By David Enna, Tipswatch.com
The Treasury just set the new composite rate for I Bonds purchased from May to October 2025: 3.98% for six months, based on a combination of a permanent fixed rate of 1.10% and an inflation-adjusted variable rate of 2.86%.
But what about all those I Bonds you are holding from past purchases? What composite rate will they be earning? The answer is a bit complicated, of course. You knew that was coming. Let’s dive in.
Rate calendar
The 2.86% inflation-adjusted variable rate will roll into effect for all I Bonds, no matter when they were issued. But the starting date depends on the month of your original purchase. Each month has a different schedule, because when you purchase an I Bond, it gets a full six months of the starting composite rate before transitioning to the next rate. This is the schedule, from TreasuryDirect:
Example 1: Purchase in April 2024
If you bought an I Bond in April 2024 with a fixed rate of 1.30%, it will be earning a composite rate of 3.21% from April to September 2025, before transitioning to 4.18% for October 2025 to March 2026.
In this case, if you used the Savings Bond Calculator to check your composite rate, for May 2025 it would show the current 3.21% rate in effect through September.
But in the calculator you can update the “Value as of” variable to October 2025 and see the next composite rate of 4.18%:
Keep in mind that the Savings Bond Calculator will not show interest for the last three months if the I Bond is not yet 5 years old. I used $1,000 in these examples because the SBC does not allow a $10,000 calculation. (In theory, it is limited to paper I Bonds, which are no longer issued.) Weird, I know.
Example 2: Purchase in May 2024
If you bought an I Bond in May 2024, also with a fixed rate of 1.30%, you transitioned this month to earning 4.18% from May to October 2025.
This matches the composite interest result rate shown in the Savings Bond Calculator with a “value as of” May 2025:
For this I Bond, if you set the “value as of” October 2025 you will get the same composite rate, 4.18%. If you try to enter a “value as of” November 2025, the SBC will give you “NA,” because it does not yet know the next variable rate.
In summary. This might seem complicated, but the key thing to remember is that the I Bond will earn the current composite rate for a full six months before transitioning to the next fixed rate / variable rate combination.
The rate calculation
You can’t just add the current variable rate to your I Bond’s fixed rate to calculate the I Bond’s composite rate, although that will give you a decent estimate. The Treasury uses a formula that adjusts for compounding factors of the fixed rate:
[Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]
So with a fixed rate of 1.10% and inflation rate of 1.43%, the current composite rate calculation looks like this:
0.011 + (0.0286) + (0.0001573) = 0.0397573
Rounding gives you 0.03976. Turning the decimal number to a percentage gives a composite rate of 3.98%.
This same rate formula applies to all I Bonds, no matter when they were issued. If the fixed rate is 0.0%, then the composite rate is simply the current variable rate. So, for example, an I Bond issued in May 2021 with a fixed rate of 0.0% will be earning 2.86% from May to October 2025:
If you know the month you purchased the I Bond, you can use Eyebonds.info or the Savings Bond Calculator as a resource to track your current fixed rate / variable rate / composite rate combination.
Full list of composite rates
The author of the Eyebonds.info site, Bob Hinkley, who is known as #cruncher on the Bogleheads forum, recently posted a slick summary chart of all the composite rates going into effect with the May reset:
Using this information (thank you #cruncher!) I compiled a list of all the composite rates that will take effect when the 2.86% inflation-adjusted variable rate rolls in, depending on the original month of purchase. Here it is, ranked by largest to smallest and by newest to oldest. The first two lines set the pattern for months in effect for each reset, May to October and then November to April:
• Confused by I Bonds? Read my Q&A on I Bonds
• Let’s ‘try’ to clarify how an I Bond’s interest is calculated
• Inflation and I Bonds: Track the variable rate changes
• I Bonds: Here’s a simple way to track current value
• I Bond Manifesto: How this investment can work as an emergency fund
* * *
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
Hi David, what are your thoughts about redeeming some of our 1998 – 2001 3.0% to 3.6% I-Bonds a few years early? While I hate giving up the +/- 6% rate, I think shifting some of the interest into earlier years and paying 12% income tax on more of it will more than make up for foregoing the extra interest. My wife and I paid $116,000 for these I-Bonds 23 to 26 years ago and they’re currently worth $515,976.80. We’ve been making Roth Conversions in prior years rather than redeeming any of these I-Bonds, but I think I probably should have started this early redemption plan a year or two sooner. Thanks.
My wife and I have I Bonds issued in 2001, with a large current value that is too much to redeem in a single year, and the amount will continue to grow until 2031. So our plan is to redeem them over 5 years, to manage the effect on taxes. That is what we will be doing.
David,
Is the 2.86% inflation-adjusted variable rate apply to TIPS as well? I’ve bought several TIPS in the last few years (on your recommendation) and wanted to know what kind of interest I’ll received during the next 6-month period.
Thanks,
No, TIPS have an entirely different way of adjusting for inflation. Principal balances of TIPS are adjusted every day of the year based on non-seasonally adjusted inflation two months earlier. So in this month, May, TIPS principal balances are increasing based on a 0.22% rise in inflation in March. TIPS can lose principal value in times of deflation. That can’t happen with an I Bond.
In the next six months? That will depend on official inflation in the April to September period.
Thanks.
As an example, if inflation increases 3% (on an annual basis) over the next 6 months prior to the next interest payment, would I expect an interest payment to increase by the fixed rate, plus 1.5%?
Each TIPS has a coupon rate, let’s say 1.5% for example. That means it will pay out 1.5% annually based on accrued principal, adjusted for inflation. So if inflation increased 3% in a year, the principal would increase 3%. The coupon rate remains 1.5%, but it is calculated against the higher level of principal, so that year’s interest payment would be higher.
If you want more details on TIPS read this: https://tipswatch.com/tips-in-depth/
And this: https://tipswatch.com/why-tips/
Hello, David. I have a question for you. When I was deliberating between making my I bond purchase in April or May, I was analyzing the lower fixed rate on the May issuance vs. the lower variable rate on the April issuance. All other things equal, I decided to go with the May issuance as I figured that starting with a higher composite rate overall would allow larger compounding over the 30 year life of the savings bond. Would you concur with that assessment? Thank you!
Getting 3.98% versus 3.11% for six months means you will earn about $43 more after the first six months. After five months, the April I Bond transitions to a 4.08% composite rate. I am guessing that the May I Bond will out-perform for the first five years or so, and then the April I Bond will move into the lead. The difference won’t be dramatic.
David: This is very interesting. Are there figures showing what dollar amounts of the various I-Bond issues are still outstanding? Also, does Treasury reveal the composition fixed rate on outstanding I-Bonds.
My wife and I quit buying I-Bonds after we each had bought the $30K Max in Nov 1998 and in May of 1999, 2000 & 2001. The drop in the fixed rates was a turn off after that feast.
You can find all this information on EyeBonds.info. And you should immediately do that to prepare for the future tax hit you face on these investments. $30,000 of the Nov 1998 I Bond is now worth $140,676 and you have, right now, a taxable gain of $110,676: https://eyebonds.info/ibonds/10000/ib_1998_11.html The other years have similar huge gains, where taxes will be due upon redemption (or technically, at maturity).
Read this: https://tipswatch.com/2024/02/04/long-time-i-bond-investors-face-a-tax-time-bomb/
If these are still paper I Bonds, you may find redeeming them difficult, especially in such large amounts.
I will try again with my questions. I know the composite rats for our I-Bonds, but I was trying to ask if there is any public data on the total outstanding $ volume of I-Bonds earning the various fixed rates?
In other words what is the remaining $ volume of I-Bonds with a 3.6% fixed rate, a 3.4% fixed rate, etc.
Also is there any public data on the aggregate fixed rate now earned by all outstanding I-Bonds? I have to assume that it is between 1% and 2%, but I would be curious to know a hard figure.
Our I-bonds were all converted to electronic form on Treasury Direct several years ago.
I was a tax lawyer for 40 years so I have thought about the “bunching” issues for 2028 through 2031 and, in our circumstances, we don’t see it as troublesome.
Thanks for the work you do with this blog.
uukj, that is an interesting question. I haven’t been able to find that data, but I’d have to believe the Treasury keeps records on its outstanding debt.