But with the inflation rate rising and the stock market shaky, even the most optimistic investors are finding it hard to be cheerful. Unless, that is, they own inflation-adjusted Savings Bonds, or I Bonds.

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Frequently Asked Questions

What are I Bonds?
I Bonds are another name for Series I Savings Bonds. I bonds are issued by the US Treasury Department as a savings mechanism for individuals. The "I" in I Bonds stands for inflation, which is how the composite rate of the bond is determined.

Are there limitations on I bonds?
Yes, there are limits to I bond purchasing and redeeming. As of January 1, 2012, the U.S. Treasury switched to electronic bonds for direct purchases. There is a $10,000 a year per series limit per person for savings bonds (per series meaning Series EE and I). Additionally, you can receive up to $5,000 in the form of a paper I Bond as a result of a tax refund (limited per tax filing, meaning married filing jointly can only receive $5,000 per couple). I bonds must be held for at least one year before being redeemed. If a bond is redeemed within the first 5 years, there is a 3-month interest penalty when redeemed. After 30 years, the I bond is considered matured and will no longer receive interest.

How is the I Bond rate determined?
The composite rate of an I bond is based on two separate rates: the fixed rate, which is set at the time of purchase and remains constant for the life of the bond, and the inflation-linked rate, which changes every 6 months based on the change in the CPI-U measurement.

Are I Bonds safe?
I Bonds are a very safe investment. I bonds are issued by the US Treasury Department, meaning there is virtually no risk of the bonds defaulting as is possible with corporate or municipal bonds. Additionally, I Bonds will never return a negative return, meaning you can not lose money with I Bonds. Even in times of deflation, the overall rate can not drop below zero and reduce your overall earnings. If your bonds are lost, stolen, or destroyed, they can be replaced by contacting the Treasury Department.

How do I redeem my Series I Bonds?
There are several ways you can accomplish this. The most common method is to return to the bank where you purchased the bonds and redeem them there. Some banks do not cash bonds or will not cash them unless you have an account. Try other local banks if this is the case.

Secondly, you can convert you paper bonds to electronic bonds on TreasuryDirect. Once the bonds have been converted, you can redeem them online and have the amount transferred to your linked account. You can read more about converting on the TreasuryDirect site here.

If you are redeeming over $1000, you may need to contact your nearest Treasury Retail Securities site. To find the closest location, visit the Treasury Retail Securities Site Locator.

Remember, if you redeem an I Bond under five years from the issue date, you will pay a 3 month interest penalty for early redemption. I Bonds continue to earn interest for 30 years.

The rate of a new bond is different than the rate of a bond I purchased? What gives?

There are several reasons your bond may have a different rate than a bond purchased today. An I Bond's rate is the same for 6 months, at which time it will change to reflect the new variable rate. Your bond will continue to receive the older rate until it reaches the 6-month anniversary, which will likely be a different rate than a new bond. Even when the variable portion changes, the rate may be different because of the fixed rate of your bond may be different than the fixed rate of a new bond.

Should I buy a CD or invest the same money in I Bonds?

Certificates of Deposit and I Bonds are both safe ways to invest, but each has different attributes that may decide which is right for you. The interest on I Bonds is not taxed until the bond is redeemed, whereas a CD is taxed like any other income. This means that an I Bond with a lower rate may actually earn more after taxes than a CD based on your tax bracket. I Bonds can also be used to pay for educational expenses and will not be taxed at the federal or state level. CDs are more flexible in terms of investment times. Whereas you can purchase a 6 month CD, I Bonds must be held for 1 year and have a 3 month interest penalty if redeemed in the first 5 years. The rate of an I Bond changes every 6 months while a CD is constant throughout the term. If you find an excellent rate on a CD while inflation seems low, a CD may make more sense. If you are looking for tax protection, believe inflation will be higher, or plan on using your savings for educational expenses, I Bonds may make more sense.

The owner of the I Bond has died, what can I do?

Depending on who is listed on the bond, different forms are required to transfer the bond. You can find the scenarios and the respective forms at the TreasuryDirect website. TreasuryDirect - Death of a Savings Bond Owner

What is my I Bond worth now?

Since I bond rates change every six months, it is difficult to build a calculator that tracks the exact amount an I Bond has grown.

The Treasury Department offers a quick chart that shows the growth of an I Bond (including yield) for several denominations. I recommend downloading the charts and looking at it to determine about what your bonds are worth. If you purchased bonds electronically, the Treasury Direct website will list the current value of each of your bonds.

PDF: Current Values for Savings Bonds
Be sure to look for "Series I" in the footer and the appropriate month you are looking for.

If you know the serial number and date issued of your bond, you can use the TreasuryDirect Savings Bond Value Calculator to find the value of your bond.

If you purchased the bond electronically, you can log into TreasuryDirect, Select I Bonds, select the specific bond you are looking at, and see the current value listed for you.

My bond was lost or stolen, what can I do?

Your bond can be replaced if it is lost after you receive it by completing a Form PD F 1048. You can download the form here.

Once you complete the form, mail it to:
Bureau of the Public Debt
P.O. Box 7012
Parkersburg, WV 26106-7012

Does I Bond Interest compound like other savings products?

Yes, the interest will compound. Technically, the bond will accrue, meaning the interest is applied to the bond's value. Interest will begin the day you buy the bond and is applied to the value every month. The interest is then paid once the bond is redeemed.

How do I change a Beneficiary of an I Bond?
There are 3 forms that allow you to have an I Bond reissued with the beneficiary information changed. Form PD 4000, Form PD F 1455, and Form PD F 1851. According to the Treasury Department, the forms should be used as followed:

Here are the reasons to use Form PD 4000 to reissue I Bonds. Full instructions are included on the form.

  • A sole owner wants to add another individual as a co-owner or beneficiary.
  • An owner wants to change the current beneficiary to a co-owner.
  • An owner wants to remove a living beneficiary and have the bond reissued either in the owner's name alone or in the owner's name with another person as a co-owner or beneficiary.
  • A surviving owner, co-owner, or beneficiary wants to remove the name of a deceased person and have the bond reissued in the survivor's name alone or in the survivor's name with another person as a co-owner or beneficiary.
  • To change the name of an owner, co-owner, or beneficiary because of marriage, divorce, annulment, or court order. See Name Changes for more information.
  • To correct a substantive error in the registration, see Incorrect I Bond Registration.

Use Form PD F 1455 to:

  • Reflect in the registration the court's appointment of a guardian, conservator, or similar representative for the estate of a living owner or co-owner.
  • Reflect in the registration the court's appointment of a legal representative for the estate of the last deceased registrant.

Use Form PD F 1851 when:

  • The owner or both co-owners want the bond(s) reissued in the name of a trustee of a personal trust estate.
For more information, visit Replacing or Reissuing I Savings Bonds

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Page last modified 1/16/2012