Near the end of 2021 when inflation was rising fast, I made the recommendation to use extra cash to buy Series I bonds.
For a few years this was a safe and high-yielding investment. At its peak a lot of people were earning over 10% with virtually no risk. However, as inflation has come back to normal levels, the rate on Series I has followed suit.
Series I bonds pay a composite interest rate made up of two components:
- Fixed Rate
- Inflation Rate
The fixed rate portion of the bond depends on when you buy it but, as its name implies, the rate stays fixed for the entire 30-year period of the bond.
The inflation rate is adjusted every six months, and as its name implies, is based on the rate of inflation.
With the composite rate now being less than you can earn in a high-yielding savings account, it may make sense to redeem your bonds and stick the proceeds elsewhere.
How to Figure My Current Rate
As noted before your current rate will be a combination of the fixed rate and inflation rate. Below is a chart showing what your fixed rate will be based on when you bought your bond.
- May 2020 – Oct 2022 0.00%
- Nov 2022 – Apr 2023 0.40%
- May 2023 – Oct 2023 0.90%
- Nov 2023 – Oct 2024 0.30%
Take your fixed rate and add on the current inflation rate, 1.90%.
For example, if your fixed rate is 0.90%, add 1.90% and you get 2.80%. That will be your annualized rate over the next six months.
Alternative Interest-Bearing Investments
CDs, Treasury bonds, saving accounts, and money market accounts are all comparable investments to Series I bonds.
Similar to Series I, savings and money market accounts pay an interest rate that fluctuates based on the trend of the federal funds rate. However, you can access your cash in a savings or money market account quickly and without penalty. If you’ll need your cash within a year, I would look at keeping it in a savings or money market account.
CDs and Treasury bonds allow you to lock in a certain rate for a certain period of time.
If you’re certain you won’t need you cash for a year or longer than purchasing a CD or Treasury bond and locking in a 4%-5% rate for a few years could be a good option.
How to Redeem your Series I Bond
The Treasury Direct website isn’t the most intuitive. Below is a step-by-step guide on how to log in and navigate to the screen where you can redeem your bond if you choose.
- Go to treasurydirect.gov
- Click Log In
- Click Next
- Put in your account number (the best way to find this is to go to your email and search for Treasury Direct. The oldest email you have from them will probably be the one with your account number. It usually starts with a letter and then nine digits).
- Put in your OTP (they will email this to you)
- Put in your Password (click Forgot Password if you don’t have this)
- On your home page click on where it says SAVINGS BONDS (it should be hyper linked in blue).
- Check the radio button at the bottom of the next page that says Series I Savings Bond
- The next page shows all the bonds you’ve bought, if you only made one purchase there will only be one line item, select that radio button.
- On the next page click ‘Redeem’
- Next page allows you to redeem the full amount or a partial amount, click ‘Continue’
- Double check it’s going to the right bank account and then hit ‘Submit’
If you’re unsure on what to do with your Series I, reach out and we can discuss the best course of action based on your personal financial plan.