With the stock market tumbling, investors are on the hunt for safer investments that pay attractive returns. The fact that you can earn 9.62% from a U.S. Savings Bond is getting a lot of buzz.
Today, let’s review the features, pros, and cons of investing in these Series I Savings Bonds.
The U.S. government sells two types of saving bonds. We may remember the Series EE Bonds from our youth when we received them as gifts. EE Bonds pay a fixed rate, currently set at 0.10%.
Series I Bond rates are set twice a year on May 1 and November 1. The rate you initially earn will be in effect for the six-month window when you purchase your I Bonds. To lock in the current 9.62% rate, you must buy I Bonds no later than October 28.
Series I Bonds compound semi-annually. This means if you buy an I Bond now, it will earn 9.62% for six months, and then the rate will reset to the rate in effect on the semi-annual anniversary date. Simply put, the Series I Savings Bond rate resets every six months.
Here are the features of Series I Savings:
- You can buy up to $10,000 of electronic I Bonds per year per person. You buy bonds through the Treasury Direct website.
- You can buy electronic bonds for any amount of $25.00 or greater.
- You can invest up to $5,000 of your federal tax return into paper I Bonds.
- Paper bonds come in denominations of $50, $100, $200, $500, and $1,000.
- I Bonds earn interest for up to 30 years.
- You can redeem a bond after one year, but if you redeem during the first five years, you will be charged a three-month interest penalty.
- I Bond interest is exempt from state income tax.
- For federal income taxes, you can declare the interest each year and pay taxes or let the interest grow tax-deferred until you redeem the bonds.
Overall, in this era of high inflation, Series I Bonds are a pretty good place to…
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