Extra Money in Savings Making Nothing: Buy I Bonds
One of the most common issues that savers have right now is that their money sitting in savings is making absolutely nothing. Banks are not paying much on short term savings accounts. And money markets aren’t much better. For savers looking to steer clear of stocks, if they can’t stomach fluctuation on their money, there aren’t many options available.
However, one highlight of inflation being higher is the opportunity that I Bonds offer. I Bonds are a Federally government issued bond linked to the rate of inflation. They are currently offering I Bond interest rates at 9.62% (as of July 1, 2022). This bond rate is likely going higher with inflation staying up. You can only purchase I Bonds directly through the US Treasury.
Are I Bonds a Good Investment?
The downside to I Bonds is that there is a limit to how much money an individual can deposit. The max is $10k per calendar year. Meaning a married couple could each contribute $10k, totaling $20k. There is the ability to use another $5k from a tax return to buy I Bonds, which means that an individual could buy up to $15k if they used $5k from their tax return.
If you are looking to use the money in a short-term timeframe, though, an I Bond is not an ideal investment strategy. An I Bond redeemed after 1 year, but less than 5 years, will lose the last 3 months of interest. I Bonds earn interest for 30 years, if they are not cashed in before maturity.
I Bond Risks
An I Bond is best suited for someone that is very risk adverse with their money and unwilling to see any loss of principle. If an investor is willing to take on a moderate to high level of risk, there are better options available for them to invest their money over the long term. However, a 9.62% rate of return on I Bonds is great over any timeframe.