Here’s why the Treasury I bond’s lower rate is still ‘significant’

The Treasury Department has announced that I bonds will now pay 3.11% for bonds issued between November 1, 2024, and April 30, 2025.  Financial advisor Stephan Shipe notes that while this rate is lower than previous periods, I bonds remain a valuable tool for preserving purchasing power in an inflationary environment.


Full Article: Here’s why the Treasury I bond’s lower rate is still ‘significant’

In November 2022, the U.S. Treasury Department announced a new composite rate of 6.89% for Series I Savings Bonds, effective through April 2023, down from the previous 9.62%. This rate comprises a 6.48% annualized inflation rate and, notably, a 0.40% fixed rate of return—the first positive fixed rate since 2019. Financial advisors highlight the significance of this fixed rate, as it ensures that I Bonds will not only keep pace with inflation but also provide an additional 0.4% return over the bond’s 30-year lifespan. Investors can purchase up to $10,000 in I Bonds annually through TreasuryDirect, with options to increase this limit by directing federal tax refunds toward additional purchases. 

Key Takeaways:

  1. New Composite Rate: The Treasury set a 6.89% composite rate for I Bonds from November 2022 to April 2023, a decrease from the prior 9.62%.
  2. Introduction of Fixed Rate: A 0.40% fixed rate was introduced, marking the first positive fixed rate since 2019, enhancing the bond’s appeal by offering returns above inflation.
  3. Rate Composition: The composite rate combines a 6.48% annualized inflation rate with the 0.40% fixed rate, ensuring returns that outpace inflation.
  4. Investment Limits: Individuals can invest up to $10,000 per year in I Bonds via TreasuryDirect, with the possibility of purchasing an additional $5,000 using federal tax refunds.
  5. Long-Term Benefits: The positive fixed rate means that over the bond’s 30-year term, investors will consistently earn 0.4% above the inflation rate, a feature highlighted by financial advisors as particularly advantageous.

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