I Bond rate starting May 2026

[DEC-1982]

I saw a report in the last couple of days, I think it was from the Cleveland Fed, suggesting or expecting a 0.9% monthly rise in inflation (CPI) for March. Anyway, we should have a very good idea about the new I Bond rate by the end of Friday this week.

 

[mrfeh]

I saw a report in the last couple of days, I think it was from the Cleveland Fed, suggesting or expecting a 0.9% monthly rise in inflation (CPI) for March. Anyway, we should have a very good idea about the new I Bond rate by the end of Friday this week.

I don't care one bit about the current inflation rate when it comes to I Bonds. The only thing that matters is the fixed rate.

 

[big-papa]

I don't care one bit about the current inflation rate when it comes to I Bonds. The only thing that matters is the fixed rate.

This.
And it matters a lot for those of us who hold I-bonds for the long haul. There were a lot of people jumping in and out of them, chasing yields just a few years ago - something for which they really weren't intended, hence the 1 year restriction on redemption and the 3 months interest penalty if redeemed before 5 years. I guess neither of these were sufficient deterrents for some.

Cheers.

 

[DEC-1982]

I don't care one bit about the current inflation rate when it comes to I Bonds. The only thing that matters is the fixed rate.

I do. I would rather have a 2% inflation rate and a 1% fixed rate than a 3% inflation rate and a 1% fixed rate. The first deal is better.

 

[mrfeh]

I do. I would rather have a 2% inflation rate and a 1% fixed rate than a 3% inflation rate and a 1% fixed rate. The first deal is better.

You'll need to explain why.

Long term, the only thing that matters is the fixed rate.

 

[Fermion]

You'll need to explain why.

Long term, the only thing that matters is the fixed rate.

If the fixed rate were 10% but inflation was 10,000%, would you be happier than if the fixed rate was 5% and inflation was 3%?

 

[DEC-1982]

You'll need to explain why.

Long term, the only thing that matters is the fixed rate.

Let's say inflation is 3% and the fixed rate is 1%. Total return 4%. On $100, I get a return of $4. Inflation eats up $3. At 22%, taxes on $4 eats up $0.88. I am left with $0.12.

Let's say inflation is 1% and the fixed rate is 1%. Total return 2%. On $100, I get a return of $2. Inflation eats up $1. At 22%, taxes on $2 eats up $0.44. I am left with $0.56.

There may be a different way of looking at all this, but the above is how I looked at it.

 

[Chuckanut]

Long term, the only thing that matters is the fixed rate.

Only if 100% of your assets are in Ibonds.

 

[mrfeh]

Let's say inflation is 3% and the fixed rate is 1%. Total return 4%. On $100, I get a return of $4. Inflation eats up $3. At 22%, taxes on $4 eats up $0.88. I am left with $0.12.

Let's say inflation is 1% and the fixed rate is 1%. Total return 2%. On $100, I get a return of $2. Inflation eats up $1. At 22%, taxes on $2 eats up $0.44. I am left with $0.56.

There may be a different way of looking at all this, but the above is how I looked at it.

You may not understand how I Bonds work...every 6 months after purchase, the inflation component resets.

Over time, everybody gets the same inflation component.

The only thing that is permanent is the fixed rate.

 

[mrfeh]

Only if 100% of your assets are in Ibonds.

We are talking specifically about the total return of I Bonds, not the effect inflation has on other aspects of life or your portfolio.

 

[DEC-1982]

I don't know how to better explain why a 1% fixed rate with 1% inflation is better than a 1% fixed rate and a much higher inflation rate, even for I bonds. Maybe it's time for me to let it go.

 

[mrfeh]

I don't know how to better explain why a 1% fixed rate with 1% inflation is better than a 1% fixed rate and a much higher inflation rate, even for I bonds. Maybe it's time for me to let it go.

Perhaps you are comparing I Bonds to other investments?

That's not what I'm doing. All I'm saying is that if somebody decides they want to buy I Bonds, the current inflation rate is not relevant.

 

[Al18]

I'm am IBond owner and can't get excited about them. Best case is they keep up with inflation. You're not getting rich off IBonds. They are better than a bank CD, because you only pay taxes on the interest when you cash in the IBond. They are good for big lumpy expenses like a new car.

 

[big-papa]

I'm am IBond owner and can't get excited about them. Best case is they keep up with inflation. You're not getting rich off IBonds. They are better than a bank CD, because you only pay taxes on the interest when you cash in the IBond. They are good for big lumpy expenses like a new car.

I hope nobody is thinking that at today's fixed rates, that there is a pot of gold at the end of the I-bond rainbow.

They give you the fixed rate, adjusted for inflation. If you have 0% fixed rate then, yes, they only keep up with inflation. Any fixed rate above 0% does better than inflation (before taxes). We have a mix of 0% up to 1.3% across all of our holdings.

We purchased I-bonds over a 10 year period and have every intention of letting all of them go to maturity with maturities every year starting in our mid 80's and ending in our mid 90's. These are more like a plan B or C depending on what our health looks like if one or either of us are still around by then.

Cheers

 

[mrfeh]

I hope nobody is thinking that at today's fixed rates, that there is a pot of gold at the end of the I-bond rainbow.

They give you the fixed rate, adjusted for inflation. If you have 0% fixed rate then, yes, they only keep up with inflation. Any fixed rate above 0% does better than inflation (before taxes). We have a mix of 0% up to 1.3% across all of our holdings.

We purchased I-bonds over a 10 year period and have every intention of letting all of them go to maturity with maturities every year starting in our mid 80's and ending in our mid 90's. These are more like a plan B or C depending on what our health looks like if one or either of us are still around by then.

Cheers

Very similar to our situation and rationale.

I don't own TIPS. I Bonds are what we use for inflation protection in our fixed income holdings.

 

[big-papa]

Very similar to our situation and rationale.

I don't own TIPS. I Bonds are what we use for inflation protection in our fixed income holdings.

Yep. We ended up with both, but for very different purposes. Individual TIPS, in my opinion, are much better at producing income streams for up to 30 years that are adjusted for inflation whereas I think of I-bonds as more like a 30 year CD with inflation protection.

Cheers.

 

[PlayinwithFIRE]

Aww...I'm left holding the bag with 0% i bonds :/

Honestly, I dont give them much thought at all.

pwf

 

[Mulligan]

I don't know how to better explain why a 1% fixed rate with 1% inflation is better than a 1% fixed rate and a much higher inflation rate, even for I bonds. Maybe it's time for me to let it go.

Ha, I understand what both you and mrfeh are saying. You both are correct, its just you two are talking about different scenarios. Yes, the fixed rate is more important over the long term as we all get the same inflation adjustment eventually over time when they reset as mrfeh was opining. But your hypothetical was different. You were just stating in theory if inflation was running rampant at say 6%, the inflation adjustment would carry more heft in terms of immediate percentage of the interest you would be receiving and thus fatten the interest received more than the fixed component contributes during that hypothetical time period.
I also dont own TIPs, just the IBonds, mostly the 1.3% and 1.2% based on a lot of heavy cross gifting to get them a lot bigger stash of them. The .9% fixed doesnt really excite me, but I will buy the $10k annual and leave it at that for this year.
I own them for several reason like mentioned above. Mostly for 1) some inflation protection 2) deferred income and 3) something I can look at monthly knowing it wont ever go down in price….Definitely no “get rich scheme” with these things, that is certain!

 

[big-papa]

But your hypothetical was different. You were just stating in theory if inflation was running rampant at say 6%, the inflation adjustment would carry more heft in terms of immediate percentage of the interest you would be receiving and thus fatten the interest received more than the fixed component contributes during that hypothetical time period.

Which is just another way of saying that a higher composite rate over a given 6 month period delivers a higher return then a lower composite rate would over the same 6 month period.
Because it's the composite rate that determines the overall change in dollars you see in your account over that 6 month period.

The composite rate formula is a mix of the fixed rate and the 6 month inflation rate:
Fixed rate +
(2 * semiannual inflation rate) +
(fixed rate * semiannual inflation rate)

Interest is compounded semi-annually

I bonds interest rates — TreasuryDirect

www.treasurydirect.gov

 

[Mulligan]

Which is just another way of saying that a higher composite rate over a given 6 month period delivers a higher return then a lower composite rate would over the same 6 month period.
Because it's the composite rate that determines the overall change in dollars you see in your account over that 6 month period.

The composite rate formula is a mix of the fixed rate and the 6 month inflation rate:
Fixed rate +
(2 * semiannual inflation rate) +
(fixed rate * semiannual inflation rate)

Interest is compounded semi-annually

I bonds interest rates — TreasuryDirect

www.treasurydirect.gov

Yes, I certainly agree, which is precisely why I sold all my 0% fixed and converted them all into the 1.3% fixed…..Because I wanted a bigger composite rate!

 

[audreyh1]

Same here. Closed out my lowest fixed rates (had already got rid of my 0%) and bought 0.9% and 1.3%.

I’m getting older. We each have one maturing in 2033, but the rest are maturing around 2050+. Man, that’s a long way away, I’ll cash them out before then.

 

[Mulligan]

Same here. Closed out my lowest fixed rates (had already got rid of my 0%) and bought 0.9% and 1.3%.

I’m getting older. We each have one maturing in 2033, but the rest are maturing around 2050+. Man, that’s a long way away, I’ll cash them out before then.

My maturities are out that far also in the 2050s. The only difference for me is if things go to plan, it will be someone besides me cashing them out as I doubt I live that long also!

 

[DEC-1982]

I don't plan to hold I Bonds till maturity (30 years). Over a longer term, stocks are likely to do better than bonds, including I bonds.

 

[mrfeh]

I don't plan to hold I Bonds till maturity (30 years). Over a longer term, stocks are likely to do better than bonds, including I bonds.

Of course. Return is not why one would buy them.

Is your entire portfolio equities?

 

[DEC-1982]

Of course. Return is not why one would buy them.

Is your entire portfolio equities?

Equities are currently 67%.