Series I Savings Bonds
By: Cameron Diehl, CFP®
Friends – Perhaps the #1 topic on people’s minds these days in regard to investing and the economy is inflation. How high will it go? How long will it last? How can you invest to mitigate its effects?
Given these concerns, I wanted to share one relatively obscure investment vehicle that has gotten quite a bit of attention lately – Series I Savings Bonds.
Purchased directly from the U.S. Treasury Department, these bonds offer a low-risk savings options and pay interest tied to the current rate of inflation. Normally quite boring, as of April 26 they are paying 7.12% and should reset even higher in the coming months based on the most recent inflation reports. Given the increased interest these bonds are paying over other options, they can represent a great option for savings / emergency funds.
A few things to keep in mind:
- You must hold these bonds for a minimum of one year. After that, if you redeem them before five years, you lose the previous three months of interest.
- The maximum purchase amount is $10,000 per person, per calendar year. For example, a family of four could purchase $40,000 worth up until December 31, 2022 and another $40,000 on January 1, 2023.
- You must purchase them directly through the Treasury Department. Unfortunately, this is not something we can purchase for our clients in their accounts. Which means setting up a separate log in for each purchaser on TreasuryDirect.gov
- Interest is taxable when you redeem them. As with any investment, it’s important to compare the after-tax returns when comparing to other options.
- Interest rates fluctuate. The rates paid on these bonds are tied to the consumer price index (CPI-U) which measures inflation. This rate is calculated twice a year and will move up or down based on the latest inflation readings. If inflation returns to more historical levels, these may become a less attractive option and you might consider cashing them out.
There’s more details you should read carefully on the Treasury’s website before purchasing. If you have any questions or would like to discuss how I Bonds might fit into your overall financial planning, I’d be more than happy to chat. These are conversations I’m having with clients daily at this point.
Disclosure: Any opinions are those of Cameron Diehl and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information contained in this email does not purport to be a complete description of the securities, markets, or developments referred to in this material. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and investors may incur a profit or a loss. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.
