Update: October 2021 Will Be the Best Month Ever in History to Buy I Bonds | Podcast

Are you searching for greater interest rates to grow your money?

If yes, then Series I Savings Bonds might be exactly what you’re looking for!

Update: The November 2021 I bond inflation rate will be 7.12% (based on data released by the Bureau of Labor Statistics) which is 3.56% earned over 6 months. Your $100 investment becomes $103.56 in just 6 months!

Check out the update below that rates are even higher than we predicted just two weeks ago!

Bonus: Listen to the just released podcast with David Enna from TipsWatch.com for more in depth analysis on I bonds: US Series I Savings Bonds Simplified

Listen in the podcast player above as Jeremy Keil provides a quick introduction to Series I Savings Bonds and gives you a special sneak peek into a future podcast episode on U.S. government bonds.

Read below for more detailed info on I Bonds and why October may be the best month ever in history to buy them.

Jeremy discusses:

  • Why October 2021 could potentially be the best month ever in history to buy I Savings Bonds
  • Reasons to at least consider investing in I Savings Bonds
  • Where you can get more information about I Savings Bonds and their benefits
  • And more

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Many investors we talk to haven’t heard of US Series I Savings Bonds (I Bonds) but have recently become aware of them because of the eye-popping yields they are offering in 2021.

Coverage began in earnest in May when the 6-month ‘inflation rate’ of 1.77% was announced (which is 3.54% annualized!):

WSJ: I Bonds – the safe high return trade hiding in plain sight

NY Times: With inflation rising, consider the humdrum US Savings Bond

After doing our own research and consulting with I Bonds expert Dave Enna at TipsWatch.com we projected in early October that the 6-month inflation rate for November will be 3.28% or higher (really 6.56% annualized). Dave thinks it may even hit 6.9%. (older, predicted numbers)

Update 10/13/2021: November’s 6 month inflation rate will be 3.56% (based on data released by the Bureau of Labor Statistics, which is 7.12% annualized.

When the US Government announces the 6-month inflation rate, you’ll be earning double that amount for half the year. Most interest rates are quoted in annual terms, but the I bonds are quoted in semi-annual 6-month terms, so to know what your annualized rate is, and to compare it to other rates just double the 6-month inflation rate.

What’s unique about buying I Bonds in October, especially on October 13 or later, is that you will know exactly what your 12-month rate of return will be.

Buying an I Bond in October will lock in 1.77% for the next 6 months, followed by 3.56% 6 months later.

Your $100 I Bond purchase in October 2021 would turn into $105.39 12 months later after getting the two successive 6-month inflation rates. That’s a rate above 5% on a government bond when other comparable rates are:

  • 12-month CD for a top rate of 0.75%, and average of 0.14%
  • Money market for a top rate of 0.55%, and average of 0.08%
  • Savings account for a top rate of 0.55%, and average of 0.06%
  • 12-month Treasury of 0.08%

(based on Bankrate.com and Federal Reserve Data from 10/6/2021)

I Bond Rate Calculations

You’ll see below that cashing out within the first 5 years might lose you the prior 3 months of interest, and yet we aren’t too concerned about that.

What happens if you truly need the money exactly 12 months from your October purchase?

Your $100 turned into $105.39, but you’d lose the prior 3 months of 1.78% interest = $103.61, which is a 3.61% return, still much better than the alternatives.

Hopefully, if you truly need the money, you can wait another 3 months and cash it out 15 months after your October purchase. That means you’d lose the last 3 months of interest (whatever it is) and get $105.39. That’s really a 15-month rate of 4.29% annualized. Again – much higher than the alternatives. (updated 10/13/21 with just released numbers)

Ins and Outs of US Series I Savings Bonds

  • You have to hold them for 12 months minimum. You can’t cash out before then.
  • If you cash out between the end of year one and the end of year five, you lose your prior three months interest as a penalty.
  • You can only buy $10,000 per person, per year, and you have to do it at TreasuryDirect.gov

Don’t wait until November to buy!

Many people might say, why bother with 3.54% right now when you can buy in November and get 7.12%?

It’s because when you buy in November you have no idea what the next 6-month rate will be, so you are taking a gamble that it would be higher than the current 3.54%.

Get Strategic with Your I Bonds purchase

David Enna, author of Tipswatch.com suggests being even more strategic, “You can buy an I Bond near the last day of the month and get credit for a full month’s interest, so you can effectively cut the one-year holding period to 11 months and a day, but realistically, if you buy in October, you’ll probably want to extend the holding period to 14-15 months. If you lose the prior three months of interest by cashing in early, you’d want to hold onto the high interest for that full six-month renewal period and wait for a full three months of lower interest before cashing in.”

Take Action

When you get your bank statement and need a microscope to find the pennies of interest you are getting, think through how much you can commit to a 12-month interest rate that pays over 5%. Zvi Bodie likes to call I bonds “America’s Best Kept Investing Secret.” Let’s fight the low interest rates that we are getting right now, buy some I Bonds, and tell everyone else we know about this incredible opportunity. To buy your I Bonds, go to TreasuryDirect.gov.

Also, make sure you check out the resources below to learn more about Series I Savings Bonds.

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