FAQs
Bottom line. I bonds, with their inflation-adjusted return, safeguard the investor's purchasing power during periods of high inflation. On the other hand, EE Bonds offer predictable returns with a fixed-interest rate and a guaranteed doubling of value if held for 20 years.
What is the downside of an I bond? ›
I bond cons
The initial rate is only guaranteed for the first six months of ownership. After that, the rate can fall, down to a fixed-rate component which, as of May 2024, stood at 1.3%. One-year lockup.
Is there a better investment than I bonds? ›
TIPS offer greater liquidity and the higher yearly limit allows you to stash far more cash in TIPS than I-bonds. If you're saving for education, I-bonds may be the way to go.
Can I buy $10,000 worth of I bonds every year? ›
Yes, you can purchase up to $10,000 in electronic I bonds each calendar year. You can also buy an additional $5,000 in paper I bonds using your federal tax return.
Why would anyone buy EE bonds? ›
Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.
Do EE bonds really double in 20 years? ›
EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.
Can you ever lose money on an I bond? ›
You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.
Why are series I bonds not good? ›
Further, I-bonds must be held for at least a year, so you won't be able to cash them out before a year is up if the rate plunges due to falling inflation. In fact, you'll lose the last three months of interest if you redeem them before five years are up.
Should I buy EE bonds or I bonds? ›
The upshot: Although EE Bonds were a sound investment, paying 90% of the prevailing yield on five-year Treasuries, while providing their owners the additional benefits of a put option and a tax shelter, I Bonds were far superior.
Are CDs or I bonds better? ›
The Series I savings bond has a variable rate that can give the investor the benefit of future interest rate increases. If you're saving for the short term, a CD offers greater flexibility than a savings bond.
How to get the most value from your savings bonds
Face Value | Purchase Amount | 20-Year Value (Purchased May 2000) |
---|
$50 Bond | $100 | $109.52 |
$100 Bond | $200 | $219.04 |
$500 Bond | $400 | $547.60 |
$1,000 Bond | $800 | $1,095.20 |
Do you pay taxes on I bonds? ›
The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.
What will the May 2024 I bond rate be? ›
May 1, 2024. Series EE savings bonds issued May 2024 through October 2024 will earn an annual fixed rate of 2.70% and Series I savings bonds will earn a composite rate of 4.28%, a portion of which is indexed to inflation every six months. The EE bond fixed rate applies to a bond's 20-year original maturity.
How long should you keep money in an I bond? ›
You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest. See Cash in (redeem) an EE or I savings bond.
How to avoid paying taxes on savings bonds? ›
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
What are the disadvantages of Series I savings bonds? ›
Series I Bond Drawbacks
However, there are some drawbacks to consider before investing in I Bonds. With their safety comes a comparatively lower return, comparable to a high-interest savings account or certificate of deposit (CD). One main limitation is that these bonds cannot be bought or sold on the secondary market.
Is it wise to buy Series I bonds? ›
I bonds can be a safe immediate-term savings vehicle, especially in inflationary times. I bonds offer benefits such as the security of being backed by the full faith and credit of the U.S. government, state and local tax-exemptions and federal tax exemptions when used to fund educational expenses.
Are Series I bonds still a good idea? ›
The annual rate for Series I bonds could fall below 5% in May based on inflation and other factors, financial experts say. That would be lower than the current 5.27% interest on I bond purchases made before May 1, but higher than the 4.3% interest offered on new I bonds bought between May 1, 2023, and Oct. 31, 2023.
Do Series I bonds ever lose value? ›
Answer: No. In periods of deflation, the bond's redemption value won't decline. Question: What are some tax advantages of the Series I bond? until redemption, final maturity (30 years after issue date), or other taxable disposition, whichever occurs first.