I Bonds: A very simple buying guide for 2022

May 2, 2022 update: Treasury holds I Bond’s fixed rate at 0.0%; composite rate soars to 9.62%.

By David Enna, Tipswatch.com

My usual beginning-of-the-year buying guide for U.S. Series I Savings Bonds has a lot of qualifications and “what ifs,” making this a complicated and much-debated decision. Is the I Bond’s fixed rate likely to rise during the year? Should I space my purchases out over the year? Will the inflation-adjusted variable rate rise dramatically at the resets in May and November?

I Bonds are issued by and guaranteed by the U.S. Treasury

I’m telling you: All of that really doesn’t matter in 2022. It looks like the wise course will be to buy I Bonds anytime from January to April, but before the May 1 rate reset. Before we get into why, here’s a quick primer for investors who are new to I Bonds:

An I Bond is a U.S. government security that earns interest based on combining a fixed rate and an inflation-adjusted rate.

  • The fixed rate will never change. Purchases through April 30, 2022, will have a fixed rate of 0.0%, which means they will simply track official U.S. inflation over time.
  • The inflation-adjusted rate (often called the I Bond’s variable rate) changes each six months to reflect the running rate of inflation. That rate is currently set at 7.12%, annualized, for six months. It will adjust again on May 1, 2022, for all I Bonds, no matter when they were purchased. (However, the effective start date of the new interest rate will vary depending on the month you bought the I Bond.)

Investments are limited to $10,000 per person per calendar year for electronic I Bonds held at TreasuryDirect. There is also the option to get $5,000 a year in paper I Bonds in lieu of a federal tax refund. The purchase limit is the reason people ponder timing their I Bond purchases; once you hit $10,000 per person per year, you can’t purchase more, at least in the traditional way.

The value of building and holding a stockpile of I Bonds was demonstrated in 2021, with inflation surging to an annual rate of 6.8% in November. As U.S. inflation rises, the return on I Bonds increases, and the money compounds tax deferred until you redeem the I Bonds. For more detailed information, read my Q&A on I Bonds and the I Bond Manifesto.

The case for buying in January

I Bonds purchased through April 2022 will earn 7.12% interest, annualized, for a full six months. That is an exceptionally high return, and blows away other safe alternatives. With a $10,000 investment:

  • I Bond: You will earn $356 in 6 months.
  • 1 year Treasury: You will earn $40 in 1 year.
  • 1 year bank CD: You will earn $65 in 1 year.
  • 2 year Treasury: You will earn $156 in 2 years.
  • 3 year Treasury: You will earn $312 in 3 years.

A lot of people are looking at that 7.12% six-month return and deciding to invest in I Bonds for the short-term, planning to redeem after the one-year holding period. (I recommend hanging on to I Bonds for the long term, but I understand the strategy in this low-interest-rate environment.)

Short-term investment? One quirk of U.S. Savings Bonds is that if you purchase near the end of a month, you get credit for a full month of interest and ownership. So for a person viewing I Bonds as a short-term investment, placing an order at TreasuryDirect to buy on Jan. 26 or 27 makes sense. That starts the clock ticking on the one-year holding period. You will be able to redeem in early January 2023, but you will lose the last three months of interest. Still, you will earn at least $356 interest (probably more) even with the three-month interest penalty. A couple could double up on that purchase.

Long-term investment? Long-term holders of I Bonds are my favorite people, and my recommendation for them is to buy up to the full purchase cap anytime between January and April. Got the money available now? Do it in January. Need time to raise the money? Get it done before April. Any purchase of I Bonds through April will earn the 7.12% annualized rate for a full six months.

So … Buy before May. It is that simple. But you didn’t think I’d leave it at that did you?

What if the I Bond’s fixed rate increases in 2022?

I wrote an article recently speculating on the slight possibility that the I Bond’s fixed rate could rise in 2022. My conclusion was that it could happen, but it would require a massive increase in real interest rates. For example, the 10-year TIPS now has a real yield of -0.97%. That yield would need to rise 125 basis points, or more, for the Treasury to even consider raising the I Bond’s fixed rate, especially when the variable rate is already so attractive.

So, would it make sense to hold off on purchases in 2022 to see if the fixed rate rises? Nope.

Yes, I know, a higher fixed rate is always preferable. That’s the first rule of I Bond investing, since the fixed rate stays with that I Bond for the entire 30-year term, while the variable component changes every six months. But in this case, waiting beyond May 1 means missing out on a massively attractive 7.12% annualized rate for six months. That’s $356 interest in six months, equivalent to more than a decade of interest from a fixed rate of 0.2%. And that $356 initial interest will give your investment a nice boost to future returns, because it will grow with future inflation.

Sorry, but here comes a huge 19-year chart, showing how semi-annual interest earned on an I Bond purchased before May 1 will compare to a purchase after May 1 with a fixed rate of 0.2% (which is very unlikely). This chart assumes that the inflation-adjusted variable rate will remain high at the May 1 reset, and then gradually begin tapering down to an annual inflation rate of 2.2%.

This is a corrected version of a chart originally published with this story.

The key takeaway from this chart is that buying I Bonds before May 1 gives your investment a $356 head start, and that head start will continue to grow with inflation over 30 years. So even though the semi-annual accrued interest would be higher with the 0.2% fixed rate, it would take until year 13 for the 0.2% fixed rate (which is highly unlikely, remember) to catch up to the I Bond purchased before May. And if the fixed rate stays at 0.0% in May (much more likely), the investment would trail the return of the pre-May I Bond through the entire 30 years.

Is it reasonable to wait until April to see if the fixed rate is likely to rise in May? Sure, and it does no harm to your investment. But it’s still highly likely that investors will want to buy before May. Even if the fixed rate does rise in May, the investment return will lag the before-May purchase for 13 years.

But one final point, which I often say: “The Treasury does weird things.” We’ll see.

Key dates for the curious

Both the I Bond’s inflation-adjusted variable rate and the fixed rate will be reset on May 1 (actually May 2 since the 1st is a Sunday) and November 1. Investors will know the new variable rate a couple of weeks before the official reset, because it is based on six-month inflation rates.

At 8:30 a.m. EDT on April 12, 2022, the Bureau of Labor Statistics will release the March inflation report, which will set in stone the I Bond’s new inflation-adjusted variable rate, based on non-seasonally adjusted inflation from September 2021 to March 2022.

So an investor who opts to wait will have from April 12 to April 28 (a Thursday) to decide on buying before May 1, or after. But remember, the only way the I Bond’s fixed rate will rise above zero is if 10-year real yields rise about 125 basis points in the next four months.

At 8:30 a.m. EDT on Oct. 13, 2022, the BLS will release the September inflation report, which will set the I Bond’s next inflation-adjusted interest rate, based on inflation from March to September 2022.

At about 10 am. EDT on May 2 and November 1, the Treasury will announce the new fixed rate for I Bonds, which seems very likely to remain at 0.0% on May 1 but is more of an open question for November 1. However, if the fixed rate rises in November, investors who capped out purchases earlier in 2022 will have a chance to get the higher fixed rate in January 2023.

Conclusion

People looking at I Bonds as a short-term investment should purchase near the end of January to get the clock started on the one-year holding period. By purchasing near the end of the month, and redeeming near the beginning of January 2023, the holding period can be cut to 11 months and a few days. This strategy is guaranteed to return at least $356 on a $10,000 investment, even with the three-month interest penalty.

Once the year is up, investors would have to look at then-current inflation-adjusted variable rate. If it is high — anywhere above 4% — they will probably want to hold off on redeeming in January to avoid a three-month penalty on an attractive interest rate.

People looking at I Bonds as a long-term investment should plan on completing their purchases — up the full cap of $10,000 per person per year — anytime before May 1. Investors who like to be strategic can wait until mid-April to make the purchase, but most likely, they will want to buy before May 1.

My personal decision: I have placed an order to buy my full allocation on Jan. 26.

* * *

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he discusses can purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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98 Responses to I Bonds: A very simple buying guide for 2022

  1. Charles Shaw says:

    I bought 2 $10000 ibonds for my wife and I in Oct 2022, how soon can I buy more ibonds?

  2. woody832 says:

    A >>possible<< workaround for the $10,000 limit which I am experimenting with is reciprocal gifts. This was an idea pitched by some author on Seeking Alpha last spring that I decided to try. It involves a 2-step process, and I will find out sometime in the future when I try to complete step 2 whether it works. It feels wrong, as it is clearly an evasion of the $10K rule.

    Treasury Direct allows you to buy I-Bonds, separate from your regular purchase, as gift bonds, designated at purchase for a specified gift recipient. You can have TD deliver the gift bonds immediately, or hold them in your Gift Box, a separate area of your TD account. While in the gift box, the gift bonds accrue interest just like bonds purchased directly for yourself, and also age normally. The gift bonds can be delivered at any time. They count against the gift recipient's $10K limit in the year when they are delivered.

    My wife and I, having already each bought $10K of I-Bonds for ourselves in January, each bought $10K of gift I-Bonds, designated for each other, in late April. They have been sitting in our gift boxes since then, accruing at 7.12%, and about to move up to the current 9.62% rate. The idea is to continue to hold them in the gift boxes until rates normalize, possibly in 2024 or 2025, and then deliver the gifts in that year in lieu of making regular purchases. In that year, say 2025, each of our accounts will get $10K of bonds that have already accrued this year's crazy 8%, plus whatever I-Bond rates are in 2023 and 2024, instead of newly-minted bonds. The bonds will already be past the 1-year no-sale period and well along toward the end of the 5-year 3-month-interest-forfeiture period.

    That's the theory, anyway. It's plainly a free lunch, and somebody once said there's no such thing. For a couple that could afford it, and was young enough, I don't see why this couldn't be done on a grand scale — say buying $200K each, to be delivered over a 20-year period. This trick shouldn't be allowed, but I wasn't able to find anything saying it won't work. My understanding is that failure would come in the form of a notice that, upon attempted delivery of the gifts, Treasury's computers have flagged the original purchases as exceeding the $10K limit, and are refunding the original purchase price. Hopefully with interest. We'll see.

    • dtobisk says:

      A week or so ago I watched a YouTube video by a financial advisor (not sure of her credentials, so I won’t bother to name her) who also went into detail about this same tactic. I hadn’t been thinking of trying it, but your comments have now brought it to top of mind. Let us know if you get any pushback from Treasury Direct. Thanks.

    • Tipswatch says:

      The “gift box” idea, which is legit, is explained well in this article: https://thefinancebuff.com/buy-i-bonds-as-gift.html

      There are a few potential downsides: Once you “gift” the I Bond the money is no longer yours. It belongs to the person you named and it will count against their I Bond cap in the year they receive the gift.

      If the I Bond’s fixed rate increases in 2023, you’d probably want to get the higher fixed rate instead of the gift, so you’d hold off taking the gift until the fixed rate returns to 0.0% (which will happen).

      The other thing to consider is that you can buy an unlimited number of TIPS at auction or on the secondary market, and TIPS have real yields at least 100 basis points higher than an I Bond. As a long term investment (5 years and up), TIPS are equally attractive and there is no limit. But you can’t nail down that 9.62% nominal yield for the first six months. So as a short-term investment, I Bonds are superior.

  3. Mark Owen says:

    I have bought 10,000.00 worth of I bonds this year, as of January. Can I buy another 10,000 dollars worth now and have it counted towards 2023? Or can I open up some type of a separate account? I want to take advantage of the good interest rate. Thank You.

    • Tipswatch says:

      You are limited to $10,000 in I Bonds per calendar year per Social Security number. If you have a spouse, she can open a separate account and do a separate purchase. There may also be separate purchase opportunities if you have a trust or corporation.

  4. Cindy S Miller says:

    I am single. I have an “Individual” iBond account which I opened this year and to which I contributed the maximum allowable amount . year).
    My question is: Can I contribute both $10,000 into my Individual iBond account at Treasury Direct as well as to create a Treasury Direct iBond account for my Revocable Living Trust and contribute $10K to that account during this same year?
    Thank you SO, SO, SO MUCH for your help and guidance:-)

  5. PAULA CIVIDANES says:

    Hello, I am just reading about this and I have been looking for some type of investment (long term) instead of having just a savings account. Today is JUNE 3rd, so obviously I am late to the party.
    Is it smart to buy the maximum right now of $10,000 I bonds or should I wait til January 2023? And second question do I go for ELECTRONIC BONDS or PAPER BONDS?
    Thanks!!

    • Tipswatch says:

      If this is a long term investment, create an account at TreasuryDirect and buy the full amount in June. You will earn 9.62% annualized for a full six months, then match inflation after that.

  6. Thomas says:

    How can I buy I bonds?

  7. Erich Sielaff says:

    Great information. But I am confused about when to buy. My thought was to buy on May 2, to get 6 months of the 9.62% rate. Is there a downside to this since it is already April 19?

    • Tipswatch says:

      I find I have been answering this question about 5 times a day, but I do believe if you want to be a long-term holder of an I Bond, you should buy before May 1. And here is the rationale, copied from a previous answer:

      Yes, we don’t know what the next variable rate will be, based on inflation from March to September. If you buy $10,000 in I Bonds before May 1, you are guaranteed to get a return of $853 in 12 months. If you buy after May 1, you are guaranteed to get a return of $481 in six months, and then some unknown amount in the next six months. So $481 is your worst-case scenario, while investing before May 1 has a worst-case scenario of $853.

      For the May 1 scenario to pay off, the next variable rate would need to be more than 7.12%, obviously, which equates to an inflation rate of about 3.56% from March to September. If it is higher than that number, both the investor who bought before May 1 and the investor who bought after May 1 would benefit, because both would get the new variable rate some time after November 2022. Long-term holders should buy before May 1 and get the immediate 7.12% for six months, then 9.62% for six months, and then all future variable rates.

      But, sure, if you are looking to hold the I Bond for only 12 months and then immediately redeem, it could make sense to buy after May 1, because you would be losing three months interest from the unknown second variable rate, which probably will be lower. A buyer before May 1 should hold for 15 months before selling, to get the full benefit of the 9.62% interest for six months.

      • hoyawildcat says:

        Buy now to lock in the 7.12% interest for the next six months and then 9.62% for the subsequent six months. That’s a guaranteed 8.37% for the next twelve months! Who knows what the interest will be in November, but, as the saying goes, a bird in the hand in worth two in the bush.

      • Erich Sielaff says:

        I finally understand. I will buy my max allocation today. Thanks for answering 5 times a day. The 6th was the charm. Best!

  8. Pingback: Financial Face-Off: Should you use your tax refund to buy I bonds or crypto? One of these options could get a 9.6% return. Let us explain. – MarketWatch – bc

  9. ken says:

    can I bonds be purchased and held in a Roth IRA?

  10. David says:

    Short term analysis is flawed. If I buy in April then sell 12 month later, I get 6 month of 7.12% + 3 months of 9.62% rate (forfeit the final 3 months interest). If I buy in May, I get 6 month of 9.62% + 3 months of Nov 2022 rate. April buy only wins if the rate collapses in Nov.

    • Tipswatch says:

      Yes, I wrote this article in January, when we didn’t know inflation would surge to create a variable rate of 9.62%. However, for short-term investors I’d still recommend buying just before May 1, holding until early July 2023, and then redeeming. So it would be a 14-month + a couple days holding, and you’d earn about 8.5%.

  11. Kevin says:

    Hi, new to this site. Very informative. Thanks. I don’t see where you have addressed gifting I Bonds. My wife and I gifted each other $10,000 in I Bonds last month. We already met the maximum $10,000 for 2021 and 2022. Now we already have our $10,000 bonds for 2023 yet we begin our 1 year holding term in March 2022 and will benefit from from the 7.12% and 9.62% rates. Treasury Direct makes this extremely simple. They have a video on their website that explains the entire process. This is my understanding of the entire process so please verify on Treasury Direct if you decide to consider this option.

  12. Dakota Traveler says:

    Mistake…
    Lots of sources state purchase limitations on ibonds as “$10,000 per person, $20,000 for a married couple.”
    DON’T YOU BELIEVE IT.
    We opened an account in my name, purchased $10,000 in my name and $10,000 in the name of my spouse.
    Treasury Direct immediately electronically sucked $20, 000 out of our JOINT ACCOUNT, issued 5 $2,000 ibonds in my name and refused an identical amount to my spouse as being in excess of the$10,000 limit.
    Fair enough, apparently 2 accounts are required, but they went on to say that it will take up to 2 months to return the amount representing my wife’s purchase to our JOINT ACCOUNT.
    What a rip! The money was transferred out of our account within about 4 hours, but it will take 2 months to replace it.
    ONLY THE GOVERNMENT!!!
    (By the way, I bought 5 $2,000 ibonds rather than 1 $10, 000 bond to limit the 3 month interest penalty, should the need arise.)

    • Tipswatch says:

      On THIS site, I repeatedly state that a couple needs two separate accounts to buy $20,000 in I Bonds. In the past, the Treasury might have allowed the first mistake and issued a warning. But not now with demand for I Bonds so strong.

    • hoyawildcat says:

      I had no problem buying I Bonds for myself and my wife (different SS numbers) using money from a single joint checking account. I bought $10K ($5K each) in October, $10K (ditto) in November, and $20K ($10K each) in January. Each purchase was a separate transaction and recorded as such by my bank and by TreasuryDirect. Am I missing something here?

      • Tipswatch says:

        Yes, same banking or brokerage account is fine, but you need two separate accounts at TreasuryDirect. (If you managed this in one TD account, you slipped through the supervision.)

    • hoyawildcat says:

      Regarding your statement that you “bought 5 $2,000 ibonds rather than 1 $10, 000 bond to limit the 3 month interest penalty, should the need arise.”

      You needn’t have done that. You can redeem as little as $25 at a time. According to the TreasuryDirect website: “You can cash a minimum of $25 or any amount above that in 1-cent increments. If you cash only a portion of the bond’s value, you must leave at least $25 in the TreasuryDirect account. Redemptions are comprised of principal and interest. (In a partial redemption, we pay interest only on the partial amount you cash.)”

  13. Laure says:

    Thanks for this information. If I register my 10K bond with two names (me as the primary and my spouse as the secondary), does that mean that my spouse cannot also purchase a10K bond and list themselves as the primary and me as the secondary? In other words, if they are registered to two people, does the 10K rule apply to both? I am just trying to figure out what makes the most sense in terms of registering the bonds if we both want to purchase a 10K bond. Thanks.

  14. Roy says:

    I’m new to I-bonds. Can you tell me – as interest earned on an I-bond accrues, does that amount also earn the fixed + variable rate in future months?

    • Tipswatch says:

      Yes, as interest paid by I Bonds grows, it is added to the principal balance and the new balance earns the current composite rate, whatever that is. So your earnings also grow with inflation.

  15. David Prompovitch says:

    It is March 2022, with inflation continuing to rise- any re-thinking on filling up on I-bonds before April vs waiting to see if the next interest jumps significantly above zero?

    • Tipswatch says:

      The next variable rate is likely to be somewhere in the range of 7.5% to 8.5%, but I still recommend buying before May 1. You will get a full six months of 7.12% and then get a full six months of the next, possibly higher, variable rate. The I Bond’s fixed rate is highly unlikely to rise above 0.0% at the May 1 reset.

  16. Amanda says:

    Thanks for your info on I Bonds. My plan is to slowly transition my emergency fund (which currently sits in a traditional savings account earning bare minimum interest) over to I Bonds by 10k each year with the goal of long term growth and reassurance of zero risk. My question is, since it is limited by 10k per year, is it a better idea to gift my kids 10k I-bond per year for more growth now rather than wait each year to drop 10k? Are there any drawbacks from adding my kids to my account? Thanks in advance.

    • Tipswatch says:

      The FinanceBuff site had a good article on gifting I Bonds: https://thefinancebuff.com/buy-i-bonds-as-gift.html …. I don’t do this, so I don’t have experience with the process. But the advantage would be to lock in the current high variable rate. Gifted I Bonds begin earning interest immediately, but can only be transferred at the rate of $10,000 a year. Your children would need accounts at TreasuryDirect. The disadvantage is that the fixed rate could rise in the future, but the gifted I Bonds would continue to carry the 0.0% fixed rate.

  17. Sarah says:

    So you can purchase a $10,000 I Bond every calendar year – $100,000 over 10 calendar years or $500,000 over 10 years? Is this correct?

    • Tipswatch says:

      A single person can buy $10,000 in electronic I Bonds every calendar year, so yes, you can build up $100,000 over 10 years (actually more, because of inflation accruals). A couple with two accounts at TreasuryDirect can buy $20,000 each calendar year. Anyone — couple or single — can also get up to $5,000 in paper I Bonds in lieu of a federal tax return.

  18. Jonathan U says:

    Hi David, thanks so much for the information on I bonds! It is really helpful. I do have a question on the chart you have. Can you confirm that the interest rates you use for the calculations in the chart are correct? It appears like the calculated interest is not using the interest rate for the 6 month period. For example, in the first half of year two, I’m thinking the calculated interest would be (10000 + 356 +368 = 10724) X 0.025 = 268 rather than 378. Am I missing something?
    Thanks!
    Jonathan

    • Tipswatch says:

      Oh yes, that chart had problems, and you could not believe how many very savvy people have looked at it without seeing the obvious issues. The premise, however, was correct — that the $356 earned in the first six months by buying before May 1 is going to have a long-term advantage over an I Bond purchased later with a fixed rate of 0.2%. I have updated the chart to show the running principal totals.

  19. vitalyfurman says:

    Hello, thank you for this informing article. I had missed the January window… should I still place the order toward end of February?

  20. Ames says:

    I can’t thank you enough for the work you do. Learning about TIPS and IBonds and then gradually accumulating them has made a substantial difference to my financial wellbeing. I often have questions and it isn’t easy to find answers; I turn to your writing to figure it out, to learn, to make my own decisions. And reading your posts and the comments makes me feel less of an outlier–although suddenly we are the cool kids!! Please keep writing.

  21. Joseph says:

    Has anyone tried purchasing more than 10,000 , years ago they used to allow it & then just send you a warning not to do it again but they would let the purchase go through

    • Tipswatch says:

      It’s “possible” you could get away with this once, but maybe not this year when I Bonds are in such high demand. Many years ago, I purchased an extra $10,000 in my account for my spouse — an honest mistake — and TreasuryDirect said, “Don’t do that.” But they let it go. This year, I doubt they’d be as forgiving.

  22. Dan Weber says:

    Hi David, thank you for your blog. I only recently discovered it and started learning about i-bonds. You share a lot of very helpful information an analysis. As a newbie to i-bonds, I wanted to confirm that there is no way to redeem any i-bonds prior to 1 full year, is that correct? I know there is a penalty of 3 months of interest prior to 5 years, but is there any way to redeem them prior to 1 year and relinquish all interest?

  23. Bob says:

    Where does one view the interest rate accrual on electronic I bonds? Bought some last December, once logged onto to treasurydirect I can find the amount bought but nothing else. Does it show monthly, quarterly or ?

    Thanks,
    Great website

    • Tipswatch says:

      Until you have owned an I Bond for 5 years, TreasuryDirect will show a three-month lag in your interest accrual, because of the three month penalty if you redeem before 5 years. So, just understand there will be a three-month lag, until you reach year 5.

      The opening page of TreasuryDirect will show your original purchase price. You need to navigate to the Current Holdings > Summary page to see the accruals.

  24. Chuck says:

    Great article, I appreciate the information. How do federal taxes play into the i-bond? I understand, for example, that if you cash out after 18 months, you lose 3 months interest (you earn 15 months interest). How would you go about estimating tax charges using the numbers you used in the example ($10,000 @ 7.12% = $356 minimum for one year).

    • Tipswatch says:

      Interest earned on an I Bond is tax-deferred until the I Bond is redeemed. (Investors also have the option to pay taxes yearly, but not many do.) After redemption, the interest is federally taxed as ordinary income. The interest is exempt from state income taxes.

  25. Rod says:

    Thank you for TIPSwatch David. I am appreciative for the information and like your writing style. I learn more with every post. Have a great year!

  26. Patrick N Rivera says:

    How do i Buy into I bond? I am a US citizen that lives in Perú…

  27. Pat says:

    What are your views on adding an additional 10K using LLC? Can this be done without a separate EIN? Thanks.

  28. Patrick says:

    Great information – thank you for staying on top of this!

  29. dtobisk says:

    This was a super informative post, so thanks very much for this and all your other work on iBonds and TIPS. I bought my $10k worth of iBonds two days into 2022 but was considering waiting a bit to buy the allocation for my wife and son who have separate accounts. I never even thought about a higher fixed rate (I have some older iBonds with fixed rates > 0, but I can’t even remember how long ago that was), but it did seem possible that the variable rate could even go beyond 7.12% annualized, depending on the Omicron, etc. effect on the workforce, supply chains, and inflation. I gather that you consider that very unlikely, and I can’t disagree, but I still think I’ll wait until the Jan 12 CPI report to see if the trend returns to the .80 – .90 level of a few recent months or falls to a point that your 30-year chart above suggests (not more than 3.50% annualized) for purchases in May 2022 and beyond. But thanks again for giving me lots to think about.

    • dtobisk says:

      Sorry, correction to one statement I made: Your chart suggests an inflation rate of not more 3.50% for 6 months, or 7.0% annualized.

    • Tipswatch says:

      I did project at 7.0% annualized rate in that chart for the next reset, based on September to March inflation, but that was just a guess. I’m thinking 4.5% on the low side and 7.5% on the high side. I definitely can’t predict future inflation.

      Important note, though: When you buy an I Bond, you get the current composite rate (7.12%) for six months, and then the next composite rate (to be set on May 2) for a full six months. So, in other words, you won’t miss out on that later rate, whatever it is.

      • dtobisk says:

        Yes! Great point about not missing out if future variable rate is higher than expected. Thanks for that.

      • hoyawildcat says:

        I understand that the variable rate is adjusted based on CPI-U data (much like the annual Social Security COLA, which is based on CPI-W data), but that the fixed rate is set at the whim of the Secretary of Treasury, and that the next fixed rate will be set on May 1st, when it will be too late to buy at the current 7.12% variable rate. Is there any way to predict (or make an educated guess) about a possible increase of the fixed rate in May? In other words, based on historical data, will it be possible to have an inkling that there will be an increase in the fixed rate before the end of April, or is it just a crap shoot?

        • Tipswatch says:

          Hoya, I have been looking at the fixed rate calculation for a decade and my conclusion is: “The Treasury does weird things.” However, the best correlation I have found is the real yield of a 10-year TIPS. When that real yield rises to at least 0.25%, or maybe even 0.50%, the I Bond fixed rate will tend to rise above zero. We are a long, long way from that, with the 10-year TIPS closing today at -0.82%. But it has been rising!

  30. pankr003 says:

    Thanks for keeping this blog going.

  31. Charles Hunger says:

    Registration ?…if spouse is listed as co-owner of my I bond purchase, does that limit her 10k max purchase (and vice versa)…?

    • Tipswatch says:

      Charles, TreasuryDirect accounts are tied to a single Social Security number, so your wife would need to set up a separate account, and then she can do another $10,000 purchase there. One account can have ownership of Spouse 1 WITH Spouse 2, and the other Spouse 2 WITH Spouse 1.

  32. Peter says:

    Great article !! Thank you

  33. hoyawildcat says:

    Excellent analysis. However, I would again suggest that people hedge their bets: Buy $5K now (in January), to lock in the 7.12% for the next six months on that purchase, and then wait until April to decide whether to buy $5K in April or in May, when there may be a non-zero fixed rate that will persist for the duration of the bond.

    • Tipswatch says:

      No problem with this strategy, and in fact you could wait until mid-April to make your entire purchase, the investment results would be the same.

      • hoyawildcat says:

        Not if I buy in May.

      • SamK says:

        Hi Tipswatch, can you please clarify how buying in mid April will still give the investment results? If I but in mid-April, I will the 7.12% for only from April till June vs buying it now will give me 7.12% for the full 6 months?

        • Tipswatch says:

          It is a quirk of I Bonds that from the month you purchase, you receive a full 6 months of the current composite rate, which is now 7.12%. If you buy in April, then you will receive 7.12% rate through September, then in October you will transition to 6 months of the next composite rate.

          • hoyawildcat says:

            Quirks indeed.

            Just to be clear, are these the rules?

            1. Anyone who currently owns I Bonds will eventually get the May COMPOSITE (fixed + variable) rate for six months.
            2. Anyone who buys an I Bond in May will get the May composite rate for six months, but will then get the May fixed rate PLUS future composite rates for the life of the bond.

            Is that the deal?

            ———

            Answer from Tipswatch: Not quite. If you buy through April, you will get the current fixed rate of 0.0% for the life of the bond, and the current variable rate for a full six months. If you buy in May you will get whatever the fixed rate is then, plus the then-current variable rate for a full six months.

            The composite rate is the combination of the fixed rate + the variable rate. It does change every six months, but the fixed rate portion of the composite rate is permanent and you won’t ever get a different fixed rate. But you will get a new variable rate after six months from the original investment, and every six months after that, until redemption.

            Composite rates for I Bonds will vary depend on the date of purchase, because the fixed rate portion of the equation never changes after your purchase.

  34. Todd says:

    Hi David, I am trying to add my bank account to a Treasury Direct account to make purchases. First time buyer. Treasury Direct says I have to fill out form 5512 and get a signature certification. I use USAA for banking and no local office. I use Vanguard for brokerage and no local office. Any suggestions on where to get a Signature Certification?

    • Tipswatch says:

      Do you use a local bank at all or a local credit union? I have a small account with a credit union and they will perform this service.

      • Todd says:

        I don’t have a local bank. Gone fully remote using USAA and Vanguard. But I did finally get thru to Treasury Direct and they said to get the form notarized and mail it in with a letter explaining that I could not get a signature certified and that should work. Will post back on results.

  35. Hanna says:

    I am always looking forward to your articles. Was lucky in 2000 when I read about I-bonds and fixed rate was over 3% plus you could buy 30k per person, besides using a credit card that paid 1%. Retired now for 30years but now use I-bonds instead of CDs.Hanna

  36. John says:

    Thanks David! I am buying on Jan 27.

    • Gerry Schreck says:

      If an I Bond variable rate of 9% for May 1 is announced on April 12th, would you buy an April or May?

      • Tipswatch says:

        Gerry, I have already put in an order to buy my allocation in late January. One important thing to understand about I Bonds: When you purchase, you get six full months of the current variable rate (7.12%) and then six full months of the next variable rate and all future variable rates. So if the next rate rises to 9%, I will get that beginning in July for 6 full months.

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