I Bonds interest is calculated with an initial fixed interest rate, that remains the same for the life of the bond and an inflation rate that is set twice a year on on the first business day in November and May.
In November, 2022 the I bond fixed interest rate through April 30, 2023 is 6.89%. If you buy a new I bond today the fixed interest rate is 6.89%
How Many I Bonds Can I Buy Annually?
You’re only allowed to purchase a total of $15,000 worth of I bonds annually. This is sufficient for small investors, but wealthier individuals, may find this a major constraint.
You can buy a maximum of $10,000 per person annually, online in denominations of $25 to $10,000. You’re also able to buy up to $5,000 paper I bonds, with your tax refund each year.
If you and your spouse each buy $10,000 worth of I bonds and $5,000 with your tax refund, that’s $25,000 per year. Do that every year for five years and you’ve got a $125,000 cache of inflation protected bonds.
If you’re seeking more inflation protected bonds, check out U.S. government TIPS bonds, available to buy at treasurydirect.gov or a TIPS bond fund.
How Long Must I own my I Bonds?
The bonds earn interest for up to 30 years. You must own them for at least one year before redeeming them. Although, if you cash your I bonds within one to five years, you’ll lose the previous three months of interest.
You can sell your electronic I bonds online at Treasurydirect.gov and have the proceeds electronically transferred to your bank account. Paper I bonds can be redeemed at most financial institutions or mailed in to the Treasury Retail Securities Services along with FS Form 1522.
How is Interest on I Bonds Calculated?
The interest rate on I bonds is a composite or combined rate of a:
- Fixed rate
- Inflation rate
The fixed rate never changes and remains the same for as long as you own the bond. The rate is announced twice each year, on the first business day in November and May, and applies to all I bonds issued during the next six months.
The inflation rate typically changes every six months and is set on the same day as the fixed rate. This interest rate for series I Savings bonds is based on changes in the non-seasonally adjusted Consumer Price Index for urban consumers or CPI-U, which includes food and energy.
The current inflation rate for your bond is applied every six months, from the bond’s issue date.
Current Composite Interest Rate for Every I Bond Issued (as of April 2022)
Composite Interest Rate for I Bonds Issued from 1998 – 2022 (April)
Composite Interest Rate
The fixed and composite interest rates are combined to determine the interest rate that your bonds earn. The combined rate is never less than zero, but the combined rate can be lower than the fixed rate. If the inflation rate is negative, or deflationary, some of the fixed rate will be reduced.
The composite rate is calculated using the following formula:
Composite rate = [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]
Since May 2008, the fixed interest rate for I bonds has hovered around 0.00%, due to historically low inflation rates. But, with the recent ramp up in inflation, the composite rate of current returns for all I bonds soared to between 9.6% and 13.39% for I bonds purchased between May and October, 2000.
When is Interest Paid on I Bonds?
I bonds earn interest monthly from the first day of the month and accrues until you cash in the bond, or it is 30 years old, whichever comes first. The interest is compounded semiannually and added to the bond’s principal value. Future interest payments are calculated on the new principal value.
