Dan is a veteran writer and editor specializing in financial news, market education, and public relations. Earlier in his career, he spent nearly a decade covering corporate news and markets for Dow Jones Newswires, with his articles frequently appearing in The Wall Street Journal and Barronâs.
Doug is a Chartered Alternative Investment Analyst who spent more than 20 years as a derivatives market maker and asset manager before “reincarnating” as a financial media professional a decade ago.
Before joining Britannica, Doug spent nearly six years managing content marketing projects for a dozen clients, including The Ticker Tape, TD Ameritrade’s market news and financial education site for retail investors. He has been a CAIA charter holder since 2006, and also held a Series 3 license during his years as a derivatives specialist.
Doug previously served as Regional Director for the Chicago region of PRMIA, the Professional Risk Managers’ International Association, and he also served as editor of Intelligent Risk, PRMIA’s quarterly member newsletter. He holds a BS from the University of Illinois at Urbana-Champaign and an MBA from Illinois Institute of Technology, Stuart School of Business.
Series I savings bonds, also called I bonds, are savings bonds offered directly by the U.S. government to help protect your money from inflation. They offer competitive interest rates backed by the federal government, so youâre virtually assured of getting back the money invested. Their interest rate combines a fixed rate that stays with the bond for its life and an inflation rate that resets every six months. I bonds earn interest for up to 30 years or until you redeem them. I bonds became more noticeable when inflation rose sharply in the early 2020s and their inflation-adjusted rates increased.
How is the interest rate on Series I savings bonds calculated?
The interest rate on Series I savings bonds combines a fixed rate with an inflation rate. The fixed rate is guaranteed for as long as you keep the bond, while the inflation part changes every six months. The government calculates rates twice each year using changes in the non-seasonally adjusted Consumer Price Index (CPI). For bonds bought from November 1, 2026, through April 30, 2027, the composite rate is 5.51%, including a 1.40% fixed rate that remains with the bond for its life.
What happens if you cash out a Series I savings bond early?
You cannot redeem an I bond during the first year after purchase. After one year, you can cash it out, but if you redeem it before five years, you forfeit the previous three months of interest. After five years, there is no early-redemption penalty, and an I bond can continue earning interest for up to 30 years.
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The safety of a Treasury bond, with an inflation bonus.
If you want hefty investment returns, you usually have to take on a fair amount of risk. But as inflation raged in the early 2020s, a high return/low risk savings vehicle rose to prominence: Series I savings bonds. Although I bonds wonât solve all your inflation woes, theyâre one way to help protect your portfolio from the pain of rising prices.
Traditional high-return investments include stocks with lofty dividend yields, as well as so-called junk bonds. The yield on a junk bond is high for a reason: Thereâs a decent chance the issuer could cancel future payments or even default, leaving you in the red. Basically, youâre being paid extra to take on more risk.
Key Points
Series I savings bonds, or I bonds, are offered by the U.S. government to protect investors from inflation.
The initial interest rate on I bonds rose to 9.62% in 2022 as inflation hit 40-year highs, but stood at 5.51% as of November 2026.
I bonds have a $10,000 maximum investment, and the rate is only guaranteed for the first six months you own them.
Series I savings bondsâsometimes called TreasuryDirect I bonds or inflation-protected bondsâstand out from that sometimes motley mix by offering competitive yields, but with the backing of the federal government. The U.S. has never defaulted on debt, so youâre virtually assured of getting back every cent of the money you invest in a Series I savings bond. And along the way youâll be paid an attractive interest rateâat least one that keeps up with inflation.
Eye-popping interest, but not forever
What kind of interest? Well, the initial I bond rate rose to 9.62% in mid-2022 as inflation hit 40-year highs. No, thatâs not a misprint, even if it seems like the kind of yield youâd normally get from a desperate company on the brink of default. Why was the yield so high?
The rate is calculated twice a year and based on changes in the non-seasonally adjusted Consumer Price Index (CPI).
When inflation goes haywire as it did in 2022, the interest rate goes up, making I bonds a more powerful investment tool.
The 9.62% rate sounds impressive, but it only applied to the first six months. Subsequent rate updates dropped the annualized rate to 6.89% and then 4.3%, but the current annualized rateâfor I bonds purchased through April 2027âis 5.51%.
I bond rates: A blend of fixed and variable interest
The interest on I bonds is a combination of a fixed rateâguaranteed for as long as you own the bondâand the inflation rate, which changes every six months.
The fixed-rate component rose to 1.4% in the Treasuryâs semiannual update in October 2026, which applies to purchases made November 1, 2026 through April 30, 2027. The six-month inflation component is 2.03%. But when you run that through a compounding formulaâto turn it into a 12-month rate of 4.11%âand add it to the fixed component, you get an annualized composite return of 5.51%.
Thatâs the initial rate, guaranteed for six months. After that, your yields will continue to adjust for as long as you own the bond.
So maybe youâre thinking of rushing to put your entire portfolio into I bonds to get that low-risk/high-return yield. That could be an option as long as your portfolio is $10,000 or less, although itâs probably best to work some asset allocation into your planning. If you have more than $10,000 to invest, youâll need to put the rest somewhere elseâannual I bond purchases are capped at $10,000 per person.
I bonds and other savings bonds seemed kind of vanilla for many years, because they tended to have very low interest rates. With inflation under 3% for decades leading into 2020, savings bonds just couldnât offer the kind of yields that looked good in comparison to, say, technology stocks growing 20% a year.
Unlike those securities, I bonds arenât bought and sold in the secondary market. Theyâre savings bonds designed for individual investors and are purchased and redeemed through the U.S. Treasury.
All that changed after the COVID-19 pandemic. Inflation surged worldwide amid worker shortages and supply chain hiccups. The Consumer Price Index (CPI) rose to 9.1% year-over-year for U.S. consumer prices by June 2022, a level last seen in late 1981, and remained above 8% into the fall of 2022. With an accompanying sharp loss in stock prices, I bonds and their robust inflation-adjusted yields suddenly looked more enticing to many investors.
How to buy a Series I Savings Bond
You can only buy a Series I savings bond directly from the U.S. government. It works like this:
Set up an electronic account at the Treasury Department. Youâll need to provide some personal information, as you would when setting up any other financial account.
Give the Treasury Department access to your bank account by providing the bankâs routing number (found at the bottom left corner of your personal checks) and your account number at the bank (see the center bottom of your check).
Tell the Treasury Department how much you want to invest. The minimum is $25, and an individual can invest up to $10,000 in a given year. Your spouse or partner can also buy an I bond, but theyâll need to set up their own account.
The Treasury Department electronically moves the money from your bank account into the account you set up at the Treasury Department.
Collect interest at the stated interest rateâbut that rate wonât last. Itâs only good for the first six months you own the bond. The government adjusts the rate every May 1 and November 1.
After six months, the interest youâve earned is added to the principal value, and interest after that is earned on the new principal, but at whatever new rate the government chooses. You can keep the bond for up to 30 years.
If inflation drops meaningfully in the six months after you purchase your I bond, you could be stuck with the bond when its rate resets lower, because you canât cash out before owning the bond for a year. And if you cash out before owning it for at least five years, youâll lose your last three months of interest.
Series I savings bonds cannot be purchased through a 401(k) plan, Individual Retirement Account (IRA), or other tax-advantaged account. Theyâre part of your regular taxable savings. Interest on I bonds is exempt from state and local taxes, and federal taxes can be deferred until you redeem the bonds or they reach maturity. You can choose to report interest annually, but most investors defer payment until the end.
The bottom line
I bonds are a relatively risk-free investment that pay a competitive interest rate, especially in a rising-inflation environment. The rate rises and fallsâand sometimes lags other fixed-income securities. Still, it could be worth parking some of your money in I bonds to keep up with rising consumer prices. Before deciding, consider the pros and cons of inflation-linked securities.
