Credit for this goes to xerty on FatWallet. This strategy will work if you are comfortable in the world of investments and also have a Treasury Direct account. If you have to ask what these things are, then this investment is not for you.
I bonds issued by the US Government have two interest components - a fixed rate and a floating rates that resets every 6 months based on inflation rates. At this time, the fixed rate is 1.2%. A bond bought now will pay 4.28% for the first 6 months and then 6.07% for the next 6 months thanks to the steadily rising inflation.
Key Steps -
1. Buy the bonds before the end of April to collect interest for all of April (nice, isn't it?) Purchase limit is $5,000 for electronic purchase + $5,000 for paper bonds (can be redeemed at most banks).
2. Hold the bonds for 14 months and a few days.
3. You get interest for 15 months (thanks to the late April purchase) but lose the last 3 months when you redeem early.
4. Effectively get a yield of better than 4.4% once you factor in the various state & local tax breaks.
For additional reading, go to the original post on FW.
If you don't have a Treasury Direct account, apply for one ASAP as they have to physically mail you a security card needed to transact.
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