How to Sell Your I Bonds

If you’ve been thinking of selling your I Bonds then you need straightforward guide to help you sell your I Bonds. Read on to learn how to sell your I Bonds, including a video with step-by-step instructions and another video discussing whether you should cash in, keep, or swap your I Bonds for a higher fixed rate of interest.

Understand How I Bonds Work

I Bonds are a type of U.S. savings bond designed to protect against inflation. They’re a blend of a fixed rate and an inflation rate, meaning that the interest they earn changes every 6 months. You probably bought your I Bonds in 2021 and/or 2022 when the inflation rate was quite high and the fixed rate was 0.0%.

Those I Bonds renewed between May 2023 – October 2023 at 3.38% for an inflation rate, and now with renewals from November 2023 – April 2024 they will renew with a 3.94% inflation rate.

Since Money Markets, Treasury Bills, and CDs are at 5% or higher you’re probably thinking of when and how you would cash out your I Bonds.

When Can You Cash Out I Bonds?

You can sell your I Bonds any time after you’ve held them for 12 months or more.  If you cash them before five years, you’ll lose the last three months of interest. After five years, you can cash them without any penalty. If you’re trying to get the most interest you can from your I Bonds then its important to keep in mind the ‘prior 3 months of interest’ situation.

If you bought I Bonds in October 2022, then you just renewed at 3.38% in October 2023. If you cash out in November or December you’ll be giving up 1-2 months of 6.5% interest. You could consider waiting until January 2024 so that when you cash out that I Bond you are only losing interest at 3.4%, not the 6.5%

How to Cash Your I Bonds

The process for selling your I Bonds is quite similar to how you bought your I Bonds.

Log in to your TreasuryDirect account, select the bonds you want to cash, and follow the on-screen instructions. The money will be deposited directly into your linked bank account.

I show you step-by-step instructions, with a screenshare showing how to do this within Treasury Direct here:

Taxes and I Bonds

When you sell your I Bonds, remember that you’ll owe federal income tax on the interest you’ve earned. However, there’s some good news: I Bonds interest is exempt from state and local taxes.

You probably have not chosen to pay taxes on the interest annually so you probably deferred all the interest until you cash the bond. Keep this interest in mind, especially whether you should do any additional tax withholding or estimated tax payments.

There could also be tax benefits for using I Bonds for education purposes, as long as you follow the rules mentioned here: How to use I Bonds for Education

It’s a smart move to consult with a tax professional before you do anything that affects your tax situation.

What will you do with your I Bonds?

Before cashing your I Bonds, think about why you’re doing it. If you’re using the funds to support your retirement lifestyle or address an immediate need, it’s understandable. But if you’re thinking of selling just because you’ve heard of a new investment opportunity, weigh the pros and cons.

Remember, I Bonds provide protection against inflation, which can be especially useful during retirement. If you’re uncertain about selling, chat with a financial advisor to ensure you’re making a decision aligned with your long-term goals. You could even consider swapping your older 0% fixed rate I Bonds for the new 1.3% fixed rate I Bonds.

Selling your I Bonds is a significant decision, especially as you navigate the retirement journey. Remember to weigh the pros and cons, stay informed, and consider seeking advice from professionals.

Of course there’s more to retirement and investing than just getting an interest rate through I Bonds. Make sure to set yourself up for retirement success by checking out my free video course on how to create your retirement plan.

More I Bonds Resources

• CNBC: When to Cash Out I Bonds
• Free Retirement Video Course: Your 5 Step Retirement Income Plan
• TipsWatch.com
• How to Buy More than $10,000 in I Bonds with the Gift Box Method

Disclosures

This material is provided for informational purposes only and is not solely intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The views and strategies described may not be suitable for all investors. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Advisory services offered through Thrivent Advisor Network, LLC. 

IMPORTANT: Advisory Person(s) may use proprietary financial planning tools, calculators and third-party tools and materials (“Third-Party Materials”) to develop your financial planning recommendations. The projections or other information generated Third-Party Materials regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time. Thrivent Advisor Network, LLC and its advisors do not provide legal, accounting or tax advice. Consult your attorney and or tax professional regarding these situations.

The return assumptions in Third-Party Materials are not reflective of any specific product, and do not include any fees or expenses that may be incurred by investing in specific products. The actual returns of a specific product may be more or less than the returns used. It is not possible to directly invest in an index. Financial forecasts, rates of return, risk, inflation, and other assumptions may be used as the basis for illustrations. They should not be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment. Investing involves risks, including the possible loss of principal.

This communication may include forward looking statements.  Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser.  Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies.