I bonds to deliver a record 9.62% interest for the next six months
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You may be looking for ways to combat rising prices. I bonds are an inflation-protected asset that is almost risk-free and can now be considered even more attractive.
The annual I bond rate is 9.62% through October 2022. This yield, according to the U.S. Department of the Treasury, represents the highest since they were introduced in 1998. announced Monday.
Based on March’s consumer price index data with annual inflation growing by 8.5%According to the U.S. Department of Labor,
Ken Tumin (founder and editor at DepositAccounts.com), who closely tracks these assets, said, “It’s an important milestone for I bonds.”
U.S.-backed I bonds don’t lose any value and they earn monthly interest. The fixed rate is the same as variable rates, which change every six month.
Although the variable rate has been set at 9.62% until October 2022 (the fixed rate is 0%), it will not change beyond that date. according to the Treasury.
It’s a great place for people who don’t have the cash they need to invest.
Resilient Asset Management was founded by the founder
Tumin said that the fixed interest rate will remain the same over the life of the bond for 30 years. Therefore, someone who bought I bonds with a lower fixed rate might beat inflation for at most six months.
The fixed rate is 0% as of May 2020. However, the maximum rate was 3.6% during six months beginning in May 2000. The history of each rate can be viewed here here.
How can I purchase I bonds
These assets can only be purchased online. TreasuryDirectFor individuals, the limit is $10,000 for a calendar year using your federal tax refundTo purchase an additional $5,000 of paper I bonds. You will find redemption details for every one. here.
Businesses, trusts and estates may allow you to purchase more I bonds. If a couple owns separate businesses, they may be able to purchase $10,000 for each company and another $10,000 as individuals. This would make the total amount of I bonds available at $40,000.
Drawbacks to I bonds
According to George Gagliardi, a certified financial planner and founder of Coromandel Wealth Management Lexington, Massachusetts, one of the drawbacks of I bonds, you cannot redeem them until they expire. You’ll also lose three months worth of interest if they aren’t cashed in within five year.
He said, “I believe it’s deserving, but like everything else, there is no free lunch.”
A potential drawback to this is the possibility of lower future returns. Gagliardi explained that I bond rates’ variable component may be adjusted downward every six-months and that it is possible to choose higher-paying assets from other sources. However, if you cash out earlier than the one-year term ends there will be a 3-month penalty and an interest commitment.
Christopher Flis (CFP) and co-founder of Resilient Asset Management, Memphis, Tennessee, stated that I bonds are still worth looking at for other assets than your emergency fund.
According to him, the “I bond” is an excellent place to save money.
According to DepositAccounts, the average yield of savings accounts is less than 1% and most 1-year CDs fall below 1.5% as of May 2.
Flis stated, “But I bonds don’t replace long-term money.”