SERIES I BONDS ISSUED SEPTEMBER 1998 AND THEREAFTER All Series I bonds reach final maturity 30 years from issue. Series I savings bonds earn interest through application of a composite rate.
You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.
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 have a 4.30% interest rate until October 31, 2023. If rates stay the same you could earn over $434 in interest in one year.
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.
The May 2023 I Bond inflation rate is announced at 3.38%* based on the March 2023 CPI-U data.
Beware of I bonds' drawbacks
The biggest red flag for short-term investors: You can't redeem these bonds for a year after you purchase them, and you'll owe a penalty equal to three months' interest if you cash out any time over the first five years of owning the bond.
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.
I bonds are an excellent option for those who want to invest their money safely but still reap some rewards along the way. With their low minimum purchase amount, guaranteed return on investment, inflation protection, and tax-deferment features, it's no wonder Suze Orman continues to recommend them.
May 1, 2023. 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.
Key Takeaways. Bonds are often touted as less risky than stocks—and for the most part, they are—but that does not mean you cannot lose money owning bonds. Bond prices decline when interest rates rise, when the issuer experiences a negative credit event, or as market liquidity dries up.
EE Bond and I Bond Differences
The interest rate on EE bonds is fixed for at least the first 20 years, while I bonds offer rates that are adjusted twice a year 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.
You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.
The current bond composite rate is 4.3%. That rate applies for the first six months for bonds issued from May 2023 to October 2023. For example, if you purchased I bonds on May 1, 2023, the 4.3% rate would be in effect until Oct. 31, 2023.
After a year like 2022, something as safe as I Bonds or EE Bonds, which guarantee to double your investment in 20 years, might seem like the move, but history suggests we can put more risk in our portfolios.
A higher fixed rate will offer more assurances that the bond will maintain purchasing power in the face of inflation. It will also provide some benefit in times of deflation. The current variable rate is 3.24% which is annualized and added to the current fixed rate of 0.4% for a composite rate of 6.89%.
Both Treasury-Inflation Protection Securities (TIPS) and Series I Savings Bonds adjust for inflation.
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%.
Can I Bonds lose value? No, I Bonds can't lose value. The interest rate cannot go below zero and the redemption value of your I bonds can't decline.
Plus, I bonds come with some tricky rules. For one, they can't be redeemed for a year after you purchase them, making them a bad place to stash cash you may need in a hurry. If you redeem them within the first five years of purchase, you'll owe a penalty equal to three months' interest.
$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.
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.
Key Points. 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.
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.