(Update 10/31/24: Confirmed 3.11% rate with 1.20% fixed and the rest variable; this is for November 2024 through April 2025.)
We’ve been reporting on the twice-per-year I Bond rate releases. The new rate for November 2024 through April 2025 is slated to be 1.90%, based on inflation reports. Additionally, estimates/predictions are that the fixed rate will be around 1.20% (or possibly a bit less). That gives a total rate of around 3.10% for 6 months.
What this means:
- If you already own I Bonds and keep them, you’ll get just 1.90% interest rate for the six month rate period of November 2024 through April 2025 (plus whatever your fixed rate is from a previous buy).
- If you buy new I Bonds (or I Bond gifts) between November 1, 2024 and April 30, 2025, you’ll likely get around 3.10% for the first six months (1.90% variable + 1.20% fixed). After the six months is over, you’ll get the fixed rate added to whatever the future variable rates are at the time.
For comparison sake: the current rate which runs April 2024 through October 2024 is 4.28% – that comes from a 1.30% fixed rate and 2.98% variable rate.
List of Past I-Bonds Rates
For context, here is a review of past I Bond rates that many of us bought into:
- May 2021 through October 2021 – 3.54%
- November 2021 through April 2022 – 7.12%
- May 2022 through October 2022 – 9.62%
- November 2022 through April 2023 – 6.48% (6.89%)
- May 2023 through October 2023 – 3.40% (4.30%)
- November 2023 through April 2024 – 3.97% (5.27%)
- May 2023 through October 2024 – 2.98% (4.28%)
- (estimate) November 2024 through April 2025 – 1.90% (3.10%)
Rate Change Deadline: To receive the current 4.28% rate for I Bonds in TreasuryDirect, you must request your purchase by 11:59 p.m. Eastern Time on Wednesday, October 30.
Also, reminder that limits on delivering gift bonds have apparently been lifted. The 1.3% fixed rate hasn’t been seen for almost 20 years and is likely to go down tomorrow, so this would be a good time to load up.
Chuck
https://www.doctorofcredit.com/treasury-direct-allowing-instructing-gifting-more-than-10000-in-i-bonds/
Yup, saw that, thanks…I was thinking it was worth mentioning again on the main page since today is the deadline…up to you and
William Charles though
Capt Obvious here, but: even with the lower interest rate, I Bonds still have the benefit of tax deferral, i.e., the interest isn’t taxable until withdrawal.
Considering other rates out there now, I dont think taking 3.10 makes much sense including any tax considerations. 10 Yr T bills pay 4% also tax deferred. 2 yr T bill also at 4%. Those have no state income taxes as well.
Interest on 10-year and 2-year Treasury notes* is taxable as earned/paid(every 6 months), NOT deferred until maturity, unlike Treasury bills and I Bonds.
*Treasury notes are issued w/ maturities of 2, 3, 5, 7 and 10 years. Treasury bills are issued with maturities 4 wks to 52 wks.
So, earning 1-2% more on even $100k ($1-$2k annually) is worth e.g. going over the EITC cliff and potentially losing out on $7k+ in tax credits? There are several such tax cliffs. These also don’t have state income tax, and can be used to pay for e.g. college tuition to avoid taxes completely.
Pretty much useless now with HYSA’s hovering around 4.5%+
Right but you are assuming HYSA will stay above 4.5% come Nov and Dec. If interest rate cuts are introduced in Nov and Dec its not that much higher. Banks are not charitable and HYSAs rates will crater fast in 2025.
I’ve been buying t-bills instead through my brokerage. No need to touch Treasury Direct, and I can set up autoroll so I don’t have to think about it.
I-bonds are nice in that they’re tax deferred, but until 5 years, you _still_ have to pay back part of the interest. T-bill rates _could_ drop, but even then, I’d still want to be able to access the funds quickly for things like bank bonuses if there’s a particularly good deal.
I did own I-bonds in the past, but with inflation dropping, I’m less worried about an inflation hedge and more interested in seeing if I can beat inflation with other guaranteed returns.
What’s your rationale for T bills over just a good savings/money market fund?
Good question since I-bonds were guaranteed to beat inflation by 1.3%…(now only 1.2%)
I guess no state tax on the interest can make the math work out?
What do you mean? State tax exemption applies to t-bills and i-bonds equally…
Fed rate is about to drop so good luck to him trying to find better guaranteed rates, lmao
If so go for Tbills. You can lock down 4% for 2-10 yrs roughly. 3.10% is too low.
Buy I-Bonds in October and get 4.28% for 6-months. The most important part of this is to lock in the 1.30% fixed rate before it resets likely lower.
In May your rate will reset to 3.20% (1.30% fixed + 1.90% composite). By the time this happens in May 2025 rates on HYSAs and T-Bills will have come down following the future rate cuts that the Fed is anticipated to make.
Buy why do this when you can get 4% on a 52 week t-bill right now?
More of a long term play. Historically the 1.3% fixed rate is pretty good. We all remember when HYSAs were only paying .5%
Why ask such an obtuse question? In the last 3-years did we not all just live through the worst inflation in the last 40-years? Why subject yourself to interest rate risk 52-weeks from now?
Interest paid on I Bonds are reinvested in the I Bond lot on the original terms of the investment, effectively expanding your I Bond space at that fixed rate. A fixed rate of 1.30% is EXTREMELY attractive; the last time we saw better than that from I-Bonds was in 2007. The I-Bonds purchased in October are guaranteed to earn 1.30% plus the semi-annual inflation adjustment for 30-years. Short term interest rates are heading down from here, who knows where they will settle.
I-Bonds will not make you rich, but in my portfolio they play the role of keeping me rich. I’ve built a small war chest of I-Bonds large enough to payoff my mortgage if I ever needed to. When we hit another hard recession and I’m in retirement I could sell I-Bonds to fund my lifestyle for upwards of a couple of years instead of having to sell depressed equities. Their interest can be tax exempt if used to pay higher education expenses and you’re below income phaseout limits; I am not. I can control when I pay taxes instead of paying tax annually on earned interest which becomes extremely important in retirement. I am guaranteed to earn a positive real return (net of inflation) which is something that nominal treasuries cannot do.
I-bonds with 0% fixed rate are somewhat useless now that I can agree with.
The ones with 1.2%/1.3% fixed rate you should always hold.
Just leave it in Vanguard VMFXX default settlement fund. Paying 4.9% rolling 7 days and it is 90-100% held in treasuries. Same for fidelity, etc.
I buy after market treasuries at the same rate, one to six month maturity, depending on the market. Same but treasuries aren’t subject to state taxes.
You can also use VUSXX, which isn’t subjected to state tax
Fidelity is now 4.5%
VUSXX
Basically buy this year’s I-Bonds and new years gift box now before November to get best rates. Right?
Yeah, best to lock in the (likely) higher fixed rate now, I’d think
Gift box?
https://thefinancebuff.com/buy-i-bonds-as-gift.html
Huh. Good info!
the glory days of ibonds are over for now
HARRIS!!!!!!! Oh wait, we’re supposed to hate inflation, right?
Trump!
BUSH!!!
Jeb!
6 month treasury bonds pay 4.5 percent so not sure why you would buy these
If you buy before end-of-month, these will pay 1.3% even when inflation is at 0% and HYSAs are at 0%. They’re also tax-deferred until redemption. Could be a good place for part of your emergency fund.
All of the above, not to mention you can cash them out any time after a year (3 month interest penalty for cash out < 5 years will be no barrier when interest rates are low). For some of us, there are major tax cliffs we’re trying to avoid, so certain investments (such as I-Bonds, municipal bonds, etc.) are a lot more attractive.
By buying these, you’re essentially making a bet that interest rates will go down in the future and that you will be able to receive a higher future rate than you can get in a savings account because you will always get that 1.3%. HYSAs and T-bills look good for now but if the fed drops rates those old I-bonds will start performing better relative to potential future offerings.
Personally I keep my emergency fund in I-bonds.
People’s memories are short. For almost the whole 2010s HYSAs paid essentially no interest. You’d be happy to have 1.3% then–not to live on, but for your emergency fund? Sure.
If you can ladder out T bills, which you can, why go for 3.10% when you can get 4% now all the way 10 yrs out? They also could have a bit more liquidity as far as cashing out for that emergency? You mgiht as well play the new account game if you were going to take 1% on money.
Redemption flexibility for tax purposes.
2-10 Yr treasuries are also roughly 4%. So I wonder about these.
I’m not sure I’d be investing in I-bonds at the current rate unless I was high income and had upcoming educational expenses.
Not too high income where they can no longer be used for educational expenses.
Main advantage of I bonds is tax deferral for 30 years esp if one plans to be in a lower income bracket (retired) in 30 years
I suppose, but at current rates, you’d likely be better off with a treasury ladder.
Maybe. I bonds do allow to redeem full value after five years and of course hedge against deflation as well as inflation (although stocks are a better inflation hedge over 30 year timeframe).
Thats what I think. Nobody has any idea where rates are going. The trend is to think lower, but thats a guessing game. So laddering makes sense.
HYSAs, especially the “normal” ones, are most likely going to see their rates crater as fast as ever they can get away with it. (Remember the reason the ~9% I-bonds were so relatively great is that the HYSAs dragged their feet ridiculously on adjusting those rates: in an efficient world the two rates would not quite converge, but would be close.) By the end of six months, then, I-bonds will probably be looking solidly respectable *as an asset for the back half of your emergency savings or similar*, or for five-year savings projects like down payments, especially with a relatively high fixed component. Putting aside the fluke 2021-22 period, which was more about inefficiency in the HYSA/CD market than about bad pricing by the feds, they’re not meant for return-chasers, but (esp. with the tax deferral and state tax exemption) they have their place.
My favorite is the emails I’ve gotten lately with the subject “An update on your soandso savings rate”, they state the new rate but then love to throw in there oh but don’t worry it’s till 8x the average rate so it’s ok you can feel good we are paying you less interest than we were last month.
Yep, literally just got one five minutes ago!