It’s no secret that for the last couple of years interest rates have been historically low. As a borrower of funds, you could hardly have asked for more over the last two years. But as a lender of funds (think savings accounts, bonds, and CDs) you weren’t able to pace inflation in your liquid accounts. Interest rates and inflation are both on the rise. As interest rates increase being aware of your saving(s) options is vital. Enter: I Bonds.
A bond is a loan. You, the bondholder, loan a sum of money to a bond issuer in exchange for an agreed-upon interest rate. As a lender of funds, your primary concern is whether the borrower will return your dollars. Some bonds carry more risk than others, depending on the creditworthiness of the issuer.
Not all bonds are guaranteed, even those issued by a government (remember, Detroit circa 2013?). I Bonds are issued by the federal government which makes them risk-free investments (technically, as the Federal Government has never defaulted on a debt). I Bonds are unique in their interest payments as their rates are tied to inflation.
There’s no such thing as a free lunch. I wouldn’t say there is a “catch” with I Bonds, but there are a couple of things to be aware of should you decide to purchase.
Though seemingly simple this is a difficult question to answer. Investing isn’t a one size fits all approach and investing doesn’t happen in a vacuum. From a textbook perspective there are some parameters to consider:
Of course, this list isn’t exhaustive and if you’re in doubt, always check with your investment professional.
You can purchase a bond through https://www.treasurydirect.gov/
If you have outstanding questions about I Bonds, you’re welcome to reach out to one of our Financial Guides. A member of our team is available to help you via phone, email, or chat Monday through Friday 9 AM - 9 PM EST.