April, May or October I-Bonds? Plus 5% MYGAs?

These are the last few days to buy April I-Bonds - buy now or wait until May or even October? We'll also talk about the higher-than-expected real yield on this past week's 5-Year TIPS auction, plus whether you can find 5% or higher MYGAs (multi-year guaranteed annuities) right now.

Transcript

SPEAKER_00 0:00

There's just a few days left to buy April Ibonds if you want to grab this current Ibond rate of 4.03%, which includes a fixed rate of 0.9%. Or might you be interested in a 5% or higher multi-year guaranteed annuity, MIGA, instead? Hello Diamond Esteg members, Super Savers and Course fans. I hope you're healthy and well. It's been another week of ongoing uncertainty in the markets, our economy, as well as geopolitically. So this week's video is a gentle and friendly reminder for those of you in our community who crave a bit more safety, stability, and predictability in your lives and your portfolios. These are the final few days to buy your April Ibonds before the May Ibond rate reset. If this is something that you might be interested in doing. So with that in mind, here are the three topics I'll be covering today. 1. What is our May Ibond rate projection? And would we personally buy now or wait? This section is a recap of last weekend's April versus May Ibond video for those of you who missed it and or want a refresher. It seems we hit a nerve here with inflation protective bonds again as we've received quite a few emails on the topic. We'll also cover the break-even time for those of you in our community who are considering redeeming your older lower fixed rate I bonds to purchase new ones at the current fixed rate of 0.9% before the end of the month. And for those of you who've already decided to wait for the May Ibond rate reset, there's no rule that says you have to rush and buy right away because no matter when you buy your I bond in a given month, you will get your interest for that full month as if you had purchased it on the first of that month. The new May Ibond rate will stay valid for six months for all I bonds issued on May 1st until the end of October. So in theory, you could even wait until then to lock in the new rates if you wanted. Drop a comment below and let us know what your Ibond plans are after watching this section of today's video. And if you've already seen it, then you may want to skip ahead to part two. What were the results for this past week's five-year tips auction? And for those of you who have enough inflation protection in your portfolio and are seeking safe and guaranteed but potentially higher yielding alternatives, we have section three. What are the current rates on multi-year guaranteed annuities, mIgas versus similar term treasuries? And can you get a 5% or higher myga at the moment? Let's dive in now, folks. What is our May Ibond rate projection? And would we personally buy now or wait? Let's begin with the Ibond fixed rate, because that's what many of you have been waiting for. As our Diamond Nesteg regulars have heard me say often, no one outside the Treasury really knows exactly how they set the IBON fixed rate. For whatever reason, they seem to treat it like a state secret. But based on our analysis dating back over two decades, it appears that since 2015, if we take 65% of the average daily real yield on the five-year tips for the six months prior to the Ibond rate reset date, this, together with a bit of rounding, gets us most of the time almost exactly to the fixed rate that is then announced by the Treasury. TIPS Treasury inflation protected securities are the other type of inflation protected debt that are government issues. As our Diamond Neste regulars and TIPS fans know, the real rates on TIPS that form the basis for our Ibond rate are set by the market, by the balance of supply and demand during the regular TIPS auctions. So let's calculate our projected I bond fixed rate. The average daily real yield on the five-year TIPS from November 1st, 2025 until close of market on Friday, April 17th, 2026, was 1.33%. Multiply this by 65%, and we get to a projected next Ibond fixed rate of 0.87%, which we then round up to 0.9%. It seems that all I bond fixed rates are always rounded to the next full 10 basis points. And this 0.9% is the fixed rate that we expect for all I bonds that will be issued on or after May 1st, 2026 through the end of October 2026. This is the same as the current fixed rate of 0.9%, which isn't too bad given that real yields on tips have come down somewhat over the past several months. It clearly helped that this time we expect the Treasury to round up and not to round down. Now let's move on to the projected Ibond inflation rate. Here we have the CPIU all items number from March 2026, 330.213. Divide this by the CPIU all items number at the end of September 2025, the starting point of 324.8. Minus one, and we get to this percentage change in CPIU over the past six months of 1.67%. Multiply this by 2 and we get to an actual annualized Ibon inflation rate of 3.34%, which is higher than the current annualized Ibond inflation rate of 3.12%. And of course, let's not forget about what we at Diamond Nest Egg lovingly refer to as the bump, the inflation adjustment on the fixed rate, which is basically the projected Ibond fix rate of 0.9% multiplied by the actual Ibond inflation rate of 1.67%, which gives us a projected bump of about 0.02%. So to get to our projected combined Ibon rate for May, let's add together our projected Ibond fix rate of 0.9%, our actual Ibon inflation rate of 3.34%, and our projected Ibon bump of 0.02%. This results in a projected combined Ibon rate for May of 4.26%, which is just slightly higher than the current rate of 4.03%, primarily driven by the higher actual Ibon inflation rate. This table may help with your decision on buying Ibonds now in April versus waiting until May or later. This column shows the month of purchase. This column shows you the fixed rate that you will get. The fixed rate stays the same for 30 years, the full term of the Ibon. This column shows you the inflation rate that you will get in the first six months after purchase. And this column shows you the inflation rate that you will get in the second six months after purchase. Remember that this inflation rate changes every six months. This column shows you the total bump on your Ibonds in the first 12 months after purchase. Again, the bump is the inflation adjustment on the fixed rate, so it changes with the inflation rate. And this last column shows you the combined or total I bond rate you will get in the first 12 months after purchase. So if you buy in April, you'll get a guaranteed fixed rate of 0.9% for the full 30-year term of the I bond, but a lower inflation rate of 3.12% to start for the first six months. And if you buy anytime from May until the end of October, you get this projected fix rate of also 0.9% for the full 30-year term of the I bond, but a higher inflation rate of 3.34% to start for the first six months. Now, as our VIP investment club members already know, Marcus and I are not buying I bonds at this point in time. Not because we don't like them anymore. We do. I bonds continue to serve a dual purpose in our portfolio as an inflation protected emergency fund as well as inflation protected retirement savings. But we've built up a good enough cushion of I bonds with fixed rates above 0.9% for now, especially given how far away we are from retirement and have decided to redirect the cash we would have otherwise spent on I bonds opportunistically into other areas of the market. That said if we were buying I bonds this year, we would buy them before the May Ibond rate reset. Because even though the fixed rates look the same on paper, so to speak, regardless of when we buy, remember that this 0.9% here for Ibonds purchased and issued before the end of April is guaranteed while this 0.9% here for Ibonds purchased and issued from May until the end of October is projected. Yes, the 0.9% fixed rate at the next Ibond rate reset is our best estimate based on our analysis of over two decades worth of Ibond data. And we've gotten this right over the past few Ibond rate reset cycles. But who knows right there may be other factors that Treasury Direct considers which we are not aware of that could lead to the actual fixed rate for May through October to be different from what we project here. In addition buying before the May Ibond rate reset also means that at the time of purchase I already know what I will earn on those I bonds in the first year. My inflation rate for the first six months will be 3.12%. My inflation rate for the second six months will be 3.34% the same 3.34% I would get if I were to purchase my I bonds between May and October. Meaning that when I average out these two inflation rates, add on my small bump in the first 12 months of 0.03% and add on my guaranteed fixed rate of 0.9% I know that in the first 12 months I will earn about 4.16% in total on any I bonds that I buy before the May Ibond rate reset. If I buy during the May through October period my Ibond fixed rate may likely be the same. And while I am starting off with a higher inflation rate for the first six months I don't know yet what my inflation rate will be for the second six months meaning that I also don't know what my bump and my total I bond rate for the first 12 months will be. As the old adage goes, a bird in the hand is worth two in the bush. And to say it again because apparently the lambers are a repetitive bunch, the new Ibond rates we've discussed today are expected to go into effect for all I bonds issued on May 1st or later. So to still get these numbers here if that's what you want you will need to make your IBOM purchase before April 30th meaning on April 28th or April 29th or possibly earlier if you want to be on the safe side because Treasury Direct needs at least one business day to process I bond purchase orders. If you buy your Ibonds on April 30th or later you will get the May Ibond rate. Now if you're still undecided at this point another option to consider is to split up your IBON purchase. For example buy 5000 of your$10,000 annual limit before the end of the month to lock in the current rates and buy another$5,000 after you know what the May Ibond rate will be. Or come join our private VIP investment club and continue the conversations with me, Marcus and our other VIP members and see what others like yourself are doing right now to hedge against inflation and grow their nest egg. Visit our website at www.diamondestic.com and click on this yellow private VIP investment club button to learn more about the latest happenings in our growing member community. I've linked everything below this video for you as well. So I bonds remember that for Ibond purchases regardless of whether you buy at the beginning of the month or the end of the month you will get interest for the entire month that you purchased your I bonds in. Meaning that even if you buy your I bonds in the last week of April, you will get your Ibond interest for the full month of April. And now we'll answer the question for those of you who've asked about what the break even time might be if you decide to redeem your older lower fixed rate I bonds that you've held for less than five years to purchase new ones at the current fixed rate of 0.9%. For old Ibonds with a 0% fixed rate the break even time is 10 months or in other words it makes sense to redeem and reinvest your old Ibonds with a 0% fixed rate if you're planning on holding them for more than 10 months because you will start earning an extra return on your investment after these 10 months. And by the way you'll have to hold your newly purchased I bonds for more than 10 months anyway because the minimum holding period for newly purchased I bonds is 12 months so you won't be able to redeem them before that. For old Ibonds with a 0.4% fixed rate the break even time is about 21 months. Do note that I bond redemptions always consist of principal and the prorated interest amount and in the year of redemption taxes may come due as part of that interest. You cannot choose to withdraw only principal or only accrued interest. It'll always be a prorated mix of the two. For the purposes of our breakeven analysis we assume that the redeemed amount for reinvestment is the net amount after tax. There are a few other assumptions that we've made in our breakeven analysis as well as additional considerations to take into account if you're considering redeeming your older, lower fixed rate I bonds that you've held for less than five years to purchase new ones at the current fixed rate of 0.9%. If you want to learn more about these assumptions andor considerations please check out this Ibond breakeven analysis video from last year. Link below in the first pinned comment for your convenience. And don't forget that your usual annual purchase limit of$10,000 per social security number or EIN will apply even if you sell old Ibonds before there's no special exemption for such an upgrade. So now that we've covered everything I bonds let's move on to the next section of today's discussion what were the results for this past week's five year tips auction so the evening before the five year tips auction per Bloomberg's website the five year tips closed at a real yield of 1.23% as we posted in our VIP investment club. In the end the new five year tips fetched a real yield of 1.367% on auction day with a coupon of 1.25% which was a big jump by standards of bond land given where it was trading on the secondary market the day before real yields on tips have come down a bit in recent months but as a point of reference for the five year tips the average real yield was 1.4% over the past 12 months and 0.92% over the past five years. So back to this real yield of 1.36% on the five year tips auction, it's also a fair bit higher than the current IBON fix rate of 0.9%. Did you pick up any 5 year tips at last week's auction? If yes drop a comment below and let us know how satisfied or perhaps not satisfied you are with the result. And if you want to chat further and see what other like-minded folks like yourself are investing in right now for safety, inflation protection as well as for growth come on over and join our VIP investment club. Our April member live is happening tomorrow Sunday April 26th at 5 pm Eastern Time 2 pm Pacific Time? Visit our website at www.diamonestic.com and click on this yellow private VIP investment club button to learn more. We hope to see some of you there. And let's move on now to the next part of today's discussion. What are the current rates on multi-year guaranteed annuities, mygas versus similar term treasuries? And can you get a 5% or higher myga at the moment? So here's our usual comparison table showing some sample myga rates versus treasuries. Myga rates from this A rated insurance company that we work with have not moved at all since last week. Remember that A is the best credit rating that an insurance company can get from AM Best which is a ratings agency that specializes in the insurance industry meaning the mygas on this table are pretty much the lowest risk making them the most comparable to Treasuries in terms of risk return profile. So for example if you were to purchase a$10,000 seven year myga at the time of this taping from this A carrier your rate might be 4.5% a$50,000 seven year myga might earn you 4.6%. A$100,000 seven year myga might earn you 4.75% and a$1 million myga might earn you 4.8% for seven years. And if you have more than the amounts shown here say north of$10 million your rate might go as high as 4.9% with this A insurance carrier this coming week. The two year three year five year and seven year treasuries have edged up a few basis points this past week but for everything longer than a two year term the MIGA rates continue to win as they should given that mygas need to pay an illiquidity premium over treasuries. As always keep in mind that the MIGA rates in this table are subject to change at any time without prior notice and that your personal rate is not fixed before you sign your annuity contract. Now for those of you who've asked us about mygas with higher rates than what's shown in this table specifically those that pay 5% or more yes those migas do exist but they may be harder to find on your own and will typically come from an insurance company that is lower rated than A. Remember higher risk higher return that said if this is something you're interested in or if you're interested in learning more about what your myga rates and options might be whenever you're watching this video, email us at jenniferdiamonesic.com so that we can connect you with our trusted annuity specialist who can help you find the annuity that's best suited for your personal situation. Alright members and course fans I hope you enjoyed today's video and learned something new and see again very soon with more brand new wealth building content for your financial journey