Here's why it could be better to buy Series I bonds before May, experts say (2024)

FAQs

Here's why it could be better to buy Series I bonds before May, experts say? ›

Here's why it could be better to buy Series I bonds before May, experts say. The annual rate for newly purchased Series I bonds could fall below 5% in May, which is lower than the current 5.27% on new purchases through April 30.

But there are a few potential downsides. For instance, I bonds have a lower maximum investment limit than investments like stocks. And the interest earned on I bonds is subject to federal income tax.

The May I Bond composite rate is 4.28% (US Treasury) which is 2.14% earned over 6 months. Breaking News: Official Treasury I Bond Rate announced! The May 2024 I Bond Fixed Rate is 1.30%.

Yes, 4.28% is the current inflation interest rate if you purchase the I Bonds before October 31, 2024. The previous I Bonds interest rate was 5.27% for November 2023 to April 2024. This also means that the composite rate is also an annualized 4.28% for the first 6 months that the bond is held.

Variable interest rates are a risk you can't discount when you buy an I bond, and it's not like you can just sell the bond when the rate falls. You're locked in for the first year, unable to sell at all.

Normally, you're limited to purchasing $10,000 per person on electronic Series I bonds per year. However, the government allows those with a federal tax refund to invest up to $5,000 of that refund into paper I bonds. So most investors think their annual investment tops out at $15,000 – one of the key I bond myths.

Bottom line. If inflation and investment safety are your chief concerns — TIPS and I-bonds deliver both. 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.

If you buy I bonds now, you'll receive 5.27% annual interest for six months and the new May rate for the following six months. He suggests buying a few days before April 30. Enna expects the fixed rate will be 1.2% or 1.3% in May, based on the half-year average of real yields for 5- and 10-year TIPS.

Can I cash it in before 30 years? 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.

What is the I bond rate for May 2024? ›

I bond rates from May 2007 to May 2024

The current rate on I bonds issued from May 1, 2024, through Oct. 31, 2024, is 4.28 percent, which includes a fixed rate of 1.30 percent.

How much tax do I owe on my I bonds? Interest on I bonds is exempt from state and local taxes but taxed at the federal level at ordinary income-tax rates.

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.

EE Bond and I Bond Differences

The interest rate on EE bonds is fixed for at least the first 20 years, while I bonds offer rates that are adjusted twice a year to protect from inflation. EE bonds offer a guaranteed return that doubles your investment if held for 20 years. There is no guaranteed return with I bonds.

Electronic I bonds can be cashed online through TreasuryDirect.gov. Paper I bonds can be cashed online, or they may be accepted by some banks. If you hold an I bond for less than five years, you'll lose three months' interest.

I bonds that are issued from November 2023 through Apr. 2024 have an initial yield of 5.27%, which is guaranteed for the first six months and will be adjusted for inflation every six months thereafter. The obvious reason to buy I bonds in 2024 is for the high initial yield combined with long-term inflation protection.

While I bonds offer tax advantages and low minimum investment amounts, they have downsides, including a penalty for early redemption and fixed rates that can be low. I bonds can be used strategically with a laddering method to access funds throughout retirement.

If you buy I bonds now, you'll receive 5.27% annual interest for six months and the new May rate for the following six months. He suggests buying a few days before April 30. Enna expects the fixed rate will be 1.2% or 1.3% in May, based on the half-year average of real yields for 5- and 10-year TIPS.