A safe way to earn 10X more interest than your bank

A safe way to earn 10X more interest than your bank

Do you have cash that you don’t want to invest in the market but you also don’t want inflation to just eat away?

Where do you go in today’s low interest environment with online banks offering 0.50% on savings accounts and brick-and-mortar banks even less than that? There is a middle of the road option to consider that currently offers more than 10 times more interest than your online savings account.

Years ago it was not uncommon for people to buy US government savings bonds, usually Series EE Bonds. As interest rates dropped to nothing, these understandably fell out of favor with most investors.

However, these savings bonds have a sister bond, which has become more interesting recently: the Series I Savings Bond. What makes this product more enticing right now? The “I” stands for inflation, which factors into these bonds’ returns. With inflation creeping up as a result of the pandemic, the I Bond is easily the highest yield available for most people: currently 9.62% (as of May 2022). For the right person, it could be a useful place to store some cash.

I Bonds were first issued in 1998 as a low-risk investment option to add potential for a return while also protecting an investor’s purchasing power. I Bonds will always return their face value, since they are backed by the full faith and credit of the U.S. government.

The yield you receive has two components: a fixed rate and a variable rate.

  • The fixed rate is determined by the U.S. Treasury and does not change for the life of your bond. 
  • The variable rate is determined by changes in inflation (specifically the CPI-U index) and will change semi-annually in the spring and the fall with the life of the bond.

The interest received on an I Bond is always exempt from state and local taxes. If you use the I Bond to pay for higher education expenses, the interest is also federally tax exempt, which can provide for an alternative option to 529 Plans.

How much can you buy? Each calendar year you can purchase up to $10,000 of I Bonds. If owned by an individual, you can add someone else (but not a trust) as a beneficiary to your bond. If you have a Trust, I recommend purchasing the I Bond in the name of your Trust.

When can you take your money out? Your I Bond cannot be redeemed for 12-months, so this is not a good option for all of your emergency reserves. If your bond is redeemed before 5 years, you will forfeit 3 months of interest. However, you would still come out ahead compared to a savings account during that same period. Ideally the money you put into I Bonds would be money for purchases a few years down the road, such as a new home, car, or wedding.

How do I buy the I Bonds? You will need to set up an account through TreasuryDirect.gov. The set-up process can be a little cumbersome. Watch the “How To Videos” below and follow the TreasuryDirect.gov prompts. TreasuryDirect.gov has great information and charts on I Bonds that I encourage you to check out here before buying. If you have any questions or would like help setting up an account to purchase I Bonds, reach out to your Sound Stewardship wealth advisor and we will work together to get you set up!

Please contact us for purchasing I Bonds in a Trust.


Helpful Videos when Buying I Bonds

Buying an I Bond as an Individual

Buying an I Bond as a Trust

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