Why This Is the Best Time To Buy Series I Savings Bonds

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Inflation is on the minds of many Americans right now. While home and gas prices are beginning to fall, there are several other areas of our budget that are hitting some of us hard. It can be difficult to remain positive after reviewing your budget.

Luckily, there’s a timely bright side to inflation and your wallet. And this is a great time to take advantage of it.

Earn High Interest Rates on Series I Savings Bonds

Series I Savings Bonds are offering a high interest rate right now: 6.89%.

Before we explain why now is the time to buy I bonds, it’s helpful to understand how Series I Bond interest rates work.

There are two savings rates: a fixed rate of return and a variable rate. The fixed rate remains the same (0.4% as of November 2022) during the life of the bond. The variable rate is recalculated every six months (3.24% as of November 2022).

The U.S. Department of Treasury calculates the rate for 12 months as an estimation of what you would earn over a year. This means the composite rate for I bonds is 6.89% currently. The day you buy I bonds, you earn the existing inflation interest rate for six months. Then you earn the new interest rate for six months.

Here’s where money expert Clark Howard says it gets interesting:

“The new rate that resets every six months is now 6.89%. But there’s a big difference. For years, the Treasury hasn’t offered any rate in addition to the inflation rate. With the new reset, people who buy series I savings bonds now, you’ll earn an additional 0.4%, meaning that you’ll always earn the rate of inflation plus an additional booster shot.”

If you purchased $10,000 worth of I bonds in 2022, you are now eligible to buy another $10,000 in 2023. A new interest rate will be announced in May 2023.

Frequently Asked Questions About Series I Savings Bonds

What does the “I” stand for in the I bond? The “I” stands for inflation. The annual interest rate resets every six months. As inflation goes up, what you earn goes up. As inflation goes down, what you earn goes down. The value of your I bonds can never be less than what you paid.

Where do I buy I bonds? Visit TreasuryDirect to purchase I bonds. You can find more information here on buying I bonds.

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Is there a limit to how much I can purchase? The maximum purchase is $10,000 per person every year. However, you can also use up to $5,000 from your federal tax refund to purchase I bonds so you could potentially purchase $15,000 in one year.

What are the withdrawal rules? The money must remain in the bond for at least 12 months. If you cash them out before five years, you lose the previous three months of interest. I bonds earn interest for 30 years.

Does Clark Howard own Series I Savings Bonds? Clark says that he has owned these bonds for 24 years. He plans to hold them for all 30 years which is the amount of time it takes for a bond to fully mature.

You can find more answers to frequently asked questions about Series I Bonds here.

Final Thoughts

If you’re wondering where to stash your cash, Clark says Series I Savings Bonds are a great option right now:

“This is a great place in a time of even moderate to high inflation to have these. The fact now that you’ll earn inflation plus another almost half of a percent makes these an even better deal than they were before. For right now, they remain a great place to park money.”

Before you buy I bonds, make sure you can leave the money in the bond for at least one year (ideally at least five years) to avoid penalties.

Questions about Series I Savings Bonds or other money topics? Call Team Clark’s free Consumer Action Center and an experienced volunteer can help: 636-492-5275.

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