INFLATION BONDS: WHAT YOU SHOULD KNOW

How Safe are I Bonds?

Investment professionals agree that I Bonds are one of the most secure investments on the planet because they are issued by the United States Treasury and backed by the full faith and credibility of the United States of America.

What is the current rate of interest on I Bonds?

If an investor purchases I Bonds available as of May 1st, 2024, the interest rate is 4.28% for the next 6 months.

How is the interest rate determined every six months?

The interest rate is determined by the rate of inflation every May 1 & Nov 1. The U.S. Treasury takes the semi-annual inflation rate and multiplies it by 2 to arrive at the new interest rate. For example, from Nov 1st, 2021, through April 30th, 2022, the inflation rate was 3.24% x 2 = 6.89%.

How do I bonds earn interest?

Interest is earned on the bond every month. The interest is compounded semiannually:  twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal.

The interest and principal are paid to you when you cash the bond.

*See footnotes for a savings bond calculator

How long can I keep an I bond?

  • Minimum term of ownership: 1 year

  • Interest-earning period: 30 years or until you cash them, whichever comes first

  • Early redemption penalties:

    • Before 5 years, forfeit interest from the previous 3 months

    • After 5 years, no penalty

When must I pay tax on the interest?

You have a choice.

  • report the interest every year

  • put off (defer) reporting the interest until you file a federal income tax return for the year in which the first of these events occurs

    • you cash the bond and receive what the bond is worth, including the interest, or

I bonds are exempt from state and local income taxes.

Most people defer reporting the interest on their Federal Taxes, putting it off until the year in which the bond is redeemed or matures.

*See Footnotes below for the power of compounding a tax-deferred investment.

 Can I purchase I Bonds as a gift?

Yes. The limit is $10,000 per calendar year for each recipient.

 Can I purchase I Bonds for my children?

Yes! See below for further detail on this.

 What is the maximum I can invest per year?

Investors can purchase up to $10,000 worth of I bonds annually per person. For example, a family of four (two adults and two children) could purchase a total of $40,000 per calendar year.

Please fill in your information below to contact the Seraphim team for more information, questions, and/or help with this process.

*To see specifics for your I bond:  Savings Bond Calculator

*To see specifics on the power of compounding a tax-deferred investment, click here