turned 40. Started a veggie patch. Started bicycling regularly.
- June: Another short trip to India for Deven’s wedding.
- July: 4th of July fireworks in Niantic. Beach visits. Summer fun. Started kayaking.
- August: Hiked up Mt. Washington with Manoj. Watched metamorphosis of caterpillars into Monarch butterflies. Adit started kindergarten. Ashwini is happy to have him on the school bus with her.
- September: Hiked up Mt. Marcy with Manoj (in New York’s Adirondack mountains).
- October: Apple picking. Family vacation at Acadia National Park in Maine. Ashwini taught me what acrostic poems are.
- November: Diwali. Thanksgiving. Seemed like Ashwini was at “Nutcracker” practices all the time.
- December: Ashwini’s “Nutcracker” performance. Nice holiday break. Adit turned 5; now he is officially a big boy.
Hope y’all had a good 2010, too. Wish you all a very happy and prosperous 2011!
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Amazon.com card rewards are quite good: 3% (3 points) on money spent at Amazon.com, 2% (2 points) on dining and gas, 1% (1 point) on everything else. Once the balance goes up to 5000 points, it can be redeemed as $50 cash or $50 in Amazon.com certificate. Getting the cash is definitely a better option. Here are my reasons:
- Cash can be used anywhere; with Amazon.com certificate, one is restricted to spending it at Amazon.com. Not a problem for us as we use Amazon.com for a lot of shopping.
- To pay for $50 in purchases at Amazon.com, instead of using Amazon.com certificate, if Amazon.com card is used, you collect 150 points or $1.50 in the rewards account. So, getting $50 cash back and spending it again at Amazon.com, you actually get $51.50 compared to only $50 with Amazon.com certificate.
I know it is counting and pinching pennies but, why give those pennies away when they are available to you without any extra effort.
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