The I Bond composite rate for purchases from May 2024 through October 2024 is 4.28%. This rate, effective from May 1, 2024, includes a fixed rate of 1.30% and an annualized inflation rate of 2.96%. This rate is effective for the first six months after purchase.
The next I-Bond rate will likely be announced around May 1, 2026, and will depend on the latest inflation data (CPI-U) and the prevailing fixed rate, but expect it to adjust from the current 4.03% rate for bonds bought through April 2026, with future rates changing every six months based on inflation, say TreasuryDirect (.gov) and The Motley Fool.
The 4.28% composite rate for I bonds issued from May 2024 through October 2024 applies for the first six months after the issue date. The composite rate combines a 1.30% fixed rate of return with the 2.96% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U).
In May 2022, the yield on these bonds peaked at 9.62% due to inflation, making them an enticing investment compared to other low-risk rates. However, the yield dropped to 6.89% by November 2022 and 5.27% by February 2024. When the rate drops drastically, you have a choice to make.
Warren Buffett views bonds as a safe haven for cash, often recommending a 90/10 portfolio (90% S&P 500 index fund, 10% short-term government bonds) for average investors, while Berkshire Hathaway itself holds large amounts of U.S. Treasury bills for capital preservation and to earn competitive yields, especially when stocks are expensive. He favors short-term Treasuries (T-bills) due to low interest rate risk and high liquidity, using them to park cash while waiting for better stock opportunities, rather than as a primary growth engine.
You should redeem I-Bonds after holding them for at least one year, ideally on the first business day of the month, and strategically to minimize the penalty of losing the last three months' interest if cashing within five years, often by waiting until you've earned a few months of a lower interest rate before cashing out to reduce the penalty's impact. After five years, there's no penalty, and bonds mature after 30 years, but cashing just after the month begins maximizes earned interest before the penalty or maturity.
For example, a $1,000 bond with a coupon of 7% pays $70 a year. Typically, these interest payments are made twice a year, so the investor receives $35 each time. Because bonds can be traded before maturity, their market value can fluctuate, causing the current yield to differ from the coupon or nominal yield.
I Bond Basics
You must hold your I bond for at least 12 months after purchase. If you cash in the I bond within five years of purchase, you lose the last three months of interest on the bond. I bond interest rates change every six months because the variable inflation rate is pegged to the Consumer Price Index (CPI).
The next I-Bond rate will likely be announced around May 1, 2026, and will depend on the latest inflation data (CPI-U) and the prevailing fixed rate, but expect it to adjust from the current 4.03% rate for bonds bought through April 2026, with future rates changing every six months based on inflation, say TreasuryDirect (.gov) and The Motley Fool.
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TreasuryDirect.gov is the one and only place to electronically buy and redeem U.S. Savings Bonds.
If the new bonds have higher interest rates, the investors who buy them will make more money than you. On the other hand, your Treasury bonds will become more valuable if the newer interest rates are lower than yours. Orman explained that these rate changes affect bonds differently depending on their maturity.
A 2019 study by Harvard Business Review found either Vanguard, BlackRock or State Street is the largest listed owner of 88% of S&P 500 companies. There is a perception that a few select companies own a vast majority of the stock market.
You can cash savings bonds without paying federal tax if you use the interest for qualified higher education expenses for yourself, spouse, or dependent, meeting specific income and age (owner must be 24+) rules on IRS Form 8815 and TreasuryDirect.gov. Otherwise, you can defer the federal tax until redemption or roll the proceeds into a 529 plan to avoid tax, though state/local taxes generally don't apply to savings bonds.
The bond becomes payable to the estate of the deceased and probate of the estate may be required. If there is a court appointed representative, the bonds will be payable to the estate and administered according to the decedent's Will. If there is no Will, the bonds will pass according to the state intestacy laws.