Looking for a way to keep your money safe, yet want to be sure that it outpaces inflation? Series I bonds may be the perfect solution for you.
Here’s What You Need To Know About Series I Bonds
Back in the 1990s, money expert Clark Howard first started talking about Series I savings bonds and how they were a tremendous deal for savers because of the fantastic rates of interest.
But in the early 2000s, the federal government started dropping its fixed rate attached to the bonds, and soon their total interest rate wasn’t worth a whole lot.
Now, because inflation is rising, Series I bonds are potentially a good place for you to stash cash again.
Here’s what you need to know before getting started.
1. How Do Series I Savings Bonds Pay You?
The “I” in Series I bonds stands for “inflation.” But that’s just half the picture. There are actually two interest rates you earn money from when you buy an I bond:
- A fixed rate that never changes for as long as you hold the bond
- A separate inflation rate that changes every six months
Series I bonds are basically a way to profit from rising inflation. Right now, the fixed rate for an I bond sold from May 2021 through October 2021 is 0.0%. This rate will remain constant over the life of the I bond.
Then there’s the separate inflation rate, which currently pays 1.77% every six months and changes at the end of that six-month period.
When you add it all together, you’re currently earning an annual composite rate of 3.54% (1.77% x 2).
That’s better than what you can earn on a CD right now. And what Clark likes about these bonds is that you never have to worry about falling behind inflation. You always get your base rate, plus the secondary rate, to put you over the top.
You can keep up to date with the latest Series I savings bond rates here.
2. How Much in I Bonds Can You Buy?
You can buy up to $10,000 of these each year, per person. The minimum investment starts at $25 when you do it online.
You can also buy paper savings bonds using your tax refund. In that case, the minimum starts at $50.
3. How Long Can You Hold an I Bond?
I bonds reach full maturity after 30 years. That means you stop earning interest on your money at that point.
An early withdrawal penalty applies if you cash out an I bond before five years of ownership. The penalty is forfeiture of three months of interest.
4. Where Can You Buy I Bonds Online?
To buy Series I savings bonds online, simply go to TreasuryDirect.gov and look for the link that says “How to buy Series I” under the Individuals tab.
Series I savings bonds are one tool that may help you achieve long-term financial stability. But don’t confuse buying one with investing, Clark says.
“Putting money in an I bond is not investing. It’s a method of saving and it gives you a way of knowing that inflation isn’t eating your money up — because you’re kicking past inflation.”