Inflation and I Bonds

This chart shows monthly and six-month non-seasonally adjusted inflation numbers that the Treasury uses to set the six-month inflation-adjusted interest rate on U.S. Series I  Savings Bonds.

I Bonds purchased from November 2021 through April 2022 will pay an inflation-adjusted annual rate of  7.12%, and when combined with a fixed rate of 0.0%, creates a composite rate of 7.12% for six months. Both the fixed rate and inflation rate will be reset again May 1, 2022.


44 Responses to Inflation and I Bonds

  1. Kevin Winsch says:

    Dave, In the I Bond manifesto I read that the interest is earned on the last day of the month and posted to your account on the first of the following month. I bought $10,000 apiece for my wife and I in mid-Nov 2021, and no interest is posted yet (Jan 5, 2022). I emailed Treas Dir asking about interest posting but no response yet. Any thoughts?

    • Tipswatch says:

      The interest postings on TreasuryDirect will exclude the last three months of interest until you have held the I Bond for five years. From their site: ” If you use TreasuryDirect or the Savings Bond Calculator to find the value of a bond less than five years old, the value displayed reflects the three-month penalty; that is, the amount of the penalty has been subtracted already.”

      • JeffT says:

        And when the bond reaches the five-year point, you’ll get three months’ worth of interest posted all at once. Feels like Xmas.

  2. Charles W. says:

    Thanks David — I am new to inflation-protected securities, and I’ve really enjoyed your content as I’ve studied-up on the concept. I happened upon some mass media coverage of I bonds in November. After doing some research, I determined it is easily in my interest to move funds from a savings account earning 0.5% to I bonds, if only for a year. Given the current trajectory of the CPI-U index, it will likely be longer than that.

    In addition to double-dipping for myself, I am considering an I bond gift to my minor children (2 years old and 6 months old). My intention would be to issue the gift and hold it in my gift box until my children approach adulthood — mostly to diversify the ways I am saving for their educations/weddings/home purchase/whatever else a parent might help a young adult achieve.

    However, the one issue that gives me pause, is with a fixed rate of 0% — would I regret the investment if we hit a prolonged period of low inflation, so the earnings drop to little-to-none and were uncompetitive with CDs/Online Savings Accounts/Money Markets. Would I then be in for tax complications I don’t understand if I wanted to divest of the I-bonds on my children’s behalf?

    Obviously, you don’t have an inflation crystal ball, and I am not seeking (and I assume you would not provide) tax advice. However, I wonder whether you have general thoughts about I bonds as a potential gift/investment vehicle for minor children. Perhaps you’ve written a post here I haven’t com across.

    Thanks for your thoughts and for this thorough and informative page.


    • Tipswatch says:

      I haven’t used the “gift box” technique, but you could also look at creating TreasuryDirect custodian accounts for each child and purchasing the I Bonds there. (I have no experience with that, either.) I wouldn’t be too concerned about the 0.0% fixed rate, but yes, that rate could increase in the future. You could ladder the purchases — buying some each year for several years — to give yourself a chance at a higher fixed rate in the future. I Bonds are a tool for capital preservation, not wealth building, so basically the money you put into I Bonds will simply get pushed out into the future, with inflation protection. Could you combine I Bonds with some asset allocation to the total stock market for your children? Anyway, I am just a financial journalist, not an adviser.

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  4. Arun Desai says:

    I would like to know if I can make additional $5000 payment to IRS, and buy paper I-Bonds from the refund that I get when I file my taxes in March/April of 2022.
    Any has used this method to buy additional paper I-Bonds from the refund.

    • Tipswatch says:

      Many people do this. You will need to overpay your 2021 federal taxes by $5,000 and then can claim the paper I Bond in lieu of your tax refund. I’d suggest filing by mid-March to make sure you get an I Bond issued before May 1.

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  6. Richard Kraus says:

    Enjoy your website data and articles. I am a fan of both I and EE bonds for my “long term” safe cash, buying each year to create a ladder: I think of EE as a 20 year CD and I Bonds as a flexible 5 to 30 year CD. Two concerns that can only be speculation at this point because there is no way to know how government policy will intersect with government debt, inflation and interest rates: 1) the $10K annual purchase limits for EE and for I (and the $5,000 limit on I Bonds for tax refunds) are not indexed for inflation so that limit will gradually be more restrictive over time and those limits have been subject to arbitrary decisions set in the past (once upon a time up to $30,000; then during the transition from paper bonds to electronic bonds, the limit was temporarily $5,000); 2) the EE original maturity date (the period it is guaranteed to double the original purchase) is subject to change: for example in May 1995 it was changed from 12 to 17 years, then it was changed to 20 years in June 2003 and has surprisingly remained there ever since as of late 2021. The 20 years to double are what create the 3.5% annual rate. What are your thoughts on the purchase limits and the potential for change in the EE doubling date?

    • Tipswatch says:

      I agree that the EE Bond terms — doubling the investment’s value in 20 years — are generous in today’s market, and the Treasury has raised that limit several times, but not recently. The doubling is counteracted by the 0.1% fixed rate for 19 years, 11 months, which probably chases most investors away from EE Bonds. The 20 year term makes EE Bonds viable as an “education fund” for a child, but any longer term would make them useless for that purpose. So the 20-year doubling makes sense, and should continue.

      For I Bonds, I also agree that the $10,000 per person per year purchase limit should increase, maybe gradually, to at least $20,000 a year. But the Treasury has no incentive to do that right now, with the variable rate so high. So many investors look at I Bonds and say, “That’s not enough to make a difference in my portfolio.” That’s true, and it’s the reason investors should buy I Bonds every year, up to the limit if they can.

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  11. Paul says:

    “Savings Bond Wizard” isn’t available anymore and has not been for a couple of years, as I recall!B

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  13. Andrew Morris says:

    Re: purchasing an extra $5,000 worth of iBonds using my Tax Refund: Can that $5,000 tax refund be deposited directly to my Treasury Direct C of I account? Or must that refund be used to purchase paper iBonds? The Form 8888 instructions and the instructions on Treasury Direct seem ambiguous to me:

    From Form 8888:
    TreasuryDirect® Account
    You can request a deposit of your refund (or part of it) to a TreasuryDirect® online account to buy U.S. Treasury marketable securities and savings bonds. For more information, go to
    U.S. Series I Savings Bonds
    You can request that your refund (or part of it) be used to buy up to $5,000 in series I savings bonds. You can buy them electronically by direct deposit into your TreasuryDirect® account.

    From Treasury Direct:
    Using Your Tax Refund for TreasuryDirect
    Do you know you can have your tax refund directed to your TreasuryDirect account to use for Treasury security purchases?

    TreasuryDirect offers flexible options for all your security purchases. One option to fund your account is to use your tax refund.

    You can request the IRS or your state tax department to deposit your tax return directly into your TreasuryDirect account where you can use the funds to purchase savings bonds or marketable Treasury securities. All you need to do is provide TreasuryDirect’s routing number and your TreasuryDirect account number in the refund instructions on your tax return.

    On your tax return, enter:
    the TreasuryDirect routing number, 051736158, in the “Routing number” field.
    your TreasuryDirect account number in the “Account number” field.
    “Savings” as the account type.
    Providing these instructions in the “refund” area on your tax return will direct your refund to the Zero-Percent C of I in your TreasuryDirect account where it will be available to fund the purchase of one or more Treasury securities.

    You can also use your refund to purchase Series I savings bonds in paper form.

    • Tipswatch says:

      I’ve never used the tax refund method, and i had assumed you it would have to be in paper I Bonds, but the wording you present here makes it look like it can be sent to Treasury Direct. Then the question would be: Would that deposited money count against your $10,000 purchase cap?

      • Andrew Morris says:

        Exactly – that is my question. I guess I’ll contact Treasury Direct for clarification. I actually had luck in the past getting a helpful response from Treasury Direct to a question I’d posed. Not sure how to go about getting clarification from the IRS.

      • Andrew Morris says:

        Here’s the response I got from Treasury Direct:

        “You must purchase the paper securities and then the electronic separate. If you put it all in your TreasuryDirect account you will only be entitiled to purchase the $10,000 limit.”

      • Andrew Morris says:

        In case anyone is interested I did the tax refund method and received $5,000 worth of paper iBonds a little more than three weeks after filing my tax return. They were sent in denominations of (6) $50, (1) $200, (1) $500, (4) $1000 paper iBonds in twelve (count ’em that’s 12) separate envelopes all delivered by the USPS on the same day (in spite of Louis DeJoy’s best efforts). Since I already have a Treasury Direct account, the next step for me was going into my Treasury Direct account to convert the paper iBonds into electronic iBonds which results in the creation of a manifest which one prints out, signs and mails with the unsigned (12) paper iBonds to a Treasury office. Those were mailed this past Saturday (certified mail/return receipt requested).

        So up to this point in time this seems to have worked just fine — I don’t know if I will do it again in the future as I don’t know that I want to spend time worrying about the the performance of the postal service and the IRS. And it was a bit time consuming explaining to my accountant that you could do this using IRS Form 8888, dealing with the conversion on Treasury Direct and traveling to and waiting in line at the post office to mail the paper iBonds to Treasury via certified mail. But at the least it’s been an interesting exercise.

  14. Mark in LA says:

    Hey Dave, It looks like you’re missing the six month periods Mar 2019 – Sep 2019 and Sep 2019 – Mar 2020 above. I believe those periods showed inflation of 1.01% and .53% respectively.

    • Tipswatch says:

      Mark, thanks for noticing that. This happens because these image files are so large that they have to be broken up into several files. I seemed to have lost track where one ended and the other began. It is fixed now, and I set up a “reminder” in the Excel file to show the current live section. Appreciate it.

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  16. JeffT says:

    Just one serious problem with having I Bonds through TreasuryDirect. They don’t issue account statements. Ever. The only proof you have of your bond ownership are screenshots, and they don’t contain enough information (like your full name, SSN, and address). Some people are very uneasy with this, and I can understand why. I read a post from one person who wanted to use his I Bond holdings as collateral for a loan, and had a devil of a time satisfying his lender that he did, in fact, own the bonds.

    • Paula Metz says:

      Also, does anyone know what would happen if your Treasury Direct account is hacked? Will the Treasury reimburse you if your electronic I-bonds are stolen?

      • Tipswatch says:

        This has been the subject of a lot of debate. The general consensus is that if that if TreasuryDirect gets hacked in a broad attack, you would be protected. But if you give away your password in a personal phishing attack, you could have a loss. TreasuryDirect has a good security system with two-stage authentication and other safeguards. Nothing is perfect, though.

        • JeffT says:

          Yes, that sounds right. If you are careless with your checking account or brokerage account login credentials and someone cleans you out, the bank or brokerage isn’t going to make you whole, either.

          And on the couple of occasions when I have done something like redeem a bond, or made a change to my linked checking account, I get an email within seconds. For someone to hack your account, it would take a coordinated effort to extract cash. Add in the two-factor authentication, and it becomes a fairly daunting task.

          BTW, gotta love the upcoming interest rate reset, especially if you’ve got older bonds with a high base rate!

  17. cynthiapond says:

    Thank you for your info and explanations of I-bonds. I didn’t know where to find out about upcoming variable rates on I-bonds. I also didn’t know I could redeem my 2003 I-bond anytime if I wanted to (which I don’t). Your site is more helpful to me than Treasury Direct’s website. Thanks for maintaining your site.

  18. Lyle C. says:

    Thanks Tipswatch, very useful info.

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