I Bonds

This page is for discussion of I Bonds which are issued by the U.S. treasury.

I Bonds have a ‘fixed rate’ portion and an additional portion which is adjusted twice per year at a rate dependent upon the rate of inflation.

The current interest rate on the bonds is 7.12% through 4/30/2022 after which they will adjust for the next 6 months. It is estimated that the new interest rate will be in the 9.5% area.

You can buy these bonds on the Treasury Direct site — here. All the details are on this page and there are penalties for early withdrawal so make sure you check out the details.

You may purchase up to $10,000 annually – a couple can have 2 accounts and buy $20,000 total.

53 thoughts on “I Bonds”

  1. Just saw the last youtube video from DiamondNestEgg:
    “How to Buy I Bonds With A TRUST Account on TreasuryDirect “, which
    explains that in addition to your purchases as individuals and gifts,
    a trust can buy another $10k/year of i-bonds. (https://www.youtube.com/watch?v=7OWgbccetv8 )

    Disclosure: I am not associated to DiamondNestEgg, nor I know the person, I am just sharing with III’s what I saw. I assume some may be interested.

    In the video she mentions how easy it is to create a trust for this purpose using your own s.s. and existing bank account.

    What she does not mention is: Can every person in my family create a trust and buy each another $10k? Can you create more than one trust and buy $10k in each?

    She does mention that next week she will publish how to easily create online a revocable living trust for this purpose. Thank you DiamonNestEgg!

    1. Thank you for the link to the video. I watched it and realized that I already have a suitable trust to use for purchasing I Bonds: my gun trust that I set up some 10 years ago (many Texans have gun trusts). So I have opened a TD account for the trust and will be purchasing $10,000 of I Bonds next week.

  2. I don’t think this has been mentioned. Are I bonds a reason stock and bond markets are down? Think about it…much has been said about a couple of thousand dollars per individual in stimulus payments juicing the economy and stock market. Now everywhere I look I see what a great investment I bonds are…they certainly have beaten cash, stocks and bonds this year! Now..what if most people strive to put away 10K…much more than the stimulus payments…into I bonds? What if they sell some stocks and bonds to buy I bonds? I know of quite a few individuals who used to dollar cost average into a S and P ETF who now are buying an I bond each month with that money. I bought 10k of I bonds in January…that is money that won’t go into other investments.

    1. Now that I have a Treasury Direct account set up for I Bonds, I have become aware of other opportunities that the account provides such as the purchase of 2 year Treasury Notes. I am pulling money from an online savings account that pays .6% and buying 2 year T Notes that pay 2.6%. I may eventually have more 2 year T Notes than I Bonds. So, at least for me, I am pulling a significant portion of rainy day funds from the online bank and investing at Treasury Direct.

  3. Close to 100% of the Ibond discussion has centered on the benefits of capturing the ~ 7% nominal return in the current environment. Everyone understands that the “real” component of Ibond returns is 0%, so for the life of the Ibond you will break even versus inflation. Earlier there was some discussion of cashing them in early and paying the forfeited interest penalty.

    I pose a different question: Are you willing to accept a 0% real return for the long term, say 10 to 30 years? Or do you think you can do better than that with other asset classes? If the answer is yes, then what are the conditions you would use to decide to cash them in? Or would you automatically hold them for five years minimum to avoid forfeiting the three months interest?

    And yes, this ignores the other issues like maximum purchase amount, adding an additional account, dealing the US Treasury, etc. Not that those issues go away.

    1. I don’t plan on holding for 10 or 30 years. But as long as I can get 7% + nominal returns (while one year CDs or money funds are at much much less) , I will buy I bonds. If CDs or money funds or T bills rise to a competitive rate, I will consider those. I just think that a portion of assets needs to be in safe liquid (I bonds are liquid after one year) investments. My current expectation is to hold for three to seven years.

    2. if the nominal rate drops to 1 to 2%, forfeiting 3 months of interest to cash them in will not be much of a penalty.

  4. What are the rules for compounding on I-Bonds? In other words, when is the periodic interest earned added to the principal base on which the interest going forward is calculated? Annually, semi-annually, something else? Sorry if this has already been discussed.

      1. Bur,
        Thanks for this. and thanks for indulging me. If I weren’t such a lazy SOB, I could have done that research myself. I think the semi-annual compounding, along with the fact that you don’t have to pay taxes until the bonds are cashed in, is a subtle, but important, benefit of the I-Bonds. In effect, the interest is allowed to compound tax-free over the holding years – not immaterial if you hold log-term.

  5. After the ludicrous rants and near-libelous accusations about illiquids from him and his still unidentified SA savant woman a while back, many of us have learned to ignore the good kap’n’s snarky posts. He even swore never to return after that fiasco, yet he still drops by every now and then to kick sand in everyone’s eyes. And so here he comes again to brighten your day.


    1. Camroc. I have reached out to my contacts in finance, financial advisors/consultants, and the consensus is that i-bonds are a good investment for the foreseeable future for the many reasons that have already been discussed.
      As for KL, he continues to pop in, and look to wreak havoc on this forum and certain individuals. He continues to not seek professional counseling to help mend his life after he has had some personal issues. This has led to his continued hatred to compensate or to make himself “feel” better” about his personal life. I hope he turns his life around and I wish him well.

    2. Thanks for your post Camroc. Spot on.

      Frankly, KL is acting like a troll – dropping in just to stir up a mess, even after his promise to leave and never come back. Too many good people on this board respond to him as if his rants actually deserve a response. Best path forward is to just ignore him, IMHO.

      First rule of the internet: don’t feed the trolls.

      1. Agreed, Private. Never feed the trolls. Keeps ’em coming back. Which is not what this forum is about.
        Re: I-Bonds. I’ve been picking up small amounts here and there, outside of my formal portfolios. In this market, the 6-month yield is unbeatable, particularly when it shifts up to 9+% in May. Under current circumstances, that rate is not likely to come right back down to earth in 2023 either.
        Are I-Bonds a major investment? No, in my opinion, given that it’s limited, under average circumstances, to 10K per annum. However, we live in treacherous times, and having a few bucks sitting around in gold and I-Bonds and perhaps even a bit of bitcoin (which I haven’t approached yet) may serve as a convenient temporary hedge, along with a well-maintained Victory Garden.
        I currently live across the river from DC, and no one has any clue as to what the resident clowns from both parties running our National Asylum will do next with what’s left of our once robust economy. Aside from spending even more money we don’t have and can’t realistically repay.
        Right now, it’s a reasonable idea to have at least a limited amount of funds in investments that are likely safe, at least for awhile. You never know how things will end.
        So socking away modest investments that will likely remain liquid under most moderately forseeable circumstances, while not exactly an investment strategy, is at least a Plan B or C in case one or more world “leaders,” including our own, end up igniting a catastrophe. It’s an individual choice, and not worthy of ridicule. At least in my opinion.
        Meanwhile, have a great weekend, folks.

  6. I have read with great interest the conversation regarding I-Bonds over the past few weeks and simply cannot understand the fascination with them. Yes, they do provide some decent returns at the present time, single people are limited to $10k per year. Even with a return of 8%, you will have to pay taxes on the interest income, so that basically lowers your return to about 6.5% per year. So with a $10k investment with those, many investors will only clear about $650 per year after taxes. Gifting to family members – Ok, but how much are you going to earn after gifting all that money away? Not much, and perhaps a negative return after these “gifts” are done.

    Sometimes I just have to wonder who initiated this conversation on I-Bonds when the contribution level is so low. Probably a party that has very limited funds and does not have much money to invest and a terrible sidetrack for investors that have considerable funds to place into the market.

    Had a long conversation with a family member today and going to have her maximize her Roth in the upcoming year. And while a mediocre grade REIT, she will put some tax-free funds into a few shares of something like CIO-A, with a yield of a little over 7%. As always, it will be placed in a well diversified portfolio. I’ll certainly recommend this website to her – for a little laughs.

    Happy “gifting” of the I-Bonds to you and your family members!

    1. Unclear to me why one cannot see benefits of owning them but we all have our own criteria. Contribution level low? Diversification with minimal risk compared to any individual preferred. Taxes deferred until sold–to be timed at a convenient year plus no state or local tax. Negative return? I cannot even begin to understand that point, sorry.
      I could list more but the tone of your post is not constructive so will end it here.

      1. Furcal – Yes, they are probably great investments with parties that have low investment funds. Fully support this idea for people that have $25,000 or less to invest and I cannot find a better idea for them with limited funds. Federal taxes will take a big chunk out of the earnings for those in the larger tax brackets.

        And yes, probably negative returns for people that are posting on this board and are trying to “gift” these to family members. How much am I going to make if I give $10,000 to my niece? It would be a negative return there for me. So she earns $800 per year and I had to give away $10,000? Looks like a bad return to me, but this is what the message board is proposing the past few weeks.

        1. When I read most of the posts from the past I do not recall the gifts going to other people outside the husband and wife. It was meant to capture the interest now while high and then gift them to each other later on. I must have missed something about giving away money to random family members and negative returns which is basically impossible with ibonds. Low returns yes. Negative no. Whatever I guess…

        2. Gee, I guess in my family at least, we were fortunate. Our rich uncle didn’t think primarily of his giving money to younger or less financially secure relatives in terms of it generating negative returns for himself..

        3. I dont see how your comments make any sense, KL (w/all due respect). People with substantial funds diversify. IBonds are simply one way of doing that, in a limited way. In addition to the various purchasing options mentioned here you can also use some of your tax refund to buy them. In the short term it’s impossible to invest say 200k+ in them, so i guess that’s your point — it’s a very limited investment. But as part of my portfolio, it’s a great rate, completely safe investment. In terms of taxes, you’re going to pay them anyway (unless u have munis) so I don’t see the logic of that point. And I’ll take a yield of 7% plus from iBonds over CIO-A any day. Zero chance of principal loss on one, not so much on the other. If you know of a better basically risk-free investment for this yield please share.

        4. KL, I rarely post but am doing so to differ with your suggestion that people with less to invest or with limited funds are the appropriate investors for I Bonds. My husband and I have purchased together almost $200K since March. As a couple with a few pennies in investments and assets it follows that we have extensive estate planning. As such, we have revocable and irrevocable trusts; additionally we have LLCs and PLCs, etc. We always maintain liquidity not so much for emergencies but to take advantage of market opportunities. I only wish all our liquidity could offer this return. BTW, while the interest will be taxable it will be offset by interest deductibility for the investment interest cost associated with these purchases.
          Again, I am grateful for all the information shared whether it is for those investing for a fixed retirement or those investing for multigenerational purposes.

          1. Petosky, assuming you’re respecting the $10k annual limit, and subtracting the two of you, and assuming you each bought each other a gift, that leaves 16 entities which have invested the $10k? Yowza that’s a lot of bookkeeping…

    2. Canada previously had a product called “Canadian savings bonds” structured similarly to iBonds until they suddenly stopped selling them. Difference being is you could buy unlimited amount without penalty for early redemption.

      Stating CIO is a better investment than a US government treasury. Is like saying you like to buy more when it keeps dipping.

    3. kaptain,

      Say you had 200,000 of fresh money to invest in fixed income (whatever) for your wife and yourself. 12 months ago inflation was raging and continues. We all knew preferred/BBs were going to take a hit for the most part. Common securities likely to go down. IG was paying 5% at best. The fascination was the fact you could take 20K in Nov/Dec 2021 and get a pretty solid return with a guarantee to get your money back. And then just a few months later park another 20K in Jan of 2022. So 40K was basically decided on quite easily which is a considerable percentage of 200K.

      Not really hard to figure out why it was so popular among us right? I do not see it as a joke when the next 6 month period is almost 10% I think and 7% before that. 3.x% before that. Who knows what comes after the 10%. It is a very nice guaranteed return on 40K with no risk of losing the principal. Took me 10-20 minutes to set this all up.

      But then this was when we were way ahead of the game here. Not discussing it now.

    4. Wow seems like someone has an axe to grind. Let’s look at what you said

      * What is the fascination with I-Bonds – the high risk free return.

      * You have to pay taxes on your interest income – Yes when you redeem them but you are exempt from state taxes. And your insinuation is irrelevant as you would pay taxes on any returns you generate on your REIT dividends or other investments

      * How much are you going to earn after gifting all that money away – The whole gifting conversation was primarily based on the concept of pre-buying and gifting among spouses. So no money is being given away. I give $10K to my wife – she gives $10K to me. Simple concept.

      * A terrible sidetrack for investors that have considerable funds to place into the market – UMMM NO. Speaking as someone who has considerable funds, there is a place in everyone’s portfolio for I-Bonds. Am I going to get rich with them – no. They make up les than 1.5% of my total portfolio. But it is a hell of a lot better earning 7.12% interest and soon to be nearly 10% interest on $60K ($30K for me, $30K for my wife) than the 0.5% this money was earning in a money market or the 0.7% it was earning in a CD. I simply took a portion of my safe money that allows me to not worry about the market fluctuations and shifted it to I-Bonds while the rates make sense. Pretty easy concept to understand

      * I hope you and your family member enjoy your little laughs about this website. Meanwhile I suspect my wife and I will be enjoying our own laughs next year while spending the extra $5K or so in I-Bond interest we will earn on a nice vacation. We will enjoy a few drinks in your honor

      Happy investing to you and your family members

    5. Lou, I appreciate your thoughts as each of us come from different perspectives on each investment, but you truly are missing the point of I-Bonds. First let me begin by telling you I spent 24+ years on Wall Street managing primarily institutional money and have NEVER had an investment that was US Government backed, completely risk-free, paying 7+%, having no commission to purchase, cannot decrease in value, tax deferred and the holder can chose to cash out after a short holding period with no risk of principle loss. As you stated (you may be a psychic) I DID give $10000 each of I-Bonds to my niece and new husband for their wedding gift and another $10000 to her brother (my nephew) because they would someday get these funds from my estate when I pass someday anyway (I am in my mid 50’s). Yes, this isn’t an investment that you can put millions of dollars into, but it was not designed for that either. I-Bonds wear initiated to give US citizens an opportunity to exchange their fiat currency for an investment that cannot loss money do to market losses or inflationary pressures each year. I purposely pay $5000 extra on my taxes each year so I can buy the initial $10000 of I-Bonds plus the $5000 from my US tax refund because I find this to be a superior investment to almost anything else in my extensive portfolio. I’d be glad to answer any questions you have. In Latin we say… noli esse stultus et emere hoc! Hoping you find your treasure, Azure

      1. Azure, thanks for your kind and gracious comment last night. Hopefully we can all “agree to disagree” on investment strategies without the name calling that was done earlier today (but not by you). We all have different thoughts and strategies on investment income. You make excellent points.

        At least for me, I currently have brokerage accounts, Roth IRA and retirement accounts at Fidelity, Vanguard, TD Ameritrade and Schwab. Add in my two accounts at U-Haul and then a small 457 plan with Nationwide and sometimes it just gets so cumbersome. Adding in another account for less than 1% of my total assets with the I-Bonds clearly does not make sense to me at the present time – even though the rates look attractive. My overall financial planning strategy includes paying zero taxes on all of my retirement accounts and would be happy to share this with you on the REIT chat board, as we don’t get too many comments over there. Wishing you continued success and thanks for a great post and positive message.

        1. Kaptain, thank you for your post and interesting explanation. What REIT message board and I’d be glad to continue our conversation. Have a great weekend, Azure

          1. Azure – I meant the REIT Chat category on this website. Sorry I did not clarify.

            In regards to you giving 10k in I-bonds to your niece and her new husband, I believe that was an excellent strategy for a younger couple. It will provide them with interest income and stable value on the original investment, especially if they decide to use the funds to purchase their first home. I am now in my mid 50’s as well and my niece asked me about I-Bonds. However, instead of that investment, I encouraged her to max out her Roth IRA this year and then to place another $6,000 in the account on January 2, 2023. While no tax deduction, her earnings will grow tax-free for many years and will never be taxed if she does not take out the funds until age 59 1/2. Enjoy your weekend as well.

    6. The I-Bond is backed by the full faith and credit of the US Treasury unlike CIO that is a micro cap $650M REIT and who knows what paying 7%. I believe there will be taxes due from its dividends too. But no state taxes on I-Bonds. So depending on your tax bracket and where you live, I-Bonds in this current high inflation environment are good return and portfolio diversifier.

    7. I’ve seen people on here buy things I wouldn’t touch with a 10-foot pole, but I wish them well. There’s no need to get snarky or border on ridicule. We’re all online friends and all learning from each other.

      I have a few problems with I-Bonds:
      1. CPI-U badly underestimates the true inflation rate we’re all experiencing. The upcoming May reset reflects a rate of 4.82%. That rate is doubled in the calculation, but, according to our masters, CPI-U isn’t even 5%!
      2. Low purchase limits – already beat to death.
      3. Sacrifice 3 months interest if cashed before 5 years.
      4. Fixed-rate interest is 0%.

      Having said all that, I invested the max last year and this year for both of us. With the economy teetering on recession, it’s hard for me to risk more money in the stock market, knowing 20-50% of my portfolio value is at risk. Real estate cap rates are sky high, reducing returns to unappealing levels and all assets are in a bubble with a major adjustment overdue. When looking for an inflation hedge, I-Bonds must be at the top of most lists. Risk-free returns, no state tax, some liquidity and reasonable returns, although I realize they really don’t track “real” inflation. And the returns are compounded semi-annually, resulting in [compound] interest earned on interest already paid.

      According to my calculations, if inflation stays at this level for another year, then returns to “normal” two years after that, I will earn an XIRR of 12.3% after 5 years, an APR of 11.7% and a simple yield of 32.8%. That’s getting $13,280 back after 5 years on a $10,000 investment. I have prepared a table, (that I can’t share here,) which shows all the data, including the early redemption penalty, which doesn’t look that bad. Given the economic outlook, the risk/reward potential is unbeatable IMO.

      Good fortune to all!

      1. Bruce, BLS reported last month that year-over-year CPI-U inflation was 8.5%. You say it is being under-reported at less than 5% – care to share where you got that info?

        1. I should have said the “semi-annual inflation rate” cited by the TD page was below 5%. The calculation for I-Bonds doubles it to get to the annual rate. The new composite rate beginning in May is 9.62% which means the semi-annual rate is 4.81%.

          It still underestimates “real” inflation IMO. Especially since they keep tinkering with how the index is determined.

          And it lags quite a bit. According to this page the rate jumped by 1.34% in one month from Feb to Mar 2022!

  7. If rate goes to zero then we are all doing pretty well as inflation will also be zero, and that won’t happen. Other low risk short term investments would then have to be very low as well. That said, I’m not extending my purchases.

  8. About 3 weeks ago, my wife tried to gift me I bonds; however, something went wrong and she instead purchased them for herself. As she already had purchased the limit for this year the Treasury sent an email to her at 4AM on the day the purchase was scheduled informing her she was over the annual limit and the funds would be returned (why they didn’t cancel the order I don’t know).

    Today, her account still shows the “extra” bonds in her name and no funds have been returned. Has anyone else encountered this problem? If so did you get the investment back or did you wind up with more than 10K of I bonds for the year?

    1. One of my kids bought at the very end of December, but funding didn’t happen until Jan. Then he bought more in Jan. However, they treated the Dec purchase as Jan (darn!), and refunded his actual January purchase. It took weeks — maybe 3 or 4? — quite a few weeks before the refund happened. It’s government, you know.

    2. I had a similar issue where purchases I made in the gift box were considered part of my persona; purchases and I received an email that the iBonds I purchased through the gift box exceeded my 10k limit and had been cancelled. I sent them an email through their Contact Us button questioning this, and I received a reply in under 12 hours acknowledging that they had made a mistake and had already reissued the ibonds in my gift box. I was pretty impressed with how quickly they responded and corrected the problem. Who would have guessed that Treasury Direct would have better customer support than my various brokerage accounts!

  9. If you want some nice charts for what the April’22 I bonds are expected to earn for the next several years (given the bond markets expectations for inflation in how they price TIPS, etc), you can check out this post on another finance forum.


    You can use it to decide how many years worth of gifts it might make sense to lock up, for example based on if you think 6% is good enough, or 5% is fine, etc.

    Thursday is the last day to buy, and sooner probably can’t hurt to avoid any snafus.

  10. Tim,

    Thanks for doing this! Interest in i-bonds is only starting, imho, and
    it will be interesting to see if the treasury will modify the rules they have.
    There is some talk that they should increase the max from $10k to $100k.

    In addition to buying each $10k, anybody can buy “gifts” without limit, but gifts can only be “delivered” to the recipient at a rate of $10k/year, as has
    been extensively posted here (unless they change this in the future).

    As of today, my family has bought each $10k, and gifts for $30k each (deliverable on 2023, 2024 and 2025, i.e. about 2.5 years from today assuming they will not change the $10k rule , to >$10k or maybe to less!).
    We will receive 7.2% for the first 6 months, 9.5% the next 6 months, and who knows how much after that. For us, this helped reduce the large amount of cash sitting at 0%, that otherwise would continue to sit there.

    How many gifts have other III readers bought?


    p.s.: if you want to guarantee the 12 months of high interest, you can still buy i-bonds during April (preferably before Thursday, otherwise you will only have 6 months guarantee beginning in May).

    p.s.2 The best and most likely 100% reliable source for info about i-bonds that I have found are the “Diamond NestEgg” videos on youtube.

    p.s.3 Do not forget: i-bonds only guarantee the value of your money with practically 0 risk ; you won’t get richer with i-bonds like you could potentially with stocks or preferreds, but obviously with significantly higher risks.

    1. Please define the reference to deliverable in future years.

      We did everyone 10k 2021 followed in short order by 10k 2022.
      Owe taxes 2021 so can not send tax refund to I-Series.
      Thought the gift option could be utilized in 2022 for 2022. Are you front loading? Must you be related to gift box recipient?

      I’ll go through the TreasuryDirect.gov site again. Your cliff notes are helpful.

      Thank you

      1. Mz. G,
        Im not an expert, most of what I know is from reading TD and the videos I reference.d in my previous post. My understanding is that you can buy upto $10k/year in i-bonds for yourself, but you can buy as many “gifts” to anyone (not only family). Td holds these gifts in your account. You cant touch them and they stay there until you deliver the gift to the recipient. The $10k/year limit applies to the recipient of a gift too. So you can deliver a gift only if the recipient has not used the $10k/year. If you buy $30k in gifts to someone, then you can deliver $10k every year the recipient does not buy any bonds. In this case, you could deliver (but do not have to) $10k in 2022, another $10k in 2023 and $10k in 2024. You can hold the gift in your account as long as you want, do not need to “utilize the gift option for 2022 in 2022”. Hope this addresses your question

        1. I watched several videos on YouTube and I understand it exactly as you stated it. The one catch I see is if you buy too many gifts you are stuck for years to deliver them. If the rate goes to zero you are trapped holding them. I bought $10,000 for my wife and she bought $10,000 for me. If 2023 has low inflation I can get out with only a 3 month penalty.

          One question I do have is the 3 month penalty. Let’s say next year the rate goes to zero. They state the penalty is your last three months if you hold less than 5 years. Will the penalty then be zero? If anyone has the answer I would appreciate it.

          1. Jb/az,
            You are exactly right about the risk of being stuck for years if the interest i-bonds will pay is lower than what you would like (or could receive investing somewhere else). That’s probably why I have not heard of anybody gifting beyond $30k (which can deliver the last $10k in 2.5 years in 2025). If someone has, I would like to know!
            It is a guess you take, how likely is it that inflation will go from the current 9.6% to 0% by November 2022 or even May 2023? Even if inflation is “tamed” we are likely to see (I guess) >2% or 3%. Assuming you want to cash your i-bond to invest in something with low risk as a CD, how likely is it that a CD then will pay significantly more than the i-bond? It is possible, but I evaluate it is a relatively small risk, especially if I want to continue to hold this amount in safe vehicles. Also, consider that i-bonds are state tax free and taxes are deferred until redeemed. And if you do wait the 5 years, there is no 3 month penalty.

            Regarding the 3 month penalty being $0 if the rate is 0%, this is what TD states: ” if a bond is cashed within the first five years after its issue date, interest
            earned during the three months prior to cashing will be forfeited”.

            So yes, my understanding is that if you cash at least 3 months after the rate is 0%, you have a $0 penalty.

            Finally, if someone wants to gift another $10k to be redeemed in future years, tomorrow is the last day to ensure a 7.1% + 9.6% for the next year. Buying in May, you only ensure the 9.6% for six months.
            On the other hand, one should also consider waiting until October to see where inflation is, and only then consider adding more gifts.

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