With most savings accounts offering measly yields, it's news that the interest rate on I-bonds as of May 1 is 4.6%. I-bonds, unlike the more traditional EE savings bonds, are designed to provide a hedge against inflation. They combine two rates of interest: a fixed component, currently 0.0%, and an inflation component, currently 4.6%, which resets every six months.
You must hold an I-bond for 12 months before you can redeem it, and you lose the last three months' interest if you cash in your bond before five years. But we don't recommend you buy I-bonds for long-term savings now because that 0.0% fixed rate lasts for the life of the bond. However, says Ken Tumin, of DepositAccounts.com, which tracks bank rates, "I-bonds are a good short-term deal compared with CDs." Say you purchase an I-bond in July and cash it in after 12 months. For the first six months, you are guaranteed to earn interest at a rate of 4.6%. Even in the unlikely event that the inflation-rate component resets in November to 0% and your bond earns no interest for the next six months -- making an early-redemption penalty moot -- you'll still earn 2.3% over the 12 months. You bump up your yield a little by buying a bond at the end of the month because interest for the entire month accrues on the first of the month.
I-bonds are sold at face value and may be purchased at TreasuryDirect.gov. And individual may buy $10,000 worth of bonds each calendar year ($5,000 electronically and $5,000 in paper bonds). The bonds are exempt from state and local taxes, and you may defer paying federal taxes until you cash them in.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Lowe's Stock Is Falling After Earnings. Here's WhyLowe's stock is lower Tuesday as Wall Street weighs a beat-and-raise quarter against declining revenue. This is what you need to know.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
