Why you should buy I-Bonds right NOW!

By: shimika77@yahoo.com0 comments

Ibonds are the primary savings vehicle that our financial advisors use to hedge inflation rates and so can you! Now through October 2022, these amazing savings vehicles are paying a whopping…. wait for it…..9.62% yield!

What are Ibonds?

I bonds are safe investments issued by the U.S. Treasury to protect your money from losing value due to inflation. Interest rates on I bonds are adjusted regularly to keep pace with rising prices. In addition, series I bonds are exempt from state and local income taxes, which makes them an even better low-risk investment for investors who live in high-tax states and cities.

Investors can buy up to $10,000 worth of I bonds annually through the government’s TreasuryDirect website. You can purchase another $5,000 with your tax refund, upping the annual total purchase amount of series I bonds to $15,000 per person.

I bond interest is calculated using so-called composite rates based on a fixed interest rate and an inflation-adjusted rate, which we describe in depth below. I bonds earn interest monthly, though you don’t get access to the interest payments until you cash out the bond. Interest you earn is added to the value of the bond twice per year. This means the principal amount you earn interest on increases every six months, positioning your money to compound over time.

You must own the bond for at least five years to receive all of the interest that is due. You cannot cash out an I bond before holding it for a year; if you do so after that point (but before five years), you forfeit three months of interest.

How much can you earn right now?

I Bonds can be purchased through October 2022 at the current rate.  That rate is applied to the 6 months after the purchase is made.  For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022.  Interest is compounded semi-annually.

How is the interest calculated:

The interest rate combines two separate rates:

  • A fixed rate of return, which remains the same throughout the life of the I bond.
  • A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Fiscal Service announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.

Because it combines two rates, the interest rate on an I bond sometimes is called the composite rate or the overall rate.

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