Update 10/25/22: The new rate for November will be 6.48%. You can still buy before the end of October to lock in 6 months at the 9.62% rate. We discussed the new 6.48% rate more in this dedicated post.
Update 4/29/22: I Bonds purchased now will count as May purchases and immediately get the 9.62% rate. Purchases no longer gets the 7.12% + 9.62%. Instead you’ll get the 9.62% rate for 6 months and then an unknown rate for 6 months. This is still a good deal to buy either now or in the coming months in order to get the 9.62% rate. If 9.62% isn’t worth your while, wait until September/October time when we have a better feel for the what the following rate will be for the next 6 months and decide then. Any purchases by October 28th will still get 6 months of the 9.62% rate.
Update Thursday 4/28/22: Today is the last day to get in on the 7.12% rate since every purchase settles the next day:
- We’ve explained how you’ll likely do better purchasing in April to lock in the 7.12% and the 9.62% rate, see U.S. Treasury I Bonds FAQ (When To Buy $10,000 I Bonds? 9.62%? And More…) for more information.
- If you buy Thursday 4/28 (until midnight?), it’ll settle Friday 4/29. If you buy Friday it’ll settle Monday 5/2 and immediately get the next rate. You’ll see clearly on the final Purchase Review screen when the official Purchase Date is.
- Even if you don’t yet have a Treasury account, you can likely set one up today and make the purchase today and have it settle Friday 4/29 since most people get automatically approved by the Treasury for an account without delay.
Update 4/12/22: New rate has been set for 9.62%. Wow! Buy in $10,000 before the end of April to lock in the current rate of 7.12% and then get the 9.62% beginning in 6 months. See this follow-up post to learn more: U.S. Treasury I Bonds FAQ (When To Buy $10,000 I Bonds? 9.62%? And More…)
Original Post 10/13/21:
Multiple people have been asking us to write about buying US Treasury Series I Savings Bonds, known as I Bonds. The rate adjusts on these bonds every six months. The current rate for May – October 2021 is 3.54% APY. The rate is set to change in November to 7.12% APY (source). You are limited to buying $10,000 per calendar year per SSN. The rate locks for 6 months from your purchase date and then updates to the new rate for the following 6 months, etc, etc.
You have to lock the money in for a year; after that you can pull the funds out with a 3-month penalty. If you leave the money in for 5 years there is no penalty.
We’ve had the I Bonds rate on our Best High-Yield Savings Account page for quite some time now, though I never focused on it much due to the $10,000 limit. However, given the current climate of low interest rates at regular banks, and the upcoming high interest rate of I Bonds, I’m definitely planning on doing this.
My understanding of the the best approach is to buy $10,000 in I Bonds now before the end of October (always give yourself a few days buffer). Then buy another $10,000 sometime between January 1, 2022 and April 30, 2022. This way you’ll end up with $20,000 earning the 7.12% rate.
- Your 2021 $10k will earn 3.54% APY for 6 months and 7.12% APY for the other 6 months. Even if you don’t want to leave the funds there for 5 years (when you can withdraw penalty-free), you can pull the funds out in January 2023 and you’ll lose the interest from October, November, December 2022. So you’ll end up getting like 4-5% APY on the 15 months you had the bonds.
- Your 2022 $10k will earn 7.12% APY for 6 months and an undisclosed amount for the last six months. Worst case scenario, if the interest rate is 0% for the second part of 2022, you can pull your money out after 12 months, and you’ll have earned around 3.6% APY on the 12 months.
If you don’t buy until after November 1st, you can still get your $10,000 in for 2021. However, we don’t know what the second 6 months will be – it’s all tied to inflation rates. Others might prefer to wait until after November 1st thinking that the May 2022 rate will be higher than 3.54%, but you run the risk of the rate going down as low as 0%. Personally, I plan to buy now in October and lock in the 3.54% rate given that is already a high rate.
Some other facts to know about I Bonds:
- The total maturity of I Bonds is 30 years.
- You only pay federal tax on the interest. There is no state or local taxes. Even the federal taxes can be deferred until the bond matures in 30 years. (You might be exempt from federal taxes if the funds are used for certain higher education expenses.)
- Best time to buy I Bonds is at the end of the month since interest is paid as if you purchased from the 1st of the month, regardless of when you buy. E.g. if you buy on October 31th, you’ll get interest as if you bought on October 1st. Never leave it until the last minute since it can sometimes take some time to get the account set up properly.
- As mentioned, there is a $10,000 limit in online I Bonds purchases. You can also buy another $5,000 in paper I Bonds by getting your tax refund in the form of paper I Bonds. That increases your total to $15,000 per year. (There is a method to convert the paper bonds to become electronic and pool with your online balance.) I’d be interested in overpaying on my taxes in order to get the additional $5,000 in paper I Bonds at the 7.12% rate as well before the rate changes on April 30, 2022. Important Note: if you extend your tax return, then I assume you’ll get the May – October 2022 rate which will likely be less favorable.
- Spouses can each do this separately: a couple filing jointly can actually lock in $45,000 at the 7.12% rate as each can get $20,000, plus $5,000 in paper I Bonds on their shared tax return.
- It is possible for a couple to lock in the current rate for the future by using the gifting option, more details in this post.
- Fund your I Bonds with an ACH pull. Be sure to link a bank account that you plan on having for the long term since it’s a pain to deal with switching.
- You can open a second TreasuryDirect account for your business with its separate business name and EIN. This allow you to purchase an additional $10,000 in I Bonds each calendar year.
- Buy I Bonds by opening an account with Treasury Direct. You can also go to the TreasuryDirect.gov home page and click Open Account on the right-hand side. Once in your Treasury Direct account, go to the Buy Direct tab at the top of the page, then choose the Bonds ‘Series I’ option.
Feel free to add any additional information or corrections in the comments below.
Hat tip to readers Betty and SS
Related:
- U.S. Treasury I Bonds FAQ (When To Buy $10,000 I Bonds, April or May? And More…)
- Gifting US Treasury Bonds To Lock In Current Rates Beyond $10,000 Limit (I Bonds)
- Pondering US Treasury Series EE Bonds (3.5% APY Return With 20 Year Lockup)
Hey all, appreciate all of the discussion here in the comments. Just wanted to say that most of the questions asked are addressed in the linked posts
https://www.doctorofcredit.com/u-s-treasury-i-bonds-faq-when-to-buy-10000-i-bonds-april-or-may-and-more/
https://www.doctorofcredit.com/gifting-us-treasury-bonds-to-circumvent-10000-limit-i-bonds/
I’m planning on redeeming my 1st I Bond on 8.1.23, after the interest posts. After I redeem it, am I immediately able to transfer the funds to my linked bank account?
iBonds kept < 5 years; If I redeem the bond in July (e.g. July 1) do I loose interest for April-June or May-July?
p.s. I think that I got incorrect info from TreasuryDirect rep who stated May-July.
The earliest day in July you can redeem will be Monday, July 3rd.
you’ll lose interest for Apr/May/June, (plus 2-3 days in July). Technically, the bond won’t earn any July interest until August 1st.
Thanks. That is what I thought. I got the wrong info from Treasury Support (in an E-mail)…
What you see as your balance is what you’ll get, the balance reflects the three month penalty.
What did TD tell you in the email? I actually thought it was May/June/July.
I would like to know if I should pull my money out now that is has been in there for 1 year? Thanks.
Wait until it has been there for 1 year and 3 months. If you withdraw the money now, you will lose 3 months of interest @ 6.48%. if you wait 3 more months, you will lose 3 months of interest @ 3.38%.
Thank you
Just calculate your months well to see what rate you are earning. And wait for 3 months until after you are not earning a good rate to pull out.
Thank you
new fixed rate for May1st – 6 months is 0.9% Nice increase in the fixed rate as the variable rate falls. Might be worth monitoring to see what the variable rate will be come this Fall.
https://tipswatch.com/2023/04/28/i-bonds-fixed-rate-will-rise-to-0-9-on-may-1-treasurydirect-says-by-mistake/
Starting May 1st, the iBond rate will be 4.30%: https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/
There we go – so May rate for Ibonds will be 3.38% + Fixed rate of ? That means that if you want to get in – you want to purchase in April so that you get the current rate of 6.48% for 6 months + Fixed rate of 0.4%. And then 3.38% + 0.4%
Useful reading: https://tipswatch.com/2023/04/12/march-inflation-report-sets-i-bonds-new-variable-rate-at-3-38/
So, buying this month and redeeming next april will net $443 or 4.43% APY. For those inclined, purchasing the last possible day (4/27) and redeeming on 4/1/24 will goose the rate up to ~4.76%. To compare with CD rates, divide these ibond APYs by (1 – your state tax rate%)
Assume next rate is 3.5%. 6.48% half year+3.5% half year, still worth to buy?
i suck at math.. is it worth to buy?
FLY317
(6.48%+3.5%)/2 =4.99%APY? lol
🙂 thank you!
it seems about the same as many bank accounts and CDs now.. potentially lower than some CDs at 6%.. I guess that answers the question.. it’s probably not worth it for most people on here to put 10k into an Ibond for 2023.
One cannot really make that determination for ‘most people’. It’s a very individual choice. Federal tax free interest income at higher than the current CD rates is a no brainer for a lot of folks.
State tax exempt, not federal tax.
Hi, where do you see CD’s at 6%?? thanks
Thanks, i am wall to wall with 5% CD’s offered at Fidelity. But i haven’t seen any FDIC insured 6% CD’s.
To put it another way, if you had 10K to invest before the end of April 2023 and your state tax rate is 7%, then you would need to find a CD that earns approximately 5.35% or better to beat the I-bond rate. However this also does not take into account the 3 month penalty that would cut into the I-bond earnings if you were taking money out at the end of the 12 month period and eat $95 of the earnings which would mean you only need to find a 1 year CD that earns approximately 4.35 or more to beat the I-bond rate.
However yet another caveat is that the fixed rate of 0.4% for the I-bond MAY turn out to be its trump card if you can hold the the funds for longer and CD rates fall after a year. However this point is very speculative with lots of ifs and could go either way.
Harry, just a question. Isn’t one faced with the same state tax, whether or not they purchase the CD or IBond? thanks
income from US govt obligations are exempt from state taxes, so ibonds, treasuries, treasury MMFs, etc aren’t subject to state tax
if you buy now and redeem in a year, you’d get 6.9% for 6 months (you forgot .4% fixed rate), 3.9% for 3 months assuming 3.5% variable rate, and 0% for 3 months, total return ~4.45% APY
super! thank you
jduck I think it’s worth it to go for a CD paying at least 5% now even if you need to pay the taxes.. and just forget about Ibonds for 2023
sorry I meant
jd
For those that want a simple answer to the “best” earliest date to sell your I-Bonds….
https://tipswatch.com/2023/03/29/want-to-exit-your-i-bond-investment-youd-better-have-a-plan/
I assume this person is credible. I got pulled in mid-April 2022 for the sensational 9% rate headline.
I know the i-bonds posts are spread over multiple pages – maybe
Chuck wants to do a “sell” post vs buy?
For I Bonds. February is the fifth month of a six-month string that will determine the I Bond’s new inflation-adjusted variable rate. Through the five months, inflation has run at 1.36%, which would translate to a variable rate of 2.72%. One month remains, so it looks like the new variable rate should fall into a range of about 3.2% to 3.5%, down substantially from the current 6.48%. The I Bond’s fixed rate will also be reset May 1, but the outlook for that reset is high uncertain, given the volatility of real yields over the last week. – Source TIpswatch.
https://tipswatch.com/2023/03/14/u-s-inflation-increased-0-4-in-february-annual-rate-falls-to-6-0/
I saw somewhere else that the latest figures for CPI came to around 6%. Why is the rate that you mentioned less than half of that?
6% is the year-over-year rate of inflation. The I Bond rate is determined by the monthly rate of inflation for each month from October to March and then multiplied by 2 (annualized).
so from May, 2023 onward.. the rate should be at least 6%?
Probably not. Using the month over month numbers, since October, inflation has been 1.36% which would translate to a 2.72% rate. There’s still one month to go, so I suspect it will be less than 4%. See my explanation of the calculation here. https://www.doctorofcredit.com/u-s-treasury-i-bonds-faq-when-to-buy-10000-i-bonds-6-48-9-62-and-more/#comment-1576753
So that implies that inflation is slowing down a lot. Why is the Fed still expected to raise interest rates a lot more?
We don’t know if they will raise interest rates a lot more. They may only raise them a quarter, or, pause (because of the banking problems). They can either tackle the banking problem or the inflation problem. I think they are ill-equipped to do either anyways.
Cheryl, they will do what they always do, they’ll print money to solve the problem. JMO
YUP, but thats how they solve monetary problems.
I should have been more clear. I meant before the banks failed recently there was talk that the Fed would raise rates over 6%. I am asking why was that the case if the inflation rate has slowed down.
In theory, the central bank has to raise interest rates to equal or greater than the rate of inflation to control inflation. Inflation is already trending down, so there is some debate whether interest rates need to be raised any more. Further hikes could trigger higher unemployment and a recession.
How are taxes reported on I-bond? I purchased some I-bond last year, but haven’t received 1099 INT yet, not sure whether it was lost in the mailing process or whether it wasn’t issued…
I bond interest is tax-deferred until redeemed (up to 30 years, the bond duration).
You won’t get a form till you redeem them.
However, you can pay taxes each year on them (report them manually and keep track) or defer to when you redeem the bond. All info can be found here https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/
Lots more info on paying interest annually here, too:
I-Bonds Tax Treatment – Optional: Report Interest Every Year
https://thefinancebuff.com/i-bonds-taxes-simple-default.html#htoc-optional-report-interest-every-year
Similar to Doctor of Credit, there is much value in the Comments, too.
favo 
Penny
Don’t do it. Defeats one of the main advantages to i bonds.
January inflation came in pretty hot at 0.8 so back up to a 1.6% interest rate + any fixed rate with two months of reporting left to go. https://tipswatch.com/tracking-inflation-and-i-bonds/
i don’t know how it’s calculated.. so based on that what will be the next projected rate if you were to guess?
gli
Unknown two month’s inflation results. right now it is 1.6% + a potential fixed rate of ? We shall know in April after that CPI hits. Could be anywhere from 1.5% to 4%
I’ll post this comment from Marc because it is as good as any: “If we extrapolate the next two months at the same 0.8%, that would put the May 1 annualized inflation rate for I Bonds at 4.8% (2.4%x2). That probably the high end of the range.
– If it’s half that at 0.4% each, it would be 3.2% (1.6%x2).
– if it’s one quarter of that, it would be 2.4% (1.2%x2).
Using the middle of those three scenarios, the one year annualized rate for buying an I Bond before May 1 would be 5.045% ((6.89%+3.2%)/2).”
https://tipswatch.com/