About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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What Your Old Series I Savings Bonds Will Be Earning


What Your Old Series I Savings Bonds Will Be Earning

Yesterday I described how new I Bonds will be good deals for small short-term investments. This is compared to short-term CDs. Since we don't know future inflation rates, we can't really compare I Bonds to long-term CDs. With a zero fixed rate, it's hard to view new I Bonds to be good long-term investments. However, if you purchased I Bonds several years ago and you still have them, you are likely benefiting from high I Bond fixed rates. That makes the I Bonds much more attractive as long-term investments.

Thanks to the new I Bond inflation rate (4.60%), I Bonds will have six months of some nice yields. This is especially true for some old I Bonds like those issued in 2000 when the fixed rate was 3.60%. Those I Bonds will have six months of a composite rate of 8.28%. This Savings Bond Advisor post has a listing of the new composite rates for all I Bonds.

Keep in mind that the six months of this high composite rate will take effect based on the issue date of your I Bond. If you purchased the I Bond in May or November, this six month period has begun. If you purchased it in June or December, the six month period will begin in June. Here's a list of all the possible 6-month periods:

I Bond Purchase 6 Month-Period of ~(Fixed Rate + 4.60%)
May or November May 2011 through October 2011
June or December June 2011 through November 2011
July or January July 2011 through December 2011
August or February August 2011 through January 2012
September or March September 2011 through February 2012
October or April October 2011 through March 2012

Note, the new composite rate is a little more than the sum of the fixed rate and the inflation rate. The actual formula is a little more complex. From the Treasury Direct's website, the formula is:

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]

The third term (fixed rate x semiannual inflation rate) adds a small amount to the composite rate. For the fixed rate of 3.60% and the inflation rate of 4.60% (2.30% semiannual), this component adds 0.08%. So the composite rate is 8.28% rather than 8.20%.

I Bond Features

For more I Bond details, please refer to the bottom of my last Series I Savings Bond review.

Anonymous   |     |   Comment #1
This is good news.  I bought a large number of Savings Bonds in the 1990 and early 2000s, so the higher inflation component adds even more to my bonds which still have around 20 years to go before full maturity.
Anonymous   |     |   Comment #2
Bully, bully for you !!
Anonymous   |     |   Comment #3
Actually, come to think about it, it's more than just Bully, bully, it's more like "what you talkin' 'bout Willis"?  Just another internet genius I guess, huh?  lol
melman   |     |   Comment #4
On the I-bonds I bought during the fall of 2001 with a 3% fixed rate, the average rate has been about 5.6%.  Not bad for something I bought simply as a way to accumuluate frequent-flier miles, back in the good old days when you could buy them with a credit card and you could buy up to $30K annually.
Anonymous   |     |   Comment #5
I am actually surprised that the Federal Reserve or the Treasury Department didn't do something to negate this higher return for the I bonds.  They have so far done everything possible to prevent giving the public anything decent in terms of interest rates for deposits.
Len   |     |   Comment #6
I also bought $30K worth with a credit card in 2001 to get a 3.00% real yield.  For the next six months those will earn 7.67% composite yield.  I wish I had bought much more.  Since then the real yields have dropped like a rock.  As to what they are doing to block the public from this, they dropped the purchase limit to $5K electronic plus $5K paper per year per SSN.  At least so far there are no purchase limits on TIPs, although I'm guessing soon they will stop issuing new TIPs at all.