Series I bonds are ‘still a good deal’ despite an expected falling rate in May, experts say (2024)

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Series I bonds are ‘still a good deal’ despite an expected falling rate in May, experts say? ›

Series I bonds are 'still a good deal' despite an expected falling rate in May, experts say. The annual rate for Series I bonds could fall below 5% in May based on inflation and other factors, financial experts say.

I bonds issued from May 1, 2024, to Oct. 31, 2024, have a composite rate of 4.28%. That includes a 1.30% fixed rate and a 1.48% inflation rate. Because the U.S. government backs I bonds, they're considered relatively safe investments.

If instead the May 1 fixed rate is higher than 1.30%, then May I bond buyers may ultimately do better—but over a very long time horizon. They'll earn a bit more every 6-month period in the future vs. April bond buyers, due to their higher fixed rate.

The 4.28% composite rate for I bonds issued from May 2024 through October 2024 applies for the first six months after the issue date. The composite rate combines a 1.30% fixed rate of return with the 2.96% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U).

For I bonds issued between May 1, 2024 and Oct. 31, 2024, the fixed interest rate is 1.3%. A second interest component is based on inflation rates, and it resets every six months. It most recently reset in May and is currently 2.96%, down from 3.94% last November.

Remember, when you cash out your I Bonds you don't earn the interest until you complete the month and that you lose the prior 3 months' interest. If you want to keep all your good interest and get the most out of your I Bonds you should cash out: after earning 3 months of lower interest and.

There are indications that interest rates may start to fall in the near future, with widespread anticipation for multiple interest rate cuts in 2024. Falling rates offer the potential for capital appreciation and increased diversification benefits for bond investors.

Can I cash it in before 30 years? You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.

If you buy I bonds now, you'll receive 5.27% annual interest for six months and the new May rate for the following six months. He suggests buying a few days before April 30. Enna expects the fixed rate will be 1.2% or 1.3% in May, based on the half-year average of real yields for 5- and 10-year TIPS.

Look for moments when the short-term simple moving average (SMA) crosses up through the long-term SMA. This indicates that the current selling price for your bond has been consistently higher in recent days than it has been within your chosen long-term window.

What is the downside of an I bond? ›

The cons of investing in I-bonds

There's actually a limit on how much you can invest in I-bonds per year. The annual maximum in purchases is $10,000 worth of electronic I-bonds, although in some cases, you may be able to purchase an additional $5,000 worth of paper I-bonds using your tax refund.

Series I bonds will pay 4.28% annual interest from May 1 through October 2024, the U.S. Department of the Treasury announced Tuesday. Linked to inflation, the latest I bond rate is down from the 5.27% annual rate offered since November and slightly lower than the 4.3% from May 2023.

Paper I bonds are only available in multiples of $50.” There are also limits on how many I bonds you can buy each year. Individual purchase limits for I bonds are $15,000 per calendar year — $10,000 worth of electronic I bonds and $5,000 worth of paper I bonds.

You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.

Interest earned on I bonds is exempt from state and local tax but subject to federal tax. The interest is taxed in the year the bond is redeemed or reaches maturity, whichever comes first.

I bonds' rates have since dipped from their headline-grabbing heights—they were as high as 9.62% in May of 2022—to 4.28% for the current crop. That rate may still look attractive, but I bonds' variable rates—combined with their five-year lockup period—may give you pause.

Another potential downside is the purchase limit. Investors are limited to purchasing a maximum of $10,000 in electronic I Bonds per year for each Social Security Number (the minimum purchase amount is $25). 6 An additional $5,000 may be purchased as paper I bonds.

While the Series I bond eliminates principal risk and inflation risk, investors must keep their money locked up for at least a year. You simply won't be able to sell the bond before then. So if there's any chance you'll need the money before a year, the Series I bond is not for you.

You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.