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If you are keen to secure 9.62% annual interest for Series I bonds for six months, the deadline is fast approaching.
You must purchase I Bonds and receive your confirmation email by October 28 to lock in the record high rate of 9.62%, according to Cash Direct.
The rate should drop to about 6.48% in November, based on latest inflation data from the US Bureau of Labor Statistics.
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Although bond rates change twice a year with inflation, you can still lock in 9.62% annual interest for six months, provided you complete the purchase by October 28. And six months after your purchase date, you’ll earn around 6.48% for another six months.
“It’s an option if someone wants the best of both worlds,” said Ken Tumin, founder and editor of DepositAccounts.com, who tracks i linkamong other advantages.
How to Estimate One-Year I Bond Rates
There are two parts to I-bond rates: a fixed rate, which stays the same after purchase, and a variable rate, which changes twice a year based on inflation.
The U.S. Treasury Department announces new rates each May and November, and you can estimate the next floating rate about two weeks ahead from the consumer price index reports released in April and October.
Estimates provide a brief period to know approximately what you will earn for a year, i.e. how long you will lose access to funds after purchase.
“It’s good to know what interest rates you’ll get when you commit to a 12-month lock-in,” said Jeremy Keil, certified financial planner at Keil Financial Partners in Milwaukee.
While it’s too early to estimate May 2023 rates, buying I bonds before the end of October means you’ll receive May and November rates for six months each.
“There’s no doubt that it’s better to get the 9.62% for the first six months and then 6.48% for six months,” said David Enna, founder of Tipswatch.com, a website that tracks i link rate.
It’s good to know what interest rates you’ll get when you commit to a 12-month lock-up.
Jeremy Keil
Financial Advisor at Keil Financial Partners
“A short-term investor – someone who just wants to put some money aside – should definitely buy in October,” he said.
However, if you are trying to get the 9.62% rate before November, Enna suggests making the purchase no later than a few business days before the end of October.
The Disadvantages of Buying Bonds I
While it can be interesting to know roughly I bond yields for a year, there are a few things to consider before buying, experts say.
“The biggest downside is you’re locked up for 12 months,” Keil said. “You can’t remove it for any reason.” And you’ll give up three months’ interest by cashing in before five years.
Still, I bonds may be worth considering for some of your emergency savings, as long as there’s other cash readily available for unexpected costs, he said.
And if you are wait for tuition bills in 2024, Keil said it was a “good time” to get guaranteed interest for one year, which is tax-free for qualifying education expenses.