Are I bonds still worth purchasing? It was only a few months ago that I bonds were paying 6.89%. As of today, I bonds are paying a combined rate of 4.30%.
In our opinion, I bonds are not worth purchasing at this point. You are able to obtain interest rates up to 4.75% in a money market savings account through banks these days. Also, I bonds contain quite a few restrictions that savings accounts do not such as: 12 month illiquid period and a 3 month interest penalty if you withdraw the funds before 5 years.
What is a Series I Savings Bond?
In short, I bonds protect you from inflation. You earn a combined rate with each I bond. I bonds are especially attractive as they are guaranteed by the federal government.
Combined rate = Fixed rate + Inflation rate
The fixed rate is known at time of purchase. The fixed rate is an annual rate and never changes. The inflation rate is based on changes to the Consumer Price Index for all Urban Consumers (CPI-U). The inflation rate is reset on May 1 and November 1 each year. As of today, the combined rate for I bonds is 4.30%.
Redemption rules:
- You can redeem your I bond after 12 months (money illiquid for the first 12 months)
- If you redeem the bond in less than 5 years, you lose the last 3 months of interest
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