TIPS and I Bonds rank up there with stock index funds as favorites of academics, reflecting a belief that trying to forecast the future is a fool's errand. Better to buy a big basket of stocks as a microcosm of the broad market, they say, than to try to select individual issues. And better to buy a bond that's built to beat inflation than trying to predict where prices will head.

JAMES PETHOKOUKIS
The New York Times
Current I Bond Rate
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Compared to Other Products

I Bonds are one of several offerings from the US Treasury Department. I Bonds are commonly compared to Series EE Bonds and Treasury Inflation-Protected Securities (TIPS). EE/E Series Bonds offer different benefits based on their year of issuance, so make sure you research the correct type of EE/E Bond when comparing against I Bonds. EE Bonds purchased after May 2005 offer a fixed rate of interest based on current market rates. Many people equate current EE Bonds with Certificates of Deposit (CD) with 30 year terms, although there are several differences that may make EE bonds preferable over CD's. EE Bonds are also not protected against inflation, meaning the inflation rate could be higher than the rate of the bond. Unlike I Bonds, paper EE Bonds were purchased at half the face value while electronic bonds are purchased at the same value. Another Treasury product designed to protect from inflation, Treasury Inflation-Protected Securities (TIPS), and can be purchased or sold at auction. TIPS are sold in terms of 5, 10, or 20 years but require a $100 minimum purchase.

I Bonds vs. EE bonds vs. TIPS - Quick Comparison

I bonds EE bonds TIPS
Maximum Purchase Limit per year $10,000 electronic and up to $5,000  paper as a result of a tax refund $10,000 electronic None
Minimum purchase: $50 for a $50 I Bond for paper bond certificates .
$25 for a $25 I bond when purchased electronically. 		$25 for a $50 EE Bond for paper bond certificates.
$25 for a $25 EE bond when purchased electronically. 		$100
Denominations: Paper bonds*: $50, $75, $100, $200, $500, $1,000, $5,000.
Electronic bonds: purchase to the penny for $25 or more.

* Paper I Bonds no longer sold directly. Only available as part of a tax refund. 		Paper bonds*: $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
Electronic bonds: purchase to the penny for $25 or more.

* Paper EE Bonds no longer issued 		Multiples of $100 electronically only.
Earnings A fixed rate of return and a  variable semiannual inflation rate (based on CPI-U  for March and September) are combined. Series EE Bonds issue dated May 2005 and after will earn a fixed rate of interest. Price and interest determined at auction.
Minimum term of ownership: 1 year 1 year No minimum. TIPS can be held until maturity or sold before maturity.
Interest-earning period: 30 years 30 years TIPS are issued in terms of 5, 10, and 20 years.
Early redemption penalties: 3-month interest penalty if redeemed during the first 5 years. 3-month interest penalty if redeemed during the first 5 years . None
Type of Investment: Non-marketable - cannot be bought or sold in secondary securities market. Non-marketable - cannot be bought or sold in secondary securities market. Marketable--can be bought and sold in the secondary securities market
Inflation Indexing: Semiannual inflation rate (based on CPI-U changes) announced in May and November. N / A Inflation adjustments measured by CPI-U published monthly

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Page last modified 1/16/2012