Thursday, December 01, 2005

No I-Bond Interest

I received a nice email asking if I forgot to include the I-bond interest in my November net worth calculations. I purchased a $1000 I-Bond, but haven't added any interest on it yet.

The reason for this is that I-bonds have a three month interest penalty if the bonds are redeemed before 5 years are up. Due to this, they will not count interest on it until 3 months have passed and thus I don't have any interest added for this past month. it will begin adding interest in January.

While this may not look good now, if I keep the bond for 5 years, when I hit that mark I get a nice 3 month addition to my interest. If I sell, I don't have to decrease my account worth because the penalty has already been built into the system.

This is even a bit confusing for my uncle (so you can imagine how I feel), but he assured me that it makes sense and I have nothing to worry about. The interest will show up and is being calculated, it's just delayed three months until the I-bond reaches 5 years.

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