U.S. Government Series I Savings Bonds, or “I Bonds” were introduced in 1998 as a way for average Americans to save while ensuring their money retains its purchasing power. I-Bonds offer the advantage of allowing you to save money and always earn at least the CPI and sometimes more.

Another popular way to save money is in a bank savings account or Certificate of Deposit. But the downside is making sure banks pay you a fair rate of interest. If you fall asleep for one second, you’ll be right back to earning nearly 0% interest. With I Bonds, you can relax because they pay you the CPI and often more.

Here are some key points about I Bonds:

1. Straight-forward Online Platform: Treasurydirect.gov is a relatively easy website to manage. You can set up an account and link it to your bank account to move money in and out of I Bonds.

2. Safety: I Bonds are guaranteed by the U.S. Treasury, making them a secure investment.

3. Liquidity: You cannot cash in the I Bonds during the first year. But after one year, you can cash in I Bonds and have the funds deposited into your checking account within 2-3 days.

4. Tax Deferred: I Bonds don’t generate interest income until you cash them in. This means you control when you pay taxes on the accrued interest.

5. Inflation Protection: The variable rate component of I Bonds is tied to the Consumer Price Index (CPI), ensuring they keep pace with inflation.

6. Deflation Protection: Even during deflation (when the CPI is negative), I Bonds won’t lose value month over month.

7. Tax Benefits: Interest earned is state and local tax exempt. If used for qualifying educational purposes and if your income falls within certain limits, the interest may also be federally tax-free.

8. Account Separation: I Bonds can be kept separate from regular bank or brokerage accounts, reducing the temptation to use them impulsively.

9. Investment Limit: You can invest up to $10,000 per year per Social Security number. Additionally, you can get an additional $5,000 in paper I Bonds if you choose to receive your tax refund as I Bonds.

10. Investment Limit: If you cash out I Bonds within the first 5 years, you’ll forfeit the last 3 months of interest.

11. Interest Rate Calculation: The current interest rate is paying 5.27%. Here is how it is calculated.

1. The interest rate on I Bonds changes every 6 months, based on inflation.

2. It can go up or down, depending on changes in the Consumer Price Index for all Urban Consumers (CPI-U), which includes food and energy prices.

3. The interest rate is a combination of two components:

3a. Fixed Rate: This rate remains constant for the life of the bond. It is announced every May 1 and November 1.

3b. Inflation Rate: This rate is based on changes in the CPI-U and is also set every May 1 and November 1.


1. Let’s consider an I Bond issued from November 2023 through April 2024.

2. The composite rate for this period is 5.27%:

2a. Fixed rate: 1.30%

2b. Semiannual inflation rate: 1.97%

2c. Composite rate formula: [Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

2d. Calculated composite rate: 5.27%

12. Taxation: Interest on I Bonds is tax-deferred until redemption. When you cash them in, you’ll owe federal income tax on the interest. State and local taxes vary.

Remember, I Bonds are a powerful tool for preserving your wealth and protecting against inflation. If you’d like to consider including them in your financial strategy, reach out to Tilly and we can help answer questions.