I scream, you scream-we all scream for…“I Bonds”?

This is the time of year when most people have ice cream on their minds, in their freezers & (eventually) in their belly.  However this year, I’ve been asked more about I-Bonds than Ice-cream.   That’s because by the time you read this, it’s likely that the U.S. Treasury will have to announce new Series I Savings Bonds will earn a healthy 9.6% annualized rate. This very attractive yield has generated a good number of questions about the use of Series I Savings Bonds.

What are these securities and how do they work?

Series I Savings Bonds are issued by the U.S. Treasury and earn interest for 30 years that is federally taxable but exempt from any state or local taxes. The interest rate earned on Series I Savings Bonds, or I-Bonds, is compounded semi-annually and is currently quite attractive at the aforementioned 9.6%. The interest rate is a combination of fixed rate (currently 0%), which does not change during the life of the bond, and an inflation rate (currently 9.6%), which adjusts semi-annually based on the Consumer Price Index for all Urban Consumers, or CPI-U. This rate resets in May and November each year.