Series I Savings Bonds have been drawing more attention during this period of inflation, and for good reason. So just what is an I Bond and why is everyone talking about this once lesser-known investment?
I Bonds are securities issued by the U.S. Treasury department specifically designed to protect your money from inflation. They earn interest based on both a fixed rate and a variable (inflation) rate which is set twice a year (every May and November) based on the Consumer Price Index. The current interest rate through October 2022 is 9.62%. Because they are backed by the U.S. government, these bonds won’t lose value and they earn interest until their maturity at 30 years or until you cash them. However, you must own the bonds for one year before you cash them, and if you cash them in before five years, you’ll lose the previous three months of interest.
Only electronic Series I Bonds can be purchased, by going directly to TreasuryDirect.gov. There is a minimum purchase of $25 with a $10,000 limit each calendar year. However, as part of your federal tax refund you can “buy” up to $5,000 paper I bonds. You can also gift I Bonds by purchasing them in the name of the recipient. The purchase price of the gifted bonds counts toward the annual limit of the recipient, not the giver.
If you have money in your savings account that isn’t needed in the near-term, this may be something worth considering. Feel free to call us to discuss further.