EARN 10% INTEREST ON US SAVINGS BONDS
SUMMARY
- The annualized interest rate on Series I US Savings Bonds (currently 7.12%) will rise to 9.62% on May 1, 2022.
- You can buy $25 to $10,000 in I Bonds each year for yourself, and indeed any family member or friend with a social security number. You can purchase an additional $5,000 in I Bonds using your tax refund.
- I Bonds are exempt from State and local taxes. Federal income tax will be assessed unless bond proceeds are used to fund qualified higher education expenses (restrictions may apply).
I BONDS LET YOU PROFIT FROM INFLATION
Has inflation got you down; and is it taking your savings along with it? Then cash in your 0% return CD and buy I Series US Savings Bonds. If you buy before May 1, 2022, you’ll lock in an 8.37% return for the 1st year – 3.56% for April through September, 4.81% for October through March 2023. If you buy after May 1st, you will earn a guaranteed rate of 4.81% for May through October. The 6-month yield for purchases or resets made after November 1st won’t be determined until the October 2022 inflation report is released but will almost certainly exceed 7%.
WHAT ARE I BONDS
First issued in 1998, I Bonds are inflation-adjusted US Savings Bonds issued by the US Treasury. Treasury resets I Bond rates every 6 months to reflect the most recent inflation data. If inflation rises, I Bond interest rates will rise. If inflation falls, I Bond interest rates will fall, but they will never drop below 0. I Bonds are issued for a term of 30 years and must be held for at least 1 year. If you redeem your I Bonds after 1 year, you’ll incur a penalty equal to 3 months interest. Bonds held for 5 years or more can be redeemed penalty free.
HOW MUCH INTEREST DO I BONDS PAY
I Bond composite interest rates have been as low as 7.12% (in 2022) and as high as 10.85% (in 2000). Rates are set on May 1st and November 1st of each year and I Bond returns compound semiannually.
- The current I Bond annualized interest rate (set November 1, 2021) is 7.12% (3.56% for 6 months).
- On May 1, 2022, the annualized I Bond rate will rise to 9.62% (4.81% for 6 months).
- You will earn interest for the entire month as long as you hold the bond at any time during that month.
HOW MUCH DO I BONDS COST
Depending upon your method of purchase, you can buy I Bonds for as little as $25 or as much as $15,000 in a calendar year. There are only 2 ways to purchase I Bonds – (1) Buy online, by setting up an account at www.TreasuryDirect.gov, or (2) Use your IRS Refund by filing Form 8888 with your tax return.
- Buy I Bonds at TreasuryDirect.gov
- You can set up a TreasuryDirect account in less than 10 minutes, provided you have your Drivers License number, Bank Routing and Account number, and Social Security Number
- You can buy $25 to $10,000 in I Bonds each year for yourself, and each member of your household. For children under age 18, you can hold I Bonds in a custodial account for them. This won’t count against you personal $10,000 annual limit
- Buy I Bonds with Your IRS Refund
- You can buy $50 to $5000 in I Bonds using your tax refund if you submitted an IRS Form 8888 with your return. This is in addition to the $10,000 maximum purchase via TreasuryDirect.gov
- The IRS will mail your paper bond certificates to you once your return is processed
IS I BOND INTEREST TAX FREE
Interest is exempt from state and local income tax.
Interest is subject to federal income tax but tax is deferred until the 30-year term expires or you cash the bond in, whichever comes first. Even then, interest may be exempt from federal tax if you use the proceeds for qualified higher education expenses, provided you meet certain income and other associated requirements. You should consult your tax advisor for more information.