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A Quick Note About I Bonds

With inflation rates currently at their highest level in a generation, inflation has been a frequent topic of client conversations.1

As our clients know, we generally recommend those nearing or already in retirement to keep 3-5 years’ worth of living expenses in fixed income and/or cash equivalents. With most savings accounts paying less than a tenth of one percent2, the purchasing power of hard-earned dollars sitting in savings accounts is being eroded.

One potential solution for a portion of assets sitting in savings is government-issued Series I Savings Bonds (commonly known as I-Bonds) available through treasurydirect.gov. If purchased before the end of April, buyers will receive a 7.12% rate through October of 2022, followed by an estimated 9.6% from November 2022 through April 2023.
I Bonds

There are a couple of key points to note3:

  • Purchases are limited to $10,000 per person per year 
  • Not available through popular custodians (Fidelity, Schwab, etc.)
  • They are State income tax-exempt, but not exempt from Federal income tax 
  • Have a 30-year term
  • Can only be cashed out after 1 year
  • If cashed within 5 years of purchase, you forfeit interest from the last 3 months
  • After 5 years, there is no penalty
  • The composite rate is comprised of a fixed rate (currently 0) + an inflation rate that is adjusted twice a year

If you would like to read more, here are some blog posts that discuss them in more detail:

If you have any questions, we are happy to help.

1.  BLS
2.  FDIC
3.  Treasury Direct

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