I am hearing that I-bonds (US bonds issued by the government) are paying 9.62% interest right now which is very good. We can invest up to $10,000 in I-bonds per year.

Should we do that?

They are backed by the full faith and integrity of the US government. We have to hold them for 1 year, which is fine. They pay out much better than the 0.01% we currently receive in interest from our accounts.

We have about $200,000 in reserve, so putting $10,000 in I-bonds would not be an issue.

Thoughts?

Sure, your HOA can invest in I-bonds. I'm not sure of the tax implications on the interest.

Not exactly.

If the HOA has an EIN, then it should be able to open an entity account. There are hoops to jump through, though, such as requiring a single authorized individual to handle the account. Given how often board members can come and go, it may not be practical for HOAs to do this.

See more here: https://www.treasurydirect.gov/indiv/TDTour/default_entity.htm

There are also some banks and brokerage firms that sell treasury securities.

Investing in bonds is a specialty in itself. Typically the higher rates require you to hold the bond for a number of years (think 30 years) in order to earn that money. And the rule of thumb is that buying bonds during periods of rising interest rates isn't smart, although this wouldn't matter if you're planning to hold the bond to maturity. If you're forced to sell it early, you may forfeit interest and/or sell it below par value (ie, for less than you paid for it).

Another rule of thumb is that chasing yields can lead to investing mistakes. Higher yield means higher risk - there is no way around this. With bonds this usually means either tying your money up for long periods of time or buying lower-quality issues (ie., junk bonds where you may not get your money back).

Unless you have someone who understands this stuff, it's best to stick to plain vanilla investing.

Justin,

Please note that your link to the article did not work.
It appears that you failed to put the URL in the code (you used it for the text part but not the actual URL portion - do a quote on your post and you will see what I am talking about).

That said, the text to the article is correct and I went to the article itself it expresses many of the opinions that we are posting about this topic. Here is a working link for anyone interested:

Investing HOA Reserve Funds The Right Way from HOA Management

Concerning the reserves calculator - I'm not sure this is what you were looking for, but I found this on the internet:

REPLACEMENT RESERVES CALCULATOR:
https://www.eccu.org/assets/general/tools/replacement_reserves_calculator/

Justin, I have no idea about that other calculator, but there's a reserve forumla compliant version available for free (that Max has given the thumbs up) here: https://www.(LINK-NOT-ALLOWED-PER-POSTING-RULES)/resources/reserves#h.bdahj25nm7rw. N.B. I developed that tool for free based on a model supplied by a leading national reserve study firm.

I will not that, in response to Cathy, "banks and brokerage firms" that sell Treasury securities (I established our CIC's brokerage account at Fidelity) do NOT sell I-Bonds. I-Bonds are a Treasury Direct feature only. Here's the Fidelity page for Fixed Income, Bonds and CDs: https://fixedincome.fidelity.com/ftgw/fi/FILanding?bar=p

Regards,
Steve

You CAN setup an account ... How to set up a Corporate Entity Account in TreasuryDirect: https://www.treasurydirect.gov/indiv/tools/establishing-a-corporate-account-2021.htm
BUT there's no way to establish a multi-user account like you would have at a bank or brokerage firm where more than one person can control things. Check out the video link above. N.B. The "Entity Account Manager" MUST:
> Be a corporate officer or designated employee
> Be authorized to act alone
> Use the EIN of the corporation

Regards,
Steve

In Washington State, a management company would be unlikely to "act alone" with reserve funds in a Treasury Direct account due to our statutes. They are also NOT a "corporate officer or designated employee" of the CIC. Any type of financial account that's not a "typical" bank account that your management company regularly uses to facilitate your operating, reserve and insurance funds may be off-limits to your management company for any number of reasons.

Due to the nature of HOW an individual or corporate entity is required to invest / manage an I-Bond investment, I would be surprised to see CICs do this.

Regards,
Steve

https://treasurydirect.gov/forms/savpdp0039.pdf