High Inflation Equals High I-Bond Interest Rates

High Inflation Equals High I-Bond Interest Rates

 

 

In this blog, we’ve provided a bit of our perspective on why it may be beneficial to look into purchasing I-Bonds.

 

What are I-Bonds?

They are U.S savings bonds. The interest rates are adjusted based on the inflation rate. So, as inflation goes higher these bonds pay high-interest rates.

 

What is the current rate?

In November 2021, the rate was set at 7.12%. The new rate that starts May 1, 2022, is expected to be over 9%.

 

How is the interest rate determined?

The interest rate is adjusted twice a year in May and November. It is adjusted based on the Consumer Price Index’s trailing 6-month change.

 

What are the potential downsides?

Each person can only purchase $10,000 per calendar year online.

If you cash them in before five years, you will lose the previous three months of interest.

If inflation goes down, the interest rate will decrease. The current rate is locked in for 6 months once you purchase the I-bond.

 

How do you buy I-Bonds?

You can purchase I-Bonds from the Treasury Direct website. www.treasurydirect.gov

 

Are I-Bonds right for you?

If you have cash earning only a small amount of interest that you do not plan to use for 12 months or more, then purchasing an I-bond makes a lot of sense. By purchasing I-bonds, you will earn more interest on that cash.

 

 

Clayton Quamme, CFP - Partner & Financial Advisor at AP Wealth Management
Clayton Quamme, CFP – Partner & Financial Advisor at AP Wealth Management

 

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