Many investors today have not heard of Series I Savings Bonds. Series I Savings Bonds are bonds issued by the U.S. Government and offer 100% principal protection backed by the full faith and credit of the United States. Series I Savings Bonds are currently paying an annualized rate of 7.12% for the first six months the Series I Savings Bonds are held, and full liquidity after just one year (investors lose three months of interest if cashed in before five years).
With the attractive features and dramatic differences in current yield when compared to rates on savings accounts, money markets, and CDs, the Series I Savings Bonds may be great investment options for investors today.
Overview of Series I Savings Bonds
Series I Savings Bonds are offered direct from the U.S. Treasury Department and are purchased through the TreasuryDirect website, treasurydirect.gov. Purchases are limited to $10,000 annually per person.
Although the $10,000 annual limit on Series I Savings Bonds limits the amount that can be purchased, there are a few ways to purchase more than $10,000 in Series I Savings Bonds. Series I Savings Bonds can also be purchased in the name of children and relatives, trusts and estates, and businesses. In addition, paper Series I Savings Bonds can be purchased using a tax refund up to a $5,000-per-return limit (assuming there is a tax refund), which is over and above the $10,000 annual limit on Series I Savings Bonds purchased through the TreasuryDirect website.
The Series I Savings Bond Fixed Rate is established by the Treasury every six months (on the first business day of May and November). The Fixed Rate applies to all Series I Savings Bonds purchased during the following six-month time period and remains constant throughout the life of the Bond (currently 0%). The Series I Savings Bonds also incorporate another interest rate, the Inflation Rate, which varies throughout the life of the bond (currently 7.12%). The most recently announced inflation rate will be applied to a Series I Savings Bond at the next six-month anniversary.
While I Bonds have a 30-year maturity, they can be redeemed after being held for at least one year. Purchasers who cash in their Series I Savings Bonds between one year and five years after issue will forfeit the last three months of interest. If the Series I Savings Bonds are held for at least five years, the bonds can be redeemed for their current value at the time.
The bottom line: there is a limited amount of time for investors to purchase Series I Savings Bonds at their current rate of 7.12%. In the current environment of low-interest rates and high inflation, Series I Savings Bonds represent a potential opportunity for investors to make more on their conservative investments and protect themselves against inflation.
If you are interested in learning more about Series I Savings Bond, contact your Trusted KerberRose Advisor today.