In November 2021, the annual I bond yield jumped to 7.12%, and hit a record high of 9.62% in May 2022 before falling to 6.89% in November 2022.
Effective today, Series EE savings bonds issued May 2022 through October 2022 will earn an annual fixed rate of . 10% and Series I savings bonds will earn a composite rate of 9.62%, a portion of which is indexed to inflation every six months.
Series EE savings bonds issued May 2023 through October 2023 will earn an annual fixed rate of 2.50% and Series I savings bonds will earn a composite rate of 4.30%, a portion of which is indexed to inflation every six months. The EE bond fixed rate applies to a bond's 20-year original maturity.
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.
If you are looking to protect your principal and guard against inflation, I bonds are still worth it long term — even with them down from the eye-popping 9.62 percent rate from last year. Even as inflation continues to retreat, you're guaranteed at least six months of the yield available at the time of your purchase.
The May 2023 I bond composite rate is 4.30% (US Treasury) which is 2.15% earned over 6 months.
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.
I bonds are a great idea for retirees and other investors looking for competitive inflation-adjusted returns. “They offer such a great deal that the government limits the annual purchase amount to $10,000 per Social Security number,” Reilly notes. “There are no coupon payments.
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.
The variable rate on I bonds will drop in May. Those who want short-term returns might prefer to buy I bonds in April to lock in higher rates. Long-term investors might be better served by waiting.
I bonds: A low-risk investing strategy
Because I bonds are backed by the U.S. government they carry very little risk. Plus, you'll have the added bonus of protecting your cash's purchasing power.
While there's no limit on how often you can buy I bonds, there is a limit on how much a given Social Security number can purchase annually. Here are the annual limits: Up to $10,000 in I bonds annually online.
Interest on I bonds is exempt from state and local income taxes and, if you qualify, from federal income tax when used to pay for higher education. You can buy up to $10,000 in electronic I bonds per person in a calendar year, with an online account at TreasuryDirect.gov.
According to the Barclay's U.S. Aggregate Bond Index, 2022 was the worst year in since they started recording in 1976 for bonds. Since 1976 in fact, we've only have 5 negative years in the bond market. Last year, 2022, was historically bad – down 13%.
Most savings bonds stop earning interest (or reach maturity) between 20 to 30 years. It's possible to redeem a savings bond as soon as one year after it's purchased, but it's usually wise to wait at least five years so you don't lose the last three months of interest when you cash it in.
When the 10-year yield declines and mortgage rates fall, the housing market strengthens, which in turn has a positive impact on economic growth and the economy. The 10-year Treasury yield also impacts the rate at which companies can borrow money.
Most bonds and interest rates have an inverse relationship. When rates go up, bond prices typically go down, and when interest rates decline, bond prices typically rise.
While the upward pressure on rates continues to affect bond prices, net new investments in bond funds will steadily lift yields in the portfolio higher as higher-yielding bonds replace lower-yielding bonds in the fund. This means that, over time, the total return of the bond will increase.
Your I Bonds will never be worth less than you invested. The bond will increase in value every six months when interest earned is added to your account value. However, you will lose the last three months of interest if you cash out your I Bond during the first five years.
Historically, stocks have higher returns than bonds. According to the U.S. Securities and Exchange Commission (SEC), the stock market has provided annual returns of about 10% over the long term. By contrast, the typical returns for bonds are significantly lower. The average annual return on bonds is about 5%.
Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you're diversifying your portfolio.
The limit is per person — so if you're married, each spouse is allowed to purchase $10,000 in I bonds (plus the paper bonds if they have a tax return). You can also purchase up to $10,000 in I Bonds for your children, but they must be used for the child, to save for college, perhaps.
$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.
If you are looking for predictable value and certainty for your financial goals, then individual bonds may be a better fit. Meanwhile, if you are looking for professional management and want greater diversification for your financial goals, then bond funds may be a better fit.