This technique works to increase FDIC insurance by holding your money in multiple accounts with different registrations.

But FDIC insurance isn't limited by SSN. The annual limit in Savings Bond purchases is limited by SSN.

That said, the Treasury appears to be policing the Savings Bond annual purchase limits just like the Bush Administration polices everything else related to the financial system - not at all. So your source may have actually done this, although it's not officially allowed.

In theory, if you're caught doing this, the penalty is only that the Treasury could give you your money back without interest.

Tom Adams

I am wondering if you could enlighten me. I have been purchasing I-bonds for the last 6-7 years in anticipation of the likelihood of severe inflationary pressures in the coming years.

Right now my wife and I purchase a total of only $20,000 yearly in our own names (in paper and from TreasuryDirect). It is my understanding that we can purchase only $10,000 each, yearly, on any one Social Security number.

Now I am now told that - in addition to the above - we can ALSO purchase an additional total of $20,000 I-bonds (4 x $5,000) by using the co-ownership method by registering additional I-bond purchases in my name AND in my wife's name as co-owners; and also by registering still another purchase in my wife's name AND in my name, also as co-owners. This - if correct - would enable each married couple to purchase a total of $40,000 yearly.

Am I correctly informed? I don't find a direct straight answer to this question on the TreasuryDirect website, and would greatly appreciate you input.

Thanks so much, also for you past help.

Tage Blytmann

Steve - I understand what you're saying.

Remember that with TIPS the inflation component is added/subtracted to/from the principle of the bond, not to the interest rate as with I bonds.

You're right that there's a rule that with deflation you could lose all you prior inflation gains, but the value of the bond can't go below the original par value.

So think again about what happens with the new issue. Since there's deflation, the value of the bond should go down, but it can't because it can't go lower than par value, which is where it started. You'd get the 3.5% coupon on the par value and be protected from deflation - at least until there was some inflation. (At that point a return of deflation could erase your inflation gains.)

With the old issue, deflation would first cause you to lose any prior inflation gains. You'd get the 0.5% coupon plus the 3% equivalent at redemption when you collected the difference between what you paid and the redemption value.

The two transactions seem about the same to me with the exception of possible loss of inflation gains made during the old issue's first few months.

Tom Adams

Very recently the Treasury has reopend auctions on old TIPS, which have coupons below 1%, since at the time they were first issued fixed coupons were much lower.

The discrepancy, of course, is taken care during the auction process and these reopened TIPS are sold at a discount to compensate for the lower coupon.

It just occurred to me that these TIPS might offer a substantial advantage over new issues in that a new issue (higher coupon), presumably sold around par, can have its higher coupon eroded by deflation. Whereas those older issues are still guaranteed to be paid off at par when they mature, thus securing a higher fixed rate, even in the case of prolonged deflation.

I'm giving an example to make sure I'm clear about what I mean:

Hypotetical 1-year TIPS (and for simplicity I also ignore compounded interest, which on a few percent for 1 year is small anyway)

Old Issue: coupon 0.5%, sold at 97 => Approximate fixed rate: 3.5%

New Issue: coupon 3.5%, sold at par.

Apparently they are equivalent, both paying 3.5% + inflation and they are indeed.

But what happens if during the year we have a 4% deflation instead.

New issue: 3.5%-4%=-0.5%. Par value is guaranteed anyway so one gets back his money. Return: 0%

Old issue: 0.5%-4%=-3.5%. Yet par value is again guaranteed, so one gets back face value which was acquired at a discount. Return: 3%

I'd like to know what you think about this, if there is something that I'm leaving out or indeed old issues, while equivalent in case of positive inflation are more protected from deflation.

I used to check your website regularly to read info on savings bonds, but I think I will go somewhere else.

Indexes are available for two population groups: a CPI for All Urban Consumers (CPI-U) which covers approximately 87 percent of the total population and a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers 32 percent of the population. The CPI-U includes expenditures by urban wage earners and clerical workers, professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, retirees and others not in the labor force. The CPI-W includes only expenditures by those in hourly wage earning or clerical jobs.

The I bond rate is based on the CPI-U, not the CPI-W. You can argue that the CPI-U isn't an accurate measure of inflation, but to say the Treasury doesn't use it to calculate the I bond rate is just stupid. It is exactly what the Treasury uses.

Tom Adams