Trouble understanding I Bond interest calculation
I have a fair number of I Bonds purchased more or less yearly between 2002 to 2009. Recently there was a discussion about I bonds and I took away from it that starting in May 2011 I bonds were paying 4.6% inflation adjustment May thru November.
Disregarding the fixed interest rate portion on the majority of my older I bonds, I am under the impression that I should see a minimum monthly increase in value of my I bonds over this 6 month period = 4.6% / 12 months X total face value of I bonds.
What is wrong with this calculation? What Treasury Direct shows is much less than this. Additionally, these same I Bonds were earning in excess of $700 per month two years ago, and for the month of July 2011 I received only $236.80 compared to $420.00 in July 2010. I thought I Bonds were paying zero for inflation adjustment last year, but Treasurey Direct calculated more monthly interest last year than this year, (I assumed totally on the fixed % of my older I Bonds).
I have tried to get a handle on the calculation of interest on the Treasury Direct web site but can't really get an understanding why the monthly calculated interest continues to decline.
What am I missing?
My motto is.... "a dollar saved is better than a dollar earned. I don't pay tax on the dollar I saved."