Home > About I Bonds
What are I Bonds?
I bonds are a type of savings bond issued by the US Treasury. I bonds are designed
to guarantee a real rate of return. To do this, I bonds adjust their rate every
6 months to track changes in the level of inflation as measured by the CPI-U. Even
in periods of deflation, I bonds protect your investment by never losing value.
Since an I bond cannot lose value and they are backed by the US government, they
are frequently chosen by investors over corporate or municipal bonds, which could
default or lose value. With I bonds, you are able to protect your investment against
inflation with the security of savings bonds.
I Bond Terms
The US Treasury considers I Bonds to be a long term investment. As such, there are
several limitations on I Bonds that must be considered when analyzing your financial
goals. I Bonds have a one year minimum hold time in which the bond can not be redeemed.
Additionally, bonds are subject to a 3 month interest penalty if the bond is redeemed
within 5 years of the issue date. Similar to other US Treasury Bonds, I Bonds continue
to earn interest for 30 years. After that time, the matured bond is worth the face
value plus the interest collected over that time.
I Bond Risk
Unlike stocks, corporate bonds, or other equities, I Bonds are low risk investments.
The inflation component of the I Bond’s rate protects the earning power of the bond
against rises in inflation over time. Even in the event of deflation, I Bonds are
guaranteed to not lose value. Because I Bonds are backed by the federal government,
risks associated with the issuer defaulting are extremely slim (if the government
defaults, you have many more problems to worry about than your I Bonds).
Compared to Other Products
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. EE Bonds are also not protected against inflation, meaning the
inflation rate could be higher than the rate of the bond. Unlike I Bonds, EE Bonds
are purchased at half the face 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
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I bonds
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EE bonds
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TIPS
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Maximum Purchase Limit per year
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$5,000 electronic and $5,000 paper
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$5,000 electronic and $5,000 paper
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None
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Minimum purchase:
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$50 for a $50 I Bond when purchasing paper bond certificates .
$25 for a $25 I bond when purchased electronically.
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$25 for a $50 EE Bond when purchasing paper bond certificates.
$25 for a $25 EE bond when purchased electronically.
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$100
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Denominations:
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Paper bonds: $50, $75, $100, $200, $500, $1,000, $5,000.
Electronic bonds: purchase to the penny for $25 or more.
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Paper bonds: $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
Electronic bonds: purchase to the penny for $25 or more.
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Multiples of $100 electronically only.
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Earnings
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A fixed rate of return and a variable semiannual inflation rate (based on
CPI-U for March and September) are combined.
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Series EE Bonds issue dated May 2005 and after will earn a fixed rate of interest.
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Price and interest determined at auction.
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Minimum term of ownership:
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1 year
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1 year
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No minimum. TIPS can be held until maturity or sold before maturity.
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Interest-earning period:
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30 years
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30 years
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TIPS are issued in terms of 5, 10, and 20 years.
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Early redemption penalties:
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3-month interest penalty if redeemed during the first 5 years.
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3-month interest penalty if redeemed during the first 5 years .
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None
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Type of Investment:
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Non-marketable - cannot be bought or sold in secondary securities market.
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Non-marketable - cannot be bought or sold in secondary securities market.
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Marketable--can be bought and sold in the secondary securities market
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Inflation Indexing:
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Semiannual inflation rate (based on CPI-U changes) announced in May and November.
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N / A
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Inflation adjustments measured by CPI-U published monthly
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