Treasury issued I Bonds are a safe way to earn respectable yields in this current environment of high inflation and stretched equity markets. They also have the advantage of tax exemption at the state and local level along with the safety provided by federally backed securities.
Some relevant facts about such are listed below:
- New bonds pay a fixed rate plus a CPI based inflation rate set each April and November for the following six months – current fixed and inflation rates through April 2022 are zero and 7.12% respectively;
- Deferred interest is compounded semiannually and paid when the bonds are redeemed or upon maturity of thirty years;
- The nominal yield on the I Bonds can never fall below zero even if the CPI turns negative;
- The bonds can be cashed in after one year with a modest three months interest penalty and after 5 years with no penalty;
- Individuals are limited to a purchase of $10,000 per year plus $5,000 from a tax refund but careful planning allows a married couple to double this amount per year;
- An added beneficial twist is that I Bonds bought at the end of the month are credited with interest for that period; and
- The best way to purchase same is to open an account at Treasury Direct where the funds can be swept from your designated bank account to the Treasury account and refunded to the same account when redeemed or upon maturity.
For additional information or assistance with the mechanics of purchase please contact Robert E. Arnold, Jr. by clicking the button below.