Originally posted on 10/13/23 when the initial estimates came out. I’ve updated the post below and reposted on 10/31/23 now that the official numbers have come out on the TreasuryDirect website.
We’ve been reporting on the twice-per-year I Bond rate releases. The new rate has been announced: the new rate reset on November 1, 2023 will be 3.97%. That’s for the variable part of the rate which changes twice per year. Additionally, the fixed rate is 1.30%. Total rate is 5.27%.
What this means: If you already own I Bonds and keep them, you’ll get just 3.97% interest rate for the six month period of November 2023 through April 2024. (The exception to that would be if you get a fixed rate from a previous buy in which case it would be higher.) If you buy new I Bonds (or I Bond gift box) between November 2023 and April 2024, you’ll get 5.27% for the first six months. (That’s 3.97% + 1.30%.) After the six months is over, you’ll get 1.30% added to any future variable rate.
For example, suppose in the year 2030 we have another crazy 9.62% I Bonds interest rate, you’ll get 10.92% (on the funds invested from November 2023 through April 2024) while everyone else is getting 9.62%. Or if we have a low inflationary cycle and the I Bond rate is .50%, you’ll get 1.80% while everyone else is getting .50%.
For comparison sake, the current rate which runs May through October 2023 is a 3.40% variable rate and a fixed rate of .90% for a total rate of 4.30%.
In the short term, the fixed rate bumps up the six-month holding interest rate from 3.97% to 5.27%. Longer term, the fixed rate gives an opportunity to lock money in for up to 30 years, with the guarantee to earn interest at the rate of inflation plus 1.30% added on top. Some people always like having I Bonds as part of a long term investing portfolio as part of the “safe” portion of their investments; the added 1.30% long term rate added on top makes it even more enticing.
Our Verdict
Personally, I’ll wait until April 2024 before deciding whether to lock funds in as a long term play. For now, the I Bond rate is similar to what I’m getting from other bank account and bond funds (for me it’s VUSXX and VMFXX). And so I can punt the decision into the future and see then if I have funds that I’m interested in locking up long term. (Do note that by buying the bonds later you are starting your 12-month and 5-year clocks later.)Â
For those with existing I Bonds, we wrote a concise guide on when to sell them off in this post. Even those who want to hold onto I Bonds long term might want to sell off the I Bonds they have and then re-buy with the new 1.30% fixed rate for the long term advantage. Just bear in mind, we are limited to investing just $10,000 per calendar year in I Bonds. However, you can do much more than the $10,000 annual limit by using the Gift Box option along with other strategies we’ve discussed in this article.
Related Posts:
See our post on When To Sell Off Our I-Bonds here. You can see all of our posts on I Bonds at this link. As a refresher, here’s a recap of previous I Bond rates:
- 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%)
Current Rate: 4.28%
This includes a fixed rate of 1.30%
For I bonds issued May 1, 2024 to October 31, 2024
Thanks, I’ll update here https://www.doctorofcredit.com/upcoming-i-bonds-rate-estimated-at-4-30-apy-variable-fixed-should-you-buy-or-sell-now/
Anyone thinks it’s worth buying the $5K I-bond via tax refund?
They send a paper bond so its a process to convert them to online. I still need to figure out how to for the one I bought last year.
How To Deposit Paper I Bonds to TreasuryDirect Online Account
Ready to convert paper I Bonds into electronic form? Here’s a step-by-step guide
Going Paperless
Converting EE or I paper bonds to electronic bonds
I’m a bit confused on why I would sell off in December. I bought 10k in march 2022 and now I’m at 11,148.00 so looks like I’m still waiting for the third period of high interest
If you’re content with the new variable rate you don’t have to sell. It’s only a recommendation because the last 3mo. offset period was Sept, Oct, Nov at 3.40%, which is lost if redeemed for bonds that are less than 5 years old.
Most of us are content to lose 3mo. interest at 3.40%.
11,148.00 was your redemption value = (value at 11/1/23) – (last 3 months of interest).
You were waiting until 12/1/23 for your third month of 3.4% interest.
Is the $10k/year figure a net number, or absolute? What I mean is, if I buy $10k in i-bonds in January, sell $7k of them in July, could I buy that $7k back in December, or do the sales not count towards the $10k limit?
10k purchase limit per calendar year.
Besides, you can’t sell within 12 months.
…
So if you have the reduced 3.97 with no fixed: It looks like it would be worth paying the 3 month penalty. it will pay for itself within a year assuming the current inflation rate. (Obviously you want to be at the 3.97 for 3 months so that your penalty is at the low rate.)
Personally I think I will cancel and look at some high yield savings and decide if I want to invest back in Ibonds.
Agreed, was a good inflation mitigation measure for the masses, but has too many limitations now.
It can only track “CPI” if the administration is honest and is willing to share the true CPI data rather than using all sorts of tricks or outright lying in order to make the number look better.
Not to mention that the limit is always on the nominal amount of 10000, while that 10000 might be worth less than 5000 in real terms now depending on your actual purchasing needs.
Thus basically an instrument with poor performance and poor liquidity (hard to get out, and hard to get in) at this point.
For whatever reason, Treasury Direct reports that my older bonds hitting their 6-month mark just reset to 3.94%, not 3.97%.
A couple of people commented in this post that 3.94% is the correct rate. I’m not sure where
Chuck got 3.97% from.
3.97% is, in fact, the correct variable portion for *new* bonds, which earn 1.3% + 3.97% = 5.27%. See the chart at https://www.treasurydirect.gov/files/savings-bonds/i-bond-rate-chart.pdf
Why the disparity? Beats me.
3.94% is the new variable rate and also the composite rate if your fixed rate is 0%. 3.97% is the rate people incorrectly assume is the new variable rate using your math which is a reasonable approximation but not exact.
I just logged into TD and noticed the message “Series I 5.27 % (includes fixed rate of 1.30 %)” displayed. So it seems that
Chuck was correct after all.
The exact formula for the composite rate is (2*variable + fixed + fixed*variable).
Currently, variable=1.97% and fixed=1.3%, so fixed*variable gives you the mystery 0.03% (rounded up from .0002561). The difference is negligible which is probably why it’s often glossed over.
For the recent bonds with a .9% and .4% fixed rate, this portion is .02% and .01% respectively.
The US government counterfeits the currency more then anything they’ll ever pay in interest, and they have no credibility of ever giving accurate inflation numbers. Ive found it better to just park cash in broker money market funds and selling puts on high divvie stocks.
The “Federal” Reserve which holds the most bonds, is a private group and also controls the U.S. money supply.
The Federal Reserve created by congress is controlled by and finances US governments money printing. The chairman of the fed is elected by the president for goodness sake.
The Chairman of the Federal Reserve is nominated by the President and has to be confirmed by Congress.
But you are still parking your cash in US currency and most money market contained short term US Treasury bills issued by the US government which you accused of no credibility.
If you are any serious .
You need to convert all of your US currency in other country currency or buy PHYSICAL GOLD/SLIVER and put it under your bed, also I suggest you buy a few barrels of crude oil snd store it in your bathtube.
Avoid US currency at all cost since the government counterfeits the currency more then anything🤣
Lmao, don’t crush the old man’s dreams…
bullish that you didnt mention btc as an option. after etf, those who despise or ignore it will unknowingly have allocation through their tardfi money manager and be none the wiser.
Taking investment advice from a bike messenger….priceless.
who are you referring to
Are these tax free as you can basically get short term treasury fund paying the same thing. And you get dividends each month.
Since you have 6 months to get this 1.3% rate, you might as well wait until mid-April to see where CPI goes. If CPI is trending down further, you might be better off waiting until May to buy an i-Bond as the fixed rate will go even higher. If CPI is trending up (which is what I expect to occur), then you will be rocking that 1.3% rate with higher variable rates going forward and you should lock it in before end-of-April before a lower fixed rate is announced.
You can only do 10k a year. Assuming you have high wealth buying now makes sense.
wouldn’t it be 4.47%? Edit – oh i get it, never mind. So even during the 9.62% moment, the fixed rate was 0%. Sigh.