Should I or Should I Not Buy I Bonds?

I bonds are getting a lot of interest because inflation is finally up.  Over the past 10 years, the return has been around 2%-3% average over the long term.

 

Consider these things about I Bonds:

  • You can only put $10,000/year per Social Security number in them per year.
  • You must hold them for 1 year.
  • If you take the money out before 5 years, you will be penalized the last three months of interest earned.
  • You will owe taxes on the interest but can arrange to defer those taxes until you take the money out of the investment.
  • You don’t get paid the interest year-to-year. Only when you sell the bonds back to the government will you see the interest.
  • If (I believe when) inflation goes down, that lovely 9.2% return will adjust down as well. See above for longer term averages.  Remember, the Fed’s target inflation rate is 2%.

 

 

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Kristi Sullivan

My name is Kristi Sullivan and I have been helping people achieve financial security since 1996. I am a fee-only financial planner and public speaker. I do no investment or insurance sales for commissions. My clients pay me for guidance through their financial questions. I also work with employers to educate their employees about personal finance. I have been helping people make financial decisions for 18 years. I have worked in employee benefits and with individual clients/families. I hold the Certified Financial Planner designation. Sullivan Financial Planning, LLC is a Registered Investment Advisory firm with the State of Colorado. Areas of expertise include prioritizing savings goals, investment allocation, and wealth manager searches.