Series I Savings Bonds ("I" stands for inflation) are Inflation-adjusted U.S. Savings Bonds and can only be purchased directly from the TreasuryDirect.gov website. With inflation levels at historically high levels, I Bonds present a unique investment opportunity right now. While purchases are limited to $10,000/year/person, I Bonds may be a way to increase your expected return on excess bank cash on hand. The main restriction on I Bonds is that you cannot sell or liquidate them within the first year, and if sold within 5 years, you will lose 3 months of past interest earned. I Bond interest rates are adjusted semi-annually and interest is received when the bonds are cashed out. There is a fixed component (which is currently 0%) and an inflation component (see below). Interest is compounded semi-annually and accrues from the first day of the month when issued. Therefore, if you buy a bond on the 29th day of the month, you should be credited interest for the entire month.
April 2022 Purchase
For I bonds purchased in April 2022, the owner will receive 7.12% interest for the next 6 months. After that time, the owner will step up to the rate that is announced in May 2022 for the next 6 months, which is expected to be around 9.62%.
May-October 2022 Purchase
For I bonds purchased in May-October 2022, the owner will receive the expected 9.62% interest for the next 6 months. After that time, the owner will step up to the rate that is announced in November 2022, which may be lower (depending on new inflation data). However, the interest rate cannot go below zero.
Interest on I Bonds is exempt from state taxes but subject to federal taxes.
Below is an excellent video published by the Wall Street Journal that further explains I Bonds.
Additional information about Series I Bonds can be found on the TreasuryDirect.gov I Bonds Information website.
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