My solution: Double the purchase cap to at least $20,000 a year.
By David Enna, Tipswatch.com
Last week, TreasuryDirect again sent emails asking holders of savings bonds in gift boxes to deliver them as quickly as possible. I have written about this in the past (here, here, and here) but this email seems to step up the urgency.
The gift box program is used almost exclusively by investors in Series I Savings Bonds, a highly attractive, very safe inflation-linked bond. For more on gift box basics, read this from TheFinanceBuff.com.
I didn’t receive the email, because I delivered all our gift box I Bonds in 2024, the year they were purchased. But readers have sent me the text (you can read the full email and explanation here). Highlight:
Dear TreasuryDirect Customer,
It’s time for some spring cleaning! That includes clearing out your TreasuryDirect gift box by delivering purchased gift bond(s) to your intended recipient. We encourage any TreasuryDirect customers with undelivered gift bonds to deliver them promptly after purchasing so your recipient can access and manage their gift now. …
While you can only deliver one gift bond at a time, there is no limit to the total amount a recipient can receive. However, once they have received $10,000, they should not purchase additional savings bonds that year because gift amounts are applied towards the purchase limit.
Note the wording here: 1) You can deliver only one set at a time, 2) but you can deliver as many individual sets as you want, at any time, and 3) after the delivery, the recipient will not be able to purchase additional savings bonds that year.
In other words, the recipient must make any traditional I Bond purchase — up to $10,000-per-year purchase cap — before receiving the gift box deliveries. After the purchase, the door is wide open for deliveries of unlimited amounts.
This policy, which I Bonds investors have known about anecdotally, appears to create a giant loophole and allows investors with a trusted partner to buy and deliver unlimited I Bonds in one year, one month, even one week.
TreasuryDirect has created an FAQ on the gift box program, which more or less clarifies implications of the email:
Is there a limit to how many gift bonds I can deliver to recipient(s)?
You can only deliver one gift bond at a time. There is no limit to the amount a recipient can receive; however, once they have received $10,000, they should not purchase additional savings bonds that year because gift amounts are applied towards their purchase limit.
Can my recipient cash out gift bonds over the annual purchase limit once they are deposited into their account?
There is no limit to the amount of bonds a recipient can cash out from their TreasuryDirect account, regardless of how the bonds were acquired. Bonds can only be cashed out if it has been at least one year since the bond was purchased.
Is there a deadline for delivering gift bonds?
Delivering gift bonds proactively prepares you for upcoming enhancements and enables your recipient to experience the full benefit of your gift.
Is delivering my gift bonds mandatory?
You are encouraged to deliver gift bonds now to ensure you are prepared for coming enhancements and so your recipient can experience the full benefit of the gift bond.
What happens if I don’t deliver my gift bond(s)?
Gift bond recipients are the sole legal owners as soon as the bonds are purchased, so holding undelivered gift bonds introduces potential complications. While no changes are currently being made to the gifting process, delivering your gifts now reduces the risk of possible issues in the future.
Will there be changes to the gift bond program or is it being eliminated?
Future changes to the gift bond program are still being determined. However, there is no impact to your participation at this time. Stay tuned as more information becomes available on how we’re enhancing your customer experience.
My interpretation
For well over a year, TreasuryDirect has been hinting at major changes to the gift box program and possibly its entire savings bond purchasing system. This email steps up the urgency with a plea to clear out all gift box savings bonds as quickly as possible.
At the same time, it opens the door to “abuse” of the system by allowing unlimited gift box purchases and immediate deliveries. OK … it really isn’t abuse since the Treasury is clearly allowing it as long as deliveries are made quickly (there is a 5-day waiting period). With this plea, Treasury has backed its way into an unintended consequence.
The urgency is strange since Treasury has been hinting at upcoming changes for 18 months, even before President Trump’s election in November 2024. Did the administration turnover delay the changes? Are they now ready to roll out?
A bit of history
Investors never really noticed the gift box program until fall of 2022, when the I Bond had a variable rate of 9.62% and was about to transition to a rate of 6.48%. Those I Bonds had a fixed rate of 0.0% but the composite rate of 9.62% was extremely attractive (the 1-year T-bill was yielding about 4.5%). I Bond mania was in full swing and the gift box program became a viable strategy for investors with a trusted partner.
At that time, the consensus view was that gift box purchases of $10,000 could only be delivered one at a time, each year, and any delivery would lock the recipient out of additional purchases or gift box deliveries in that year. Some investors bought 10 sets in 2022 and it appeared they would have to sit on those 0.0% I Bonds for delivery over the next 10 years. Once TreasuryDirect opened the floodgates with emails urging deliveries “as soon as possible,” those investors could immediately deliver and redeem. The loophole sprang open.
I was never a fan of using the gift box strategy unless the fixed rate was historically high, because the fixed rate is permanent. The only time I used the strategy was in 2024, when the I Bond’s fixed rate was 1.30%. Later that year, I delivered all the gift box swaps and figured I would never again use the strategy.
Common-sense solution
Why do investors use the gift box strategy? Most of the time, these are fairly wealthy people looking to build a stockpile of inflation-protected cash in a very safe investment. For them, the $10,000 per year purchase cap is too small to make a difference in their asset allocation. So they craftily resort to the gift box.
Here’s my solution:
- The Treasury should immediately raise the savings bond purchase cap to $30,000 a year — equal to the cap that existed from 1998 to January 2008. Adjusted for inflation since January 2008, that cap would be $46,000 today.
- It should eliminate the gift box program or alter it in a way that allows only small purchases and controlled deliveries. Gifts from grandparents to kids were nice in the past when Treasury issued paper savings bonds, but less accessible in our new age of electronic investments.
As a compromise, I’d accept raising the purchase cap to $20,000 a year — $40,000 for a couple. That would make the I Bond more attractive for sophisticated investors. And it would create an expanded opportunity for investors without a trusted partner, who are essentially locked out of the gift box strategy.
And another thing … TreasuryDirect, please be upfront about future changes you are planning. Let us know in clear terms what to expect.
And a reminder … If you are planning a purchase of the April-issue I Bond, make sure to place your order at TreasuryDirect no later than Tuesday, April 28. Purchases “completed” on April 30 will be May-issue I Bonds. From TreasuryDirect:
I expect we will see the new fixed-rate / composite rate announcement Friday morning about 10 a.m. EDT. I will be posting an update.
Did you get the gift box email? If so, what are your plans? Would you consider using the strategy in 2026 to lock in the 0.9% fixed rate?
• Confused by I Bonds? Read my Q&A on I Bonds
• Let’s ‘try’ to clarify how an I Bond’s interest is calculated
• Inflation and I Bonds: Track the variable rate changes
• I Bonds: Here’s a simple way to track current value
• I Bond Manifesto: How this investment can work as an emergency fund
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
