Every 6 months, on the first business day of May and November, the interest rate on your Inflation Linked Savings Bonds (I-bonds) changes based on inflation as measured by the Consumer Price Index.
The current inflation adjusted interest rate
for your I-bonds is: 2.76%
This will be added to whatever fixed rate your individual I-bonds carry.
Inflation has been tame recently, so I-bonds are not paying a lot. However I still like them for five reasons:
- I-bonds are inflation protected = you don’t lose purchasing power. If inflation climbs so will the interest rate
- I-bonds are principal protected = you cannot lose money
- I-bonds are tax deferred = you don’t pay any federal tax on the interest until you cash the bond
- I-bonds are state income tax free
- I-bonds have an education tax exclusion = qualified taxpayers can use the bonds to pay for qualified education expenses tax free
To my knowledge there is nothing else available today with this unique combination of features.
Building a position in I-bonds over time (purchases are limited to 10K per social security # per year) as a part of a well diversified portfolio is a great opportunity to add inflation protection to your portfolio with no risk of principal loss!
Michelle Morris, CFP®, EA
BRIO Financial Planning