This article has been updated to reflect the current new Series I bond rates for November, 2022 through April, 2023 period. The new US Treasury Series I Savings Bond interest rate for November, 2022 was just announced. The new I bond rate has been set at a 6.89% APR. While the new current I bond rate is lower than the most recent 9.62% rate (March through October, 2022), this is still one of the highest I bond rates offered since I bonds launched in 1998. It is nearly double the rate when I first purchased an I bond and wrote about them in my I bond overview. You can buy I Bonds online at the current 6.89% rate through the end of April 2023 and you will get that rate for a 6-month period after purchase.
I bonds have exploded in popularity as they are a very safe investment that have offered a strong guaranteed rate of return in recent years from the US Treasury. Comparatively safe bank investments, meanwhile, are offering the following paltry interest rates (source: bankrate.com national averages for November, 2022):
- 5-year CDs: 1% APR
- Savings accounts: 0.16% APR
- Checking accounts: 0.09% APR
If you have funds in these types of accounts that you don’t anticipate needing for the next year (eg emergency savings), then it’s worth looking into potentially moving over. Check out the aforementioned I bond articles for more basic I bond details, and I’ll also give you a quick primer below.
What is the New November, 2022 I Bond Rate?
In bond interest rates are a combination of a fixed rate (which you get for the life of the bond) and a variable rate that changes every 6 months. Fixed and variable rates are announced every 6 months (on May 1 and November 1). The current I bond rate for bonds issues between November 1, 2022 and April 30, 2023 is 6.89%. This consists of a fixed rate of 0.4% and a variable rate of 6.48%. The next new variable rate will be announced May 1, 2023.
How Long is the 6.89% Variable I Bond Rate Good For?
You receive the I bond variable rate for 6 months from the date of issue. Rates are compounded semiannually. For example, an I bond purchased in January of 2023 would get the 6.48% APR variable rate until July of 2023, at which point the variable rate would switch to the May, 2023 variable rate for the subsequent 6 months (in addition to the 0.4 ‘% fixed rate). The next variable rate change for that bond would be January, 2024, when the November, 2023 rate would kick in for 6 months.
Here’s a chart to help explain:
How Much Bonds Can You Buy Per Calendar Year?
The amount of I bonds you can purchase in a calendar year depends on how you purchase them:
- Individuals (at Treasurydirect.gov): can buy $10,000 per calendar year, per account holder, in digital I bonds through the US Department of Treasury at treasurydirect.gov. Individuals with a Social Security number can have 1 account each. Must be 18+ to buy.
- Individuals (Tax Return): can buy up to $5,000 per Social Security number in literal paper bonds through the IRS as a form of tax refund payment using IRS Form 8888 (joint filers can purchase for each of the 2 filers) when you submit your tax return.
- Living Trust (at Treasurydirect.gov): living trusts can purchase up to $10,000 per year through the name of the trust. This is definitely a more complicated option, but good to be aware of.
So, hypothetically, an individual could buy up to $15,000 per calendar year in I bonds, or a couple could buy up to $30,000 per year. Buying through a trust would open up an additional $10,000 per trust.
Is There an Early Withdrawal Penalty for I Bonds?
What if you need to access funds immediately, for whatever reason, or future I Bond rates go up and you want to cash out and buy new I Bonds? Here’s a breakdown:
- I bonds have a 30 year expiry from the date of purchase.
- I bonds must be held for a minimum of one year.
- If an issue is held for less than 5 years (but more than 1 year), the holder can cash in their issue, but will forfeit the most recent 3 months of interest returns as a penalty.
Should I Invest in I Bonds?
I am personally investing in I Bonds this year because I currently see them as a safe option with a significantly higher return in the short-term than similar investments (eg savings accounts, CDs, MMAs). While those rates could decline (they won’t go negative) if and when inflation declines, the same is true for deposit accounts as well, which currently have much lower rates than I bonds. No investment is 100% failsafe, however, and I’m not your investment advisor, so you should do your research and make a decision for yourself, based on your own personal financial situation.
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