Can I Use I Bonds for an IRA?
- When buying bonds, one option is to buy them directly from the U.S. Treasury. However, according to Bankrate.com contributor Dr. Don Taylor, the U.S. Treasury does not sell bonds directly inside of an IRA. This means that you won't be able to purchase I bonds inside of your IRA using TreasuryDirect.
- Paper bonds are bonds that are purchased from a brokerage (any bond not purchased from the Treasury directly). Theoretically, it should be possible to purchase an I bond inside of an IRA this way. However, IRAs are custodial accounts. You must have an IRA custodian willing to offer I bonds. If your custodian doesn't offer them, then they will have to design a specialized process for purchasing them for you.
- An I bond is a secure investment. Purchased inside of an IRA, the I bond guarantees your retirement savings and allows you to cash out the bond when it has matured and buy other investments without paying income tax on the bond earnings. This lets you take advantage of tax deferral inside of your IRA while not giving up the benefits of a guaranteed investment.
- Your broker may charge additional fees for purchasing an I bond inside of an IRA. Unless the custodian already does this in the normal course of doing business, the additional fees and expenses you'll incur for buying I bonds inside of your IRA may not be worth the effort. Additionally, if the interest rate paid on the bond is low, you may not outpace the rate of inflation. In this case, the bond would be losing value in real terms, even though it earns interest.