Government I-Bonds

[olydog1]

All the doom & gloom at iTulip is a frightening wake-up call. I'm trying to look out for my family but do not have a lot of expertise with investing. My question is two-fold:
1. I'd like opinions on the I-Bond, in light of different US economic scenarios.
2. Is there any way to put IRA money into I-Bonds? The government allows it, but neither banks nor brokers will invest IRAs into them as they don't make money by doing so. Thats my conundrum.

[BK]

I-bonds cannot be bought in an IRA. The closest alternative is to buy a Treasury Inflation Protected Bonds (TIPS) - these are US Treasuries that have a fixed interest rate and an inflation component -interest rate. Beware that TIP Funds do fluctuate in value based on changes in interest rates.
You do know that you can buy I-Bonds online - through www.treasurydirect.gov

PS: You may want to investigate alternative ways of beating inflation - the I-Bond Fixed Rate is at an all time low - the time to buy I-Bonds was 4-7 years ago - the fixed rate was a lot higher - the Fixed rate stays constant for the life of the Bonds.

[olydog]

Yes, the fixed rate is 1%... not so hot.

But... the government website where you purchase the bonds,
http://www.treasurydirect.gov/indiv/...nds_glance.htm
shows that
I- Bonds Current Rate is 6.73% through April 2006.
Nothing to sneeze at there.

Now... if the future does hold extreme inflation, as I read in some of the scenarios on this website, wouldn't I-Bonds be a good, safe investment? They should keep pace with inflation. (What other investments would do that?)

Or... if the future holds deflation, another scenario on this website, the bonds would at least hold their face value + 1%, in a time of declining prices. Thereby, they still are a good value.

Please go ahead and shoot holes in this. I'm trying to learn. But if you are a broker and would prefer to steer me into something that earns commission, please be up front about your perspective.

I-Bonds are exempt from state & local income taxes, but subject to federal taxes (unless used to finance education).

It would be nice to hold them in an IRA. I thought the government wanted more savings by its citizens, so why isn't there a path for putting IRA money into I-Bonds? The government says it is okay to do so, there just isn't a way to do it!

[BK]

I own some I-Bonds.

Holding them in a IRA - is not an option- and I-Bonds are Tax deferred by definition. You pay NO Taxes until you sell the I-Bonds, I-Bonds are a 30 bond - so, you could hold it for retirement and hope you Tax bracket is lower than your working years.
The main crtic of I-Bonds is that you may not be keeping pace with the Real Inflation. Having held some I-Bonds for a few years - I agree that you do not keep pace with inflation. But, they have been better than CDs or T-Bills for the last few years.