Are you searching for greater interest rates to grow your money?
If yes, then US Series I Savings Bonds might be exactly what you’re looking for!
The November 2022 I Bond Composite Rate
The November 2022 I bond composite rate is 6.89% (US Treasury) which is 3.45% earned over 6 months. Your $100 investment becomes $103.45 in just 6 months!
How is the I Bond Composite Rate Determined?
The composite rate is a combination of the fixed rate and the semiannual inflation rate.
The fixed rate for I Bonds issued between November 2022 and April 2023 is 0.40%.
How long do I get the current I Bond interest rate for?
This fixed rate stays with those I Bonds throughout the 30 years that they earn interest.
The current semiannual inflation rate of 3.24% will reset every 6 months following the purchase, or renewal, of your I bond.
How is the I Bond Inflation Rate determined?
We are keeping a close eye on the latest CPI-U numbers, which you will see below determine the inflation rates for I bonds. CPI numbers were released on October 13, 2022.
CPI-U Data and November 2022 – April 2023 I Bond inflation rate
|March 2022 CPI-U:||287.504|
|September 2022 CPI-U:||296.808|
|November 2022 I Bond inflation rate:||6.48%|
How does the current I Bond rate compare to historical rates?
When we compare the historical 6-month composite rates against 12-month Treasuries at the time we see that the 6-month I bond rate is an average of 0.31% lower.
At an initial rate of 6.89%, buying an I bond in October gets roughly 2.2% more compared to the 4.67% 12-month treasury rate (November 1, 2022).
What to consider when buying I Bonds in Late 2022
You are required to hold I bonds for 12 months, yet you only know the rate you’ll get over the next 6 months.
There are 2 rates you need to keep in mind:
- The current rate for November 2022 purchases is 6.89%
- The rate after that, which will go into effect 6 months after your purchase is currently unknown
We’ll discuss how these 2 rates interact later on in the section “What’s the worst-case scenario?”
What you need to know about I Bonds
An I bond is a U.S. Government Savings bond that carries a fixed interest rate, plus an additional inflation adjuster, so that you get an inflation-adjusted real rate of return. In a world of inflation worries and few inflation-adjusted investments, the I bond is a great place to look for savers.
What are the details with an I bond?
- 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
- I bonds are a great place for part of your emergency fund money
Bonus: Listen to our podcast with savings bond expert David Enna from TipsWatch.com on I bonds: US Series I Savings Bonds Simplified
Why I Bonds are so interesting right now
Many investors we talk to hadn’t heard of US Series I Savings Bonds (I Bonds) but have recently become aware of them because of the eye-popping yields they started offering in 2021.
Coverage began in earnest in May 2021 when the 6-month ‘inflation rate’ of 1.77% was announced (which is 3.54% annualized!).
Then, in November 2021 I bond rates doubled to 7.12% and then 9.62% in May 2022!
Now, for purchases in November 2022 the rate is 6.89%!
How do I Bonds work?
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 I bonds are quoted in semi-annual 6-month terms.
To calculate the annualized rate and to compare it to other rates just double the 6-month inflation rate, add in the fixed rate and then multiply the fixed rate times the inflation.
That last factor is quite small, so feel free to ignore it to get a rough sense of the current rate. To see the math on each factor go to Treasury Direct I Bonds Interest Rates.
The current composite rate of 6.89% is only earned for the first 6 months of your I Bond. Your November 2022 I Bonds purchase will turn your $100 into $103.45 just 6 months later. This is a 6.89% annualized rate.
When do I get the next interest rate with I Bonds?
Six months after your purchase you’ll get the new six-month inflation rate, still get the same fixed rate from the start of your I Bond, and your money will grow by your new composite rate.
Your interest will be added every six months to the principal of your I Bond, and you’ll get the next 6 months interest applied to that new principal amount. This is called semiannual compounding.
You are required to hold I bonds for 12 months, and you only know what the next 6 months will bring for interest, but what’s the worst that could happen?
What’s the worst-case scenario when I buy an I Bond?
The worst-case scenario for purchases in November 2022 is you earn 6.89% interest for the 6 months after you buy your I bond, followed by 0.0% after that.
If this occurred your November 2022 I Bond purchase would turn $100 into $103.45 6 months later, and still be worth $103.45 at the end of month 12.
If the rate 12 months from now is not to your liking, then you could cash out your I bond in 12 months, lose the 3 months prior interest (which would be 0.0% in this example), and still have $103.45.
That’s a 3.45% rate over the next 12 months!
You’re very likely to earn more than 3.45% over the next 12 months, though.
There have been 50 announced inflation rate adjustments since I bonds started in September 1998, and only 2 have been negative!
Yet even when the inflation rate was negative, I bond interest never goes below 0.0%!
Imagine if there was a 12-month CD that pays 3.45% with the chance that it goes higher! That’s how you could view your November I bonds purchase.
What are the interest rates on investments that are similar to I Bonds?
Unlike most of 2021 and 2022, I bond rates are now more in line with other similar time frame savings options.
What should I do if I’ve already maxed out I Bonds purchases for 2022?
Wondering what to do if you’ve already maxed out your I Bonds purchases for 2022? Consider short-term Treasury Bills!
For guidance on buying Treasury Bonds and Treasury Bills check out our blog: Get More Interest From Buying Treasury Bonds and Bills (T-Bills) Through Treasury Direct.
How to 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, you may want to extend the holding period to 14-15 months.
If you lose the prior three months of interest by cashing in early and are unhappy with the new 6-month rate, you’d want to hold on for the full higher interest period in months six to twelve and wait for another full three months of lower interest before cashing in after month fifteen.”
How to Take Action On Your Interest Rate Money
When saving your money over a 12-month time frame I Bonds are just one of many investments to consider. Zvi Bodie likes to call I bonds “America’s Best Kept Investing Secret.” Consider your I bonds purchase not just for the short run, but also over the long run as part of a healthy emergency fund savings balance. To buy your I Bonds, go to TreasuryDirect.gov.
Bonus: Listen to the podcast with David Enna from TipsWatch.com for more in depth analysis on I bonds: US Series I Savings Bonds Simplified
Bonus: For guidance on buying Treasury Bonds and Treasury Bills check out our blog: Get More Interest From Buying Treasury Bonds and Bills (T-Bills) Through Treasury Direct.
More I Bonds Resources
- 9 Steps on how buy I Bonds by Jeremy Keil
- A Complete Guide to Investing in TIPS and I Bonds (2022) by David Stein with Money For the Rest of Us
- Podcast: US Series I Savings Bonds Simplified featuring David Enna from TipsWatch.com
- Treasury Direct: Series I Savings Bonds
- 3 Things You Should Know Before Choosing A Financial Advisor
- 7 Questions That Could Make or Break Your Retirement
- Free Retirement Video Course: Your 5 Step Retirement Income Plan
- Subscribe to Retirement Revealed on Google Podcasts
- Subscribe to Retirement Revealed on Apple Podcasts
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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.
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