Sometimes it pays to procrastinate. Savers who never got around to buying series I inflation-adjusted savings bonds last winter may have thought they missed a great opportunity when the interest rate plunged from 6.73% to 2.41% on May 1. Not so, says Daniel Pederson, author of Savings Bonds: When to Hold, When to Fold and Everything In-Between.
The interest rate for I-bonds has two components, Pederson explains: a fixed rate that lasts for the 30-year life of the bond plus an inflation adjustment that changes semi-annually, in May and November. Bondholders earned 6.73% for the six months between November 2005 and May 1, 2006, but the bulk of that was due to the inflation component, which jumped because of last summer's run-up in oil prices. The fixed rate was just 1%.
Although the inflation factor for new bonds has plunged to 1.01%, the fixed-rate component has jumped to 1.4%. So, says Pederson, "you're guaranteed 0.4 percentage point more over the life of the bond."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For the past 15 years, inflation has averaged 2.7% annually -- which, added to a fixed component of 1.4%, would be equivalent to a 4.1% return on I-bonds. Series EE bonds, currently paying a fixed rate of 3.7%, would be a better deal only if you expected inflation to be lower than average.
-- Joan Goldwasser
-
Four Surprising Signs You’ll Never Retire (and How to Fix Them)Gearing up to retire? If any of these four signs ring true, you may want to make some changes before you do.
-
Stocks Rise After Trump-Powell Fed Tour: Stock Market TodayNvidia hit a new all-time high intraday, but another renowned semiconductor name and some less iconic stocks were bigger movers Friday.
-
Best Banks for High-Net-Worth Clientswealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2025 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
