U.S. savings bonds

I bond rates reset: How to buy


A type of savings bond issued by the U.S. government has become popular among investors since inflation started ticking higher in mid-2021. The interest rate that Series I bonds pay resets twice each year, based on the current rate of inflation, so these bonds are a way to protect investors from inflation. 

Investors who rushed to buy I bonds as inflation reached a more-than 40-year high briefly crashed a website run by the U.S. Department of the Treasury in 2022. Now that inflation is cooling, however, I bonds have lost some of their luster.

“We’re not getting as many questions about them as a year ago,” says Danny Rozansky, a principal and managing director at Robertson Stephens, a San Francisco-based wealth manager. 

I bond rates will readjust on May 1 — falling to 4.3%, from the current 6.89% rate — while the Federal Reserve’s efforts to curb inflation by raising interest rates has made other traditionally safe havens, including certificates of deposit (CDs) and high-yield savings accounts, much more attractive, adds Alec Quaid, a Denver-based certified financial planner at American Portfolios. “At this point, folks have kind-of missed the boat on I bonds.” 

Still, if you’re intrigued by these savings bonds, here’s what you need to know about buying them.

How to buy I bonds

I bonds can only be purchased directly from the U.S. government, and are available either in an electronic or paper format. Unlike stocks and many other types of bonds, you cannot buy and sell I bonds in secondary markets, such as through an online broker. 

You may purchase up to $10,000 in electronic I bonds each calendar year, and up to $5,000 in paper bonds with your federal tax refund, for a total allowable amount of $15,000.

Because you must buy I bonds yourself, this decreases their attractiveness to some investors who want to consolidate their investments, Rozansky notes. If you do buy I bonds, it’s important to alert your financial advisor so these investments are factored into your total portfolio, he adds.

Buying I bonds online

To buy I bonds online, you must first create an account with TreasuryDirect. To set up this account, you will need to provide some personal information, including your social security number and bank account details. 

To buy electronic I bonds:

  1. Log into your TreasuryDirect account.

  2. Select BuyDirect.

  3. Choose I bonds as your selection.

  4. Fill out the necessary information, including how much you want to buy up to $10,000 and down to the exact penny.

Buying paper I bonds

You can buy paper I bonds using your IRS federal tax refund — but only if you’re due a refund and don’t owe taxes. When filing your taxes, complete IRS Form 8888 and specify how much of your refund you want to go toward I bonds, and whether they’re for you or someone else (as a gift).

You may buy up to $5,000 in paper bonds each calendar year, in $50 increments. 

What are I bonds?

Series I bonds are a type of U.S. savings bond that are specifically designed to protect investors against inflation. These bonds pay a variable interest rate that’s based on the rate of inflation, as measured by changes in the consumer price index for all urban consumers (CPI-U). 

When you buy I bonds, you are lending money to the U.S. government with the promise to be paid back later with interest. These types of savings bonds are considered to be very safe investments because the U.S. government has never defaulted on its debt — even during past recessions. As such, I bonds can help investors protect against volatility in the stock market.

How do I bonds work?

You can buy up to a total of $15,000 in I bonds each calendar year, with a minimum investment of at least $25. I bonds earn interest for 30 years, unless you cash them in before then, and the monthly interest rate is a combination of:

Whereas the interest you earn with a high-yield savings account often compounds and is deposited to your account on a monthly basis, that’s not the case with I bonds. You begin earning interest from the first day of the month you buy I bonds, but the monthly interest compounds semi-annually. Twice a year, the interest the bond accrued in the prior six months is added to the principal value. Once the I bond rate adjusts, you will earn interest on that new value.

Thanks to this compounding effect and their relative safety, I bonds became popular among investors when they were paying high interest rates. But these bonds do carry a risk — that the interest rate will go down, as it’s poised to do soon, Rozanky notes.

What’s more, investors should be aware of two other aspects that might make I bonds less attractive vis-à-vis other options, like CDs or high-yield savings accounts. Investors can only cash in, or redeem, an I bond after holding it for 12 months. And if you do so within five years of buying the I bond, then you will lose the last three months worth of interest. Because CDs and high-yield savings accounts are offering such competitive rates right now, it’s a good idea to shop around and consider all of your options.

Should you buy I bonds now?

The above restrictions that apply to cashing in I bonds, along with the prospect of a “dramatic change” in rates, are among the reasons why Quaid is hesitant to recommend them to clients. What’s more, I bonds require you to open a new account and then manage your investments across multiple accounts — and that hassle may not be worthwhile going forward.

“Many people are not going to take the time to figure this out, and not for the rate they’re paying now, that’s just real life,” he says

Instead, Quaid recommends opening a high-yield savings account which will offer more flexibility for accessing your money — and interest rates for high-yield savings accounts (offered at online banks) are currently as high as 5.0%. For investors who want to lock in a guaranteed rate, some CDs are also paying interest rates of 5.1%, though you can’t access that money for a set period of time or you risk losing interest.

Finally, as with any investment, it’s important to consider your timeline, how you view risk, and other financial considerations on your horizon, Rozansky says. “People ask: Is this a good investment, and it really depends.”

The bottom line

Not so long ago, when inflation was running at about 2%, you probably didn’t hear much about I bonds. That changed as inflation crept higher, and the rate I bonds were paying briefly surpassed 10%.

But the Fed’s aggressive efforts to curb inflation by raising interest rates means I bonds are now paying lower rates — while other types of investments have become more attractive.

Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at [email protected].



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