Sedona Arizona

What about these Series I Bonds?

Series I Bonds explained

By now you may have heard about Series I Bonds. They’ve been featured on the news, on social media, and probably in conversation with someone you know.

Given the recent popularity, I’ve had quite a few clients reach out to ask whether these might be a good addition to their portfolio as a cash-alternative.

Let’s cover – at a high level – how I Bonds work:

  • You can buy up to $10,000 per person per year; you are eligible to buy an additional $5,000 if using your tax refund
  • The initial interest rate on new Series I savings bonds is 9.62%.
  • You can buy I bonds at that rate through October 2022. These bonds reprice every 6 months and the interest compounds semi-annually.
  • The rate has both a fixed and a variable component, with the variable rate based on changes in inflation
    • the current fixed rate is 0.00%
    • the combined rate can never be negative
  • Interest accumulates monthly and is paid at maturity (30 years), or at the time the bond is redeemed
  • You can redeem the bond after 1 year; however, you will lose the last three months of interest if the bond is redeemed within the first 5 years. After 5 years, no penalty.
  • The interest is subject to Federal tax and reported on a 1099-INT form. It is not subject to state and local tax.
    • you can elect to report the interest each year, or you can defer reporting until redemption or maturity
  • I bonds may be tax-free if used for education

Are I Bonds right for you?

There are several great ways to use I Bonds to fund future financial objectives and expenses. It’s important to consider factors such as your liquidity needs, risk, expected return, length of investment, and other limitations before investing.

Want to know more? Click here to set up time to talk about how these might fit into your financial and investment planning.

This post is for informational purposes only and should not be considered investment advice or recommendation. Talk to your financial and tax professionals before making an investment. Please visit https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm for more information.

Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

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Author: Dale Shafer II, CFP®, APMA®, CDFA®

The National Association of Personal Financial Advisors
The Society of Advice

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