What Are I Bonds
I bonds are low-risk savings bonds issued by the U.S. Treasury that adjust for inflation. The “I” stands for “inflation.” I bonds earn interest for 30 years or until you cash them out. Like other Treasury bonds, they are tax-free at state and local levels. Unlike other bonds, there is no secondary market for savings bonds, so they do not experience the same price volatility. Due to the recent inflation spikes, I Bond interest is currently over 8%. Not bad for low-risk, government-backed securities!
Purchase limits: $10,000 per person, per year. These limits are imposed per tax ID, so I bonds can be bought by individuals, trusts, and businesses.
Holding Period: You must hold your I bonds for at least a year. The funds are not available for any reason during those first 12 months. Cashing in the I Bond prior to five years will cost you three months of interest. After five years, there is no interest penalty when you cash it in.
How To Buy
Unlike other treasury bonds or a bond fund, I bonds cannot be purchased in a regular investment account. They must be purchased directly from the U.S. Treasury at www.treasurydirect.gov The process is simple enough, but be forewarned, the site is a bit clunky.
- Start here with the Open Account Application.
- Save your password
- You will be emailed an account number, which will become your username.
- Return to TreasuryDirect, log in, and input your account number.
- Retrieve your one-time password from your email.
- Input both your one-time password & your original password.
- Go to “buy direct” at the top of the web page
- Choose Series I Savings Bonds and purchase your desired amount
* Purchase limits are applied per tax ID. For a couple to invest $20,000, each partner must open their own TreasuryDirect account with their own tax ID.