Series I Bonds Providing a 9.62% Annualized Yield

 Series I Bonds Providing a 9.62% Annualized Yield

As inflation has pushed higher, Series I bonds which are tied to inflation have garnered headlines.  Here is what you need to know.

• I Bonds are backed by the U.S. Government, they will not lose value and they pay interest in two parts, a fixed rate and a variable rate.

• The annualized rate for I bonds issued from May 2022 through October 2022 is 9.62 percent.

• The interest is compounded semiannually. Every six months from the bond’s issue date, interest the bond earned in the six previous months is added to the bond’s principal value, creating a new principal value. Interest is then earned on the new principal.

• Interest earnings is subject to Federal Income Tax but exempt from state taxation

• You can acquire electronic I Bonds up to $10,000 per person (or certain trusts, business entity) through Treasury Direct or up to $5,000 of paper I Bonds using your Federal Income Tax refund

• The downside is that you need to hold the bond for 12 months. And if you cash the bond before it is five years old, you lose the last three months of interest.

I Bonds are worth considering beyond your emergency fund, but not necessarily your long-term funds.  If you have additional questions or would like to discuss in more detail, please give us a call.