I bonds — TreasuryDirect (2024)

FAQs

I bonds — TreasuryDirect? ›

The composite rate for I bonds issued from May 2023 through October 2023 is 4.30%.

The composite rate for I bonds issued from May 2023 through October 2023 is 4.30%.

Key Points. Pros: I bonds come with a high interest rate during inflationary periods, they're low-risk, and they help protect against inflation. Cons: Rates are variable, there's a lockup period and early withdrawal penalty, and there's a limit to how much you can invest.

How much can I buy? Individual purchase limits for I bonds are $15,000 per calendar year — $10,000 worth of electronic I bonds and $5,000 worth of paper I bonds. Paper I bonds can only be purchased using your federal tax refund and are not bought electronically.

I bonds issued from May 1, 2023, to Oct. 31, 2023, have a composite rate of 4.30%. That includes a 0.90% fixed rate and a 1.69% inflation rate. Because I bonds are fully backed by the U.S. government, they are considered a relatively safe investment.

Three credit unions pay over 7% APY on accounts right now: Landmark Credit Union and OnPath Credit Union. Plenty of high-yield savings accounts pay over 5% APY on your total balance without making you jump through hoops.

The 4.30% composite rate for I bonds issued from May 2023 through October 2023 applies for the first six months after the issue date. The composite rate combines a 0.90% fixed rate of return with the 3.38% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U).

Another advantage is that TIPS make regular, semiannual interest payments, whereas I Bond investors only receive their accrued income when they sell. That makes TIPS preferable to I Bonds for those seeking current income.

Unlike I-bonds, TIPS are marketable securities and can be resold on the secondary market prior to maturity. When the TIPS matures, if the principal is higher than the original amount, you get the increased amount. If the principal is equal to or lower than the original amount, you get the original amount.

You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.

What is the penalty for I bonds? ›

One of the big downsides of purchasing I bonds is you can't access the money for at least one year. But there's another sneaky pitfall: a three-month interest penalty for selling the asset within five years.

Before that, you could purchase paper I bonds at banks and other financial institutions. Now, only one method remains: You must fill out IRS form 8888 to elect part or all of your tax refund money go toward buying paper I bonds — up to $5,000 and in multiples of $50 (i.e., $50, $100, $150, and so on).

$10,000 limit: Up to $10,000 of I bonds can be purchased, per person (or entity), per year. A married couple can each purchase $10,000 per year ($20,000 per year total).

Since you can get the same 0.90% fixed rate on your I Bond purchase in September 2023 through October 2023 it's likely best to wait until October 2023 so that you can get a better sense of what your future renewal rates will be, as well as what rates you can get on similar interest rate investments.

Are I Bonds Still a Good Investment in 2023? Series I savings bonds are not a perfect investment, but they make sense for many Americans looking to capitalize on high inflation. When you can earn 4% or more from risk-free savings bonds, going elsewhere to earn less with higher risk hardly makes sense.

Buy Bonds during a Market Crash

Government bonds are generally considered the safest investment, though they are decidedly unsexy and usually offer meager returns compared to stocks and even other bonds.

We know that March 2023 CPI-U was 301.836 and August 2023 CPI-U is 307.026. This represents a 1.72% increase. This means that starting in November 2023, new I Bonds will earn a rate of 4.36%.

I savings bonds earn interest monthly. Interest is compounded semiannually, meaning that every 6 months we apply the bond's interest rate to a new principal value.