What are I Bonds?
I Bonds, or Series I Savings Bonds, are a type of U.S. government savings bond designed to help individuals save money while protecting their purchasing power from inflation. They are issued and backed by the U.S. Department of the Treasury. I Bonds are a low-risk investment option and are often considered a safe way to save for the long term.
Key Features of I Bonds
- Inflation Protection: I Bonds protect savings from inflation by earning interest based on a combination of a fixed rate and an inflation rate.
- Fixed and Inflation Components: The interest rate of an I Bond is composed of a fixed rate and an inflation rate that changes every six months.
- Tax Benefits: Interest earned on I Bonds is exempt from state and local income taxes, and federal taxes are deferred until redemption.
- Purchase Limits: There are annual purchase limits per individual for I Bonds, which are subject to change.
- Holding Period: I Bonds have a minimum holding period of one year, and if redeemed within the first five years, a penalty applies.
- Maturity and Interest: I Bonds have a total maturity period of 30 years, during which they continue to earn interest.
- Accessibility: I Bonds can be purchased directly from the U.S. Department of the Treasury through the TreasuryDirect website or through an employer's payroll savings plan.
Valuable Inflation Hedge
I Bonds are a valuable tool for saving money while safeguarding against inflation. Before investing, it's essential to understand their features, benefits, and limitations. Consider consulting with a financial advisor or visiting the official U.S. Treasury website for the most up-to-date information on I Bonds.