With newspaper headlines sounding a constant drumbeat of financial bad news -- recession, inflation and rising unemployment -- you might think it's time to put some cash in a supersafe investment. I savings bonds are meant to offer protection against inflation. And at a rate of 4.84%, they would seem the perfect solution.
Not so fast. There's less to that attractive interest rate than meets the eye. I bonds' rate is composed of two elements: a fixed rate, which lasts for the life of the bond, and a six-month rate, which reflects the current rate of inflation.
All of that current 4.84% interest rate, which lasts until November 1, represents inflation. The fixed rate is now 0% for 30 years. So if the rate of inflation falls off, so will your return. Greg McBride, of Bankrate.com, warns that savers should "focus on the fixed-return component. Right now, that return is nonexistent."
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.
To encourage savers to buy Treasury bills, notes and bonds, the government recently lowered the minimum investment to $100. At the same time, it cut the maximum annual I-bond amount that an individual can purchase from $30,000 to $5,000.
If you believe that the inflation rate (recently 5% annually) will keep rising and you want to protect a small portion of your funds against all risks, you could still choose to invest in I bonds. Just remember that if you cash them in within the first five years because you find a better opportunity elsewhere, you'll forfeit three months' interest.
Kip Tip: Check Latest Rates Here
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
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.
-
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.
