You read that correctly – 9.62%!! I-Bond stands for inflation-indexed bond and they are issued by the US Government. Therefore, the reason the current rate is so attractive is that it is reflective of higher inflation rates. I-Bonds have been around for a long time, but they have not been very popular because we have been in such a low inflation rate environment, therefore, their rates have been pretty low. Well, that has certainly changed now that we have record inflation rates!! And that is exactly why the US Federal Government offers I-Bonds – to help people combat inflation.
I-Bonds are the only bond in which the Federal Government guarantees both the principal and the interest which is why they are becoming extremely popular.
Let’s answer a few questions that you might have about I-Bonds:
How are the rates determined?
Every 6 months on May 1 and Nov 1, the Feds declare the new 6-month rate. The May 1st, 2022 rate was determined by the CPI-U from October thru March. The CPI-U stands for Consumer Price Index Urban. The CPI-U from Oct 2021 to Mar 2022 rose by 4.81% which is the semi-annual inflation rate. The Feds multiply the 4.81% rate times 2 to get the 9.62% annual rate which they then declared on April 15th to become effective May 1st. This rate is then guaranteed for 6 months. It should be noted that you earn the 9.62% rate for 6 months from the time you purchase the bond. So, if you buy an I-Bond on Oct 1, 2022 you will receive the 9.62% rate from Oct 1, 2022, thru March 31, 2023. Then on April 1, 2023, you will receive the new 6-month rate declared on November 1, 2023
Is there a purchase limit?
Minimum of $25 and a maximum of $10000 per person/per year ( BUT…. our R & D dept discovered a way in which you can buy up to $30000 per person this year!! – more about that later!! )
How do I buy I-Bonds?
You have to buy I-Bonds online thru Treasurydirect.gov.
You can also buy an extra $5000 paper I-Bond thru your Federal Tax Return
Is there a minimum holding period?
I-Bonds have to be held for at least 1 year. In other words, you can NOT access your money for the first year. From years 2 – 5 there is a penalty for early withdrawal. The penalty is loss of your last 3 months of interest.
Could my I-Bond earn 0% interest?
Yes, they could, but remember your principal is always guaranteed. If we experience deflation or Zero inflation, then your renewal rate could be 0%. But after 1 year you can cash in your bond. Since you only lose your last 3 months of interest, we recommend that if the Feds do declare a 0% rate that you then wait 3 months to surrender your bond. Why?? Because you only lose the LAST 3 months of interest so therefore you would lose 0% interest!!
Here are some other I-Bonds facts:
- I-Bonds are 30-year bonds issued by the US Federal Government
- Current 6-month rate declared on May 1, 2022, is 9.62%
- Both principal and interest are guaranteed by US Government
- Rate based on CPI-U for the previous 6 months
- Rates are declared every May 1 and Nov 1
- You can NOT touch your money until AFTER 1 year. Between years 2 and 5, if you withdraw your money, the penalty is the loss of your last 3 months of interest
- Interest is compounded semi-annually
- Interest is subject to Federal Income tax but NOT State Income tax
- $10,000 per person/per year contribution limit ( we know how you can purchase 30k!!)
- You can decide to have interest taxed each year or defer the taxation until you cash in the bond
- If we experience ZERO inflation for the previous 6-month lookback period, the new rate would be 0%
- We recommend holding your bonds for at least 15 months so if this should happen you would not lose any interest
- You can NOT use IRA, 401k, ROTH IRA, or other qualified money to purchase an I-Bond
Now let’s get back to the annual maximum I-Bond purchase limit of $10000 per person/per year. The biggest complaint our clients had was that they could only buy a maximum of $10000. So, our R & D dept (Research & Development Dept) did some extensive research and they discovered a way in which our clients can buy $30000 of I-Bonds this year. If you are married, you can each buy 30k of I-Bonds for a total of 60k this year and all 60k will start earning the 9.62% rate!!!
If you are interested in learning how you can buy 30k of I-Bonds this year, please contact us by calling 920-921-7526 or emailing us at info@goebelins.com.
Larry Goebel is President/Owner and an Insurance & Financial Advisor with GOEBEL Insurance & Financial.
GOEBEL Insurance & Financial specializes in Holistic Insurance and Financial Planning and Retirement Planning.
Phone: 920-921-7526
Email: info@goebelins.com
