Series-I Savings Bonds - probably 8%+ interest "May thru Oct."

[MickinMD ★]

If State Farm comes through with a big payment to me for what they initially said they wouldn't pay because they already paid for extra stuff in the house, I'm definitely going to put some of it in Series-I Savings Bonds rather than 0.80% annual interest 5-year Credit Union CD's.

I-Bonds are a paying 7.12% annual interest rate for the inflation component (some bonds pay a little more due to a positive "fixed rate" adjustment depending when they were bought) and it's likely they'll pay over 8% when the Treasury announces the next rate change in May.

Links to buy them (no buy or sell fees) and keep them online with the U.S. Treasury Dept. are here.  There is a 3-month interest penalty if you redeem a bond before its 5-year maturity, but that's so low you'll still beat any bank or credit union CD's rate if you keep it for six months.  You can keep a bond for 25 more years after it matures if you want.

The minimum Series-I Bond you can buy and keep online is $25 and the max. $10,000 - there are no fees.  The max. total purchases in a year online are $10,000.

The U.S. Treasury announces new inflation rates in May, based on the previous Sep.-Mar. CPI-U inflation, and November, based on the previous Mar.-Sep. inflation.

You get whatever inflation rate is current and keep that for six months, then the next rate for six months, so your rate doesn't change each May and November unless they were the months you bought bonds.  Also, if you buy on the last day of the month, you get interest from the first of that month!  So setting up an automatic monthly purchase program for the 26th of the month, which guarantees a weekend won't push your purchase to the next month, gets you the same interest if you set your investment for the 1st of the month!

For more info on Series-I Bonds, there's an overview here and an explanation of rate calculation explanation here.

If you want to wade through numbers, here's where the data is that lets you calculate what the next rate will be a few weeks ahead of time.

Series-I Savings Bonds change interest rates according to unadjusted CPI-U inflation twice a year. They are paying a 7.12% annual interest rate now for it's November to April CPI-U inflation rate.  This was calculated by the CPI-U change from Mar. 2021 thru Sept. 2021.  On April 12, the March 2022 CPI-U index will be released and that will allow us to calculate what the May-November rate will be since it's based on the Sept-March CPI-U inflation.

The next inflation rate, May - Oct., will be calculated by the unadjusted CPI-U change from Sept. 2021 to Mar. 2022.

The historical, monthly CPI-U tables going back to 2012 can be found here.  The CPI data, including CPI-U, with be published at 8:30 am EDT on April 12th.

The annual rate, based on the 5 months of Sept. 2021  - Feb. 2022 CPI-U data is: (284.182/274.138 - 1) x 100% x 12/5 = 8.793%, where the 200+ numbers are the Feb./Sep. CPI Indexes from the monthly tables.

If there is NO inflation or deflation for March, the percentage would drop to 7.328%, but that's not likely.  So I'm expecting the U.S. Treasury to announce 8+% payable in May.

 

 

 

 

[Kirby]

I looked at these once and it seems that people who inherit them need a medallion guarantee to collect.  Do you know if  the individual investor  needs a medallion guarantee  to cash them out or collect amounts from the account?

[JerrySTL ★]

Good to know. I bought $3000 worth of Series I Savings Bonds back in 2018.

Still have a few EE bonds that I bought when I was in the military. Their final maturity is between 2032 and 2037. They are getting about 3.5% interest.

[Tizeye]

As one retiree in a seminar I was leading noted, the problem with fixed income is...no raises. Inflation continues but you are locked in at a set rate.  Good for a small amount of money not required but be mindful if it is the major source of funds.