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Federal Series I Savings Bonds

Federal Series I Savings Bonds have been in the press lately.  In the current low interest rate environment, these bonds currently offer attractive yields.  The basics of Series I Savings Bond are as follows.  These are more complicated than one would think.  

  • Offered via the Treasury Department and are backed by the U.S. government
  • Purchased through the TreasuryDirect website - https://www.treasurydirect.gov/indiv/myaccount/myaccount.htm
  • Purchases are limited to $10,000 annually per person, your federal tax refund can be used to purchase an additional $5,000 
  • Interest Rate Structure
    • The unique interest rate structure of I Bonds is what makes them so attractive right now.  The interest rate is comprised of two components (Fixed Rate and Inflation Rate) which are added together to arrive at the Composite Rate.
      • Fixed Rate
        • Is established by the Treasury every six months (first business day of May and November) and applies to all I Bonds purchased during the following six months.  This rate remains constant throughout the life of the bond.
        • The current Fixed Rate is 0%. 
      • Inflation Rate
        • This rate varies throughout the life of the bond.  It is established by the Treasury Department every six months.  On November 1, 2021 the U.S. Treasury Department announced the I Bond Inflation Rate for the next six months would be an annualized 7.12%(based on the CPI-U for all items) 
    • The 7.12% annualized Composite Rate will apply for the fist six months of all I Bonds purchased from November 2021 through April 2022.  Upon the I-Bond’s six-month anniversary a new Composite Rate will be applied.  
  • Example, you buy $10,000 of I Bonds on 2/1/2022.  The Composite Rate for the bond is based on the current Fixed Rate of 0% and the adjustable Inflation Rate of 7.12% announced on November 1, 2021.  Beginning August 1, 2022 and through January 31, 2023, the I Bond will earn interest based on the Composite Rate that is announced on May 1, 2022.  
  • The Composite Rate of I Bonds purchased today will generally equal the inflation rate.  The value of an I Bond – its principal plus any interest accrued to date – cannot go down.  The Inflation Rate component(for a six-month period) of an I Bond can be negative (deflationary environment) however, the Composite Rate cannot be below 0%.  
  • Redemption 
    • The bonds must be held for more than 1 year. 
    • If you redeem the bonds after 12 months but before the five-year anniversary, you forfeit the last 3 months of interest.
    • If you redeem after 5 years, you receive the current value – no penalty. 
  • Tax Considerations
    • Exempt from State and Local Taxes
    • Subject to Federal Income Tax

Here is the direct link to the Treasury Direct Series I Savings Bond web page:


Every Investor's situation is unique.  Please consult your tax/investment advisor before making investing decisions.  This post is for informational purposes only.