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Series I Bond :: May through October 2023

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Series I Bond :: May through October 2023

4.3% for I bonds issued May through October 2023.

Bob Brinker
May 24, 2023
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Series I Bond :: May through October 2023

www.brinkeradvisor.com

Earlier this month Treasury updated the Series I bond rates. The new rate for I bonds purchased between May and October is 4.3%. This rate consists of a 0.9% fixed rate that will not change during the life of the bond, and a 1.69% semiannual inflation rate for the initial six months of ownership. The example below from the TreasuryDirect.gov website details the current I bond rate calculation:

The new rate is down considerably from the prior 6.89% I bond rate. Although the fixed rate component increased from 0.4% to 0.9%, the six-month CPI inflation adjustment declined from 3.24% to 1.69%.


If you already own I bonds, this table shows you how the May 1st inflation update will alter your composite rate:


One of the questions we often get is: Should I redeem my current I bond and reinvest the proceeds into the new I bond? Let’s walk through some considerations to help you make this decision.

  1. Taxes. One of the benefits of Series I and EE savings bonds is that you are able to defer the tax liability until you receive the interest earned on the bond. This is a wonderful benefit to owning I bonds. It is generally unattractive to redeem an older I bond and trigger the tax liability.

  2. Purchase Limits. One of the most common I bond complaints we hear is the relatively low annual purchase limit of $10,000 in electronic I bonds. If you are already bumping up against the purchase limit, redeeming your existing I bonds isn’t the best choice.

  3. Early Redemption Penalty. You are required to hold onto your I bond for at least one year. After one year, you may redeem an I bond. However, if you redeem an I bond after one year but before five years, you will lose the most recent 3 months of interest. Therefore, you generally only want to consider early redemption during periods when the I bond composite rate is extremely low.

We think the current Series I bond rate is an attractive investment. The 0.9% fixed rate is generous when looking at I bond announcements over the past 15 years. The last time the fixed rate was higher than 0.9% was all the way back in April 2008, when it was 1.2%. If you decide to purchase an I bond, we recommend making your purchase later in the month. Treasury will back-date your purchase to the first day of the month of purchase. Therefore, if you purchase I bonds in the last few days of the month you can earn nearly one free month of interest. The easiest way to purchase Series I Savings Bonds is at TreasuryDirect.gov.

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Series I Bond :: May through October 2023

www.brinkeradvisor.com
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