The initial rate is only guaranteed for the first six months of ownership. After that, the rate can fall, down to a fixed-rate component which, as of May 1, 2023, stood at 0.9%. One-year lockup. You can't get your money back at all the first year, so you shouldn't invest any funds you'll absolutely need anytime soon.
Cons of Buying I Bonds
I bonds are meant for longer-term investors. If you don't hold on to your I bond for a full year, you will not receive any interest. You must create an account at TreasuryDirect to buy I bonds; they cannot be purchased through your custodian, online investment account, or local bank.
Are I bonds a good investment for you? I bonds can make good short-term investments, but you should feel comfortable holding them for at least one year and ideally, five years before cashing them in. They can be a good fit for seniors who want to earn interest on their savings while also keeping their nest egg safe.
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.
For retirees, I bonds represent a robust portfolio option in 2023 – and savvy investors know it. Take the March 2023 I bond composite rate, which stands at 6.89%. That's a good and safe return for retirement investors, who know only too well that capital preservation is the name of the game in retirement.
Series I savings bonds are often considered a hedge against inflation. The current composite rate for I bonds is 4.3%. You can't buy more than $10,000 in electronic I bonds for yourself annually.
Step 1: Max out your $10,000 per person calendar year limit conventionally. You can buy $10,000 yourself and your spouse can buy $10,000 through their Treasury Direct login. Step 2: You could buy $10,000 or more in gift I Bonds in May that you could deliver to your spouse in future years.
$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). 7.12% interest: The yield on I bonds has two components—a fixed rate and an inflation rate.
Cashing in a savings bond (Series EE or Series I) is relatively easy. But you can't cash one in until you've had it for at least one year. And if you cash it in before it's 5 years old, there's a penalty.
Overall, I bonds are low-risk investments when the general market is declining or volatile.
The short answer is bonds tend to be less volatile than stocks and often perform better during recessions than other financial assets. However, they also come with their own set of risks, including default risk and interest rate risk.
The 3.79% forecast is assuming that the Treasury keeps the fixed rate for new I Bonds at 0.4%, as it is now, Pederson said. He expects the fixed rate to hold at 0.4% or possibly tick a bit higher. The Treasury has been known to occasionally tweak the fixed rate when new rates for the savings bonds are announced.
Individuals, organizations, fiduciaries, and corporate investors may buy Treasury securities through a bank, broker, or dealer.
Series I savings bonds protect you from inflation. With an I bond, you earn both a fixed rate of interest and a rate that changes with inflation.
You must own the bond for at least 5 years to receive all of the interest. You can cash out an I Bond after one year, but if you withdraw it before 5 years, you'll forfeit 3 months of interest.
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.
This composite rate of TreasuryDirect Series I Savings Bond, applied to $10,000 in I bonds, would earn a guaranteed $215 in interest over the next six months (not $430, that's because it's an annualized rate) — but you cannot cash in your bond until you've held it for a year. So why even mention the six-month take?
There is no limit on the total amount that any person or entity can own in savings bonds.
EE Bond and I Bond Differences
The interest rate on EE bonds is fixed for the life of the bond while I bonds offer rates that are adjusted to protect from inflation. EE bonds offer a guaranteed return that doubles your investment if held for 20 years. There is no guaranteed return with I bonds.
The composite rate for I bonds issued from May 2023 through October 2023 is 4.30%.
While the rules make I bonds unattractive for the very short term, their return potential means they don't make sense for the very long term, either, says Meade. "Even if it's at 6.89% now, that rate is likely to go down," she says.
Treasury Bills, Notes and Bonds
U.S. Treasury securities are considered to be about the safest investments on earth. That's because they are backed by the full faith and credit of the U.S. government. Government bonds offer fixed terms and fixed interest rates.
Australian Government bonds: These are bonds issued by the federal government. Due to the lack of default risk, they are considered safer investments than corporate bonds and offer lower interest rates.