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Tax Refunds Paid in I-Bonds?

E-mail|Link Posted by Cheryl Costa October 9, 2009 10:40 AM

Starting next year, taxpayers can elect to receive their tax refund in the form of Savings Bonds -- more specifically, in I-Bonds. This might be a good means of "forced savings" for those who would otherwise squander their refund, but is it a good idea for everyone else?

Probably not, that is because I Bonds carry interest rates that are tied to the inflation rate. With inflation very low or non existent in the past few quarters, the fixed interest component on these bonds is currently zero. While it is true that the rates are going to be re-set in just a few weeks (on November 1st), inflation has been a non-issue lately so it is probably a good bet that these bonds won't be carrying a high interest rate by the time taxpayers are deciding how to take their refund.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master�s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.