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I Own an I Bond, Now What?

I Own an I Bond, Now What?

February 22, 2024

In June 2022, we posted an article titled “I” For Inflation. Is an I Bond a Good Option for Me? At the time, this low-risk investment that was yielding 9.62%. An I Bond is a US Treasury issued savings bond that pays a base rate of interest plus the inflation rate that is recalculated every 6 months.

Since that time, inflation rates have been declining and the annual yield of that same bond has dropped from 9.62% at the beginning to as low as 3.38% and now resides at 3.94% in the current six-month segment. At these rates, the current holding is a reasonable, low-risk investment option. However, a newly issued I Bond carries a 1.3% fixed rate plus the inflation adjustment, giving newly issued I Bonds an annual yield of 5.27%.

Moving forward

Treasury Series I Bonds are designed for a holding period of 5 years or longer. However, if you surrender them after 12 months of holding (and before 5 years) you may do so by forfeiting 3 months of interest. At today’s rates, you would walk away from less than one percent interest in exchange for the flexibility to reposition that investment elsewhere.

Hypothetically, had you invested in August 2022 and redeemed your I Bond today, you would walk away with an annualized investment return of 6.03%, not too shabby for a low-risk investment. Those investable dollars could now be repositioned in a new I Bond carrying a higher base rate, or in another investment vehicle of your choice.

While it is not necessary to walk away from the I Bond investment, it should certainly be considered in light of your other options that may be available. Everyone has their own unique circumstances, and we believe that reviewing your ALL of your current assets on a regular basis is an important part of managing a personal investment strategy.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Series I bonds are guaranteed by the US government as to the timely payment of principal and interest and offer a fixed rate of return and fixed principal value. Minimum term of ownership applies. Early redemption penalties may apply.

The economic forecasts set forth in this material may not develop as predicted and there is no guarantee that strategies promoted will be successful.