Can U.S. Savings I-Bonds be held in a Roth IRA?
Can U.S Savings Bonds be held withing an IRA, and if so, how?
Hello – my understanding is that it’s either impossible or difficult to hold I-Bonds in a Roth IRA. Is that correct? If so, then I am considering moving some Roth IRA money to a taxable account in order to take advantage of the high I-Bond rates. I’d do this for several reasons:- I don’t have cash available outside of the Roth to invest in I-Bonds- The rates I’d get with an I-Bond are over 9% vs. the 1.5% my Roth IRA money market is currently earning- I have kids in high school who have 529 plans, but they are probably not sufficient to cover college costs, and all interest on I-bonds is tax-free if used for education (assuming family earnings are below a certain level, and I hope to be retired by then so should qualify). So I’d likely cash in the I-Bonds in about 5 years to cover college costs, capturing all of the gains tax-free.Anyhow, while I never thought I’d move money out of a Roth into a taxable account just to invest in something else, it seems to make a lot of sense.Any feedback from the peanut gallery? Thanks.
- Savings bonds can be issued to a trust.
- A self-directed IRA can hold non-marketable assets in trust.
- The cost and complexity of doing so are probably not worth it.
Permalink Submitted by William Tuttle on Thu, 2022-01-27 22:48
Treasury Direct does allows Savings Bonds to be purchased in the name of a trust. A self-directed traditional IRA with a specialized custodian might theoretically be able to purchase and hold Savings Bonds in a trust for that account.
However, there would be little tax advantage in doing so. Savings bonds are already tax deferred and not subject to RMDs.
Just because you can do something does not mean you should do something.
Permalink Submitted by Bill Briner on Fri, 2022-01-28 00:25
Your comment that just because you can do something does not mean you should do something seems to ignore the fact that I-Bonds are currently paying 7.12% (tax-free if in a Roth IRA) compared to 0.60% for the highest CD rate in the nation for a 1-year CD. I have some Roth IRA funds coming available with no other good fixed income options available. Is your advice that it would be better to accept 0.60% than try to earn 7.12%? That advice makes absolutely no sense to me. Please explain.