Series I Savings Bonds

Series I Savings Bonds!

I Bonds are an accrual-type security in that interest is paid when the bond is cashed. Earnings on I Bonds are inflation-indexed. The earnings rate is calculated as a combination of a fixed rate of return and a semiannual inflation rate based on CPI-U. I Bonds earn a guaranteed real rate of return. They are sold at face value and earn interest for up to 30 years. (For example, a $100 I Bond costs $100.) I Bonds come in seven denominations, $50, $75, $100, $200, $500, $1,000 and $5,000.

You can purchase up to $5,000 worth of I Bonds in your name and social security number each calendar year. In a co-ownership situation, the issue price of the I Bond applies toward the annual purchases of the co-owner whose name and Social Security Number appears on the bond. The purchase limit for I Bonds isn't affected by the purchases of Series EE Bonds.

Investors should be aware that while inflation will increase and decrease over time, the fixed rate at which an I Bond is issued will not change for the Bond's 30-year life, guaranteeing owners a real rate of return regardless of economic variations. I Bonds issued with higher fixed rates than new issues retain those rates to the end of their interest-bearing lives.

Many savings and investment instruments in the marketplace seek to incorporate inflationary expectations into their yields. However, very few directly index their returns to actual inflationary changes as I Bonds do. As a result, the Series I Bond delivers a reliable real rate of return over its lifetime regardless of whether expectations turn into reality.

More Series EE and Series I Savings Bond Information: