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%.
