What Are I-Bonds And Should You Buy Them?

In a rising interest rate environment, many of you may be thinking what vehicles you should be utilizing moving forward to invest your money. Given four-decade high inflation numbers, I-bonds are becoming an attractive way to invest your money while also protecting against inflation. So, for those wondering what I-bonds actually are, let’s take a look. 

I-bonds are bonds issued by the U.S. Treasury designed to protect investors’ savings from inflation risk and loss of purchasing power. These bonds are purchased directly from the US government, hold lower risk, provide more safety and are estimated to deliver a 9.62% annualized return starting next month. Given the current climate with inflation through the roof, if you have cash sitting around that is currently earning 0%, now might be a great time to consider purchasing some I-bonds for next few years.  

However, there are a few important details to note when considering I-bonds. There is currently a $10,000 per person limit on the amount you can invest each year into I-bonds. Your I-bonds will have a maturity of 30-years and cannot be redeemed for one full year. However, if you redeem your I-bonds before five years, you will inflict a withdrawal penalty of 3-month’s interest. So, keep in the mind that if you are considering investing in I-bonds, you should do so with the intention of keeping them invested for 5 years. Additionally, you can buy an extra $5,000 in I-bonds within your tax refund if applicable or eligible. 

If you have a long-term view about your investments and might have some cash you don’t need access to for a while, you should definitely check out I-bonds to protect the purchasing power of your cash. If you have any questions about your specific financial situation and how I-bonds may fit within your portfolio, email us at info@shermanwealth.com or schedule a complimentary intro-meeting here and we are happy to help.