I Bonds: Where To Buy & How Do They Work?

I bonds are inflation-adjusted savings bonds issued by the United States government. Every six months, the interest rate on I Bonds is revised.

The interest rate on I Bonds is determined by a computation that is linked to the consumer-price index.

According to the Bureau of Labor Statistics, the total CPI jumped 8.2% in September compared to the same month a year ago.

Bonds purchased between May and nearly the end of October will earn 9.62% for six months before being adjusted to reflect new inflation statistics.

For example, a $10,000 I Bond purchased on October 28 would earn an annualised rate of 9.62% for six months.

At that time, the $481 in interest collected would be added to the original $10,000, yielding a new yearly rate of 6.47% on $10,481.

Although I Bonds have a $10,000 annual restriction per individual, there are several ways that allow you to exceed that limit.

To purchase electronic bonds, investors register an account on the TreasuryDirect website. They can also use their tax refund to purchase paper bonds through an Internal Revenue Service scheme.

If you have extended your tax return and have an overpayment, you can use the refund to acquire I Bonds.

An I Bond yields interest monthly from the issue date, so if you buy it on Nov. 20, you'll get November interest.

When is I Bond interest paid?

The interest, which is compounded twice a year, can be earned for up to 30 years or until the bond is cashed, whichever comes first, according to Ms. Ladd.