An I Bond is a government-issued bond you can only purchase straight from the treasury’s website. It’s a nearly risk-free investment that acts as a type of savings instrument that tracks cash in line with inflation. If inflation is high, the I Bond interest rate is high. If it is low, the I Bond interest rate is low.
What kind of return can I expect from I bonds?
Interest rate return on the I Bond = a fixed interest rate (set when you buy the bond) + variable interest rate (set by treasury every 6 months). This rate is compounded every 6 months. Currently, I Bonds issued from May 2022 through October 2022 have an interest rate of 9.62%.
Are there any rules associated with them?
You will need to hold the I Bond for at least 1 year. If you cash out before 5 years, you will lose the previous 3 months of interest. If you were to hold the bond for 18 months, you would only receive 15 months of interest. The maximum amount you can buy in a calendar year is $10,000 of electric I Bonds ($20,000 per married couple). You can buy an additional $5,000 of paper I Bonds using your tax refund.
Who should be interested in I Bonds?
This is a good option for people who may not need access to the funds for the next 1-5 years. Any longer-term investment is better placed in other options as the I bond’s interest will decrease as inflation decreases.
How to set up an account on treasurydirect.com: https://www.treasurydirect.gov/tdhome.htm
How to buy the I bonds: