New Savings Bonds Rates - I Bond Fixed Rate Rises to 0.30%

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The Treasury released the new I Bond and EE Bond rates today. New rates are announced on every first business day of May and November. The I Bond fixed rate increased 20 bps to 0.30%. As I had calculated three weeks ago, the I Bond inflation rate is 2.22%. This results in a composite I Bond rate of 2.52%. This is the highest the fixed rate has been since 2010.

The Treasury kept the EE Bond rate the same at 0.10%. With this low rate, in my opinion, the only reason to purchase an EE Bond is if you’re planning to hold it for 20 years. In that case, the EE Bond is guaranteed to double in value. This is equivalent to an annual return of about 3.5%.

Summary:

I Bond Rates:
Composite Rate: 2.52%
Fixed Rate: 0.30%
Inflation Rate: 2.22%

EE Bond Rate: 0.10%

Rates effective May 1, 2018 through October 31, 2018

The increase in the I Bond fixed rate is small, but the new 0.30% rate is the highest it has been since 2010. In November 2009, the Treasury announced a 0.30% fixed rate, and on May 2010, that rate fell to 0.20%. From May 2010 until today, the fixed rate had never been above 0.20%. Most of that time, the fixed rate was zero. Hopefully, this is a sign that we’ll see higher I Bond fixed rates in the years ahead. Before 2008, the fixed rate had always been 1.00% or higher.

Current I Bond Holders

If you have old I Bonds, you'll have six months of rates that range from 2.22% (for I Bonds with a fixed rate of 0%) to 5.86% (for I Bonds with a 3.60% fixed rate). Back in the good old days, the I Bond fixed rates used to be above 3.00%. The highest I Bond fixed rate was 3.60% during the period from May 2000 to October 2000. If you have any of those I Bonds, you'll want to keep them as long as you can. They will mature after 30 years from the issue date. You can see the entire history of the fixed rates in this TreasuryDirect page.

Remember that the six months with the 2.22% inflation rate may not begin this month. It depends on when you purchased the I Bond. An I Bond's new inflation rate takes effect every six months after its issue date. So if you purchased an I Bond on October 2012, the 2.22% inflation rate won't take effect on that I Bond until October 2018.

Series I Savings Bond Features

Below is a summary of the I Bond features. More information is available at this Treasury Direct I Bond page:

  • Can't be redeemed within 12 months of issue date
  • Lose 3 months interest if redeemed within 5 years
  • Interest is composed of fixed and inflation-based rate
  • Fixed rate remains for life of bond
  • Inflation-based rate changes every 6 months after issue date
  • New rates announced every six months on November and May 1st
  • Federal tax can be deferred on interest until bond is redeemed
  • Interest is exempt from state and local tax
  • Some or all interest is tax exempt when used for educational expenses
  • Maximum purchases per year and per social security number is $10,000 in TreasuryDirect and $5,000 in paper bonds purchased with IRS tax refunds (This excludes trust/business purchases) - total was $60,000 before 2008 (Treasury's press release).

For more details about the purchase limit, please refer to the Treasury's press release on the new annual purchase limit and the Treasury Direct's purchase limit FAQs.


Comments
Rasputin
Rasputin   |     |   Comment #1
10,000 limit makes this meaningless....why bother??
Sperry8
Sperry8   |     |   Comment #2
Every little bit helps. And over the years one can get a decent amount in there.
Rasputin
Rasputin   |     |   Comment #4
No. So many better places to put your money that will pay more over the years. Plus these really annoy me. They take out 3 months of interest because that's the penalty if you keep it less than five years......they actually apply a penalty before you even do anything that would trigger a penalty...... only the government acts this way! Yes I know it doesn't matter if you keep it five years but still.....I like seeing my earnings immediately....makes me feel better. As I said this annoys me. No.
anonymous
anonymous   |     |   Comment #12
How is the 3 month penalty different from a CD? Oh wait, it's lower than most CD penalties, that's the difference. Also, if you time it right, it's a 1 month penalty. I'm also strongly guessing (someone correct me if I'm wrong) that you don't have to report the I-bond penalty interest on your tax return. So, there's a tax advantage to not having the money earned "yet" vs. paying taxes on a EWP.
anonymous
anonymous   |     |   Comment #13
Just for avoid any confusion, there is a deduction available for EWPs on CDs. But I think with I-bonds, the penalty amount is probably not considered earned until 5 years. Practically it makes very little difference.
CuriousDave
CuriousDave   |     |   Comment #23
The I bond "penalty interest" for early redemption is not income but a reduction of income, so that only the net amount of interest is taxable in the year of the early redemption. This is similar to the tax treatment of the penalty for early withdrawal of CDs, except that that penalty is reported separately as an "above the line" adjustment (reduction) in figuring Adjusted Gross Income. In the end, the effect is the same.
Sperry8
Sperry8   |     |   Comment #15
@Rasputin - I'd like to know where you can park your $10k for better than 2.52% tax and risk free.
CuriousDave
CuriousDave   |     |   Comment #24
It's tax free on the state and local tax return but not tax free on IRS Form 1040. It's tax deferred, meaning it's reportable only in the year of redemption. However, one can elect instead to report the income in each year as earned, and the problem with that is that once you make the election for a bond, income for that bond must then be reported annually until redemption.
Really
Really   |     |   Comment #35
Thank you.. You hit the nail on the head !!! My son has 2 - $5000 bonds that were purchased 4/2011 and has almost $1800 in interest.. So please tell me where I can place 10,000
Collect about $1800 in interest @ 2.52% and no risk and can keep it there 22 more year's and I'll sell them today..
Not for me
Not for me   |     |   Comment #5
#1, you are correct, $10k was good money in the 50's and 60's, today it is not. My family almost spends that much money monthly on mortgages, 3 different car payments, all kinds of insurances, utilities, maintenance and food, not counting the trips and vacations. Unless the i-savings-bonds limits are raised substantially, I will not consider them, no matter what interest rats they are quoted at.
anonymous
anonymous   |     |   Comment #11
... and let me guess, you also wouldn't consider IRAs because of the $5500 yearly contribution limit? Maybe not even a 401(k) because of the still kinda low-ish $18,500 contribution limit?
Wrong guesses
Wrong guesses   |     |   Comment #21
#11, wrong guess, but that is expected from a person who guesses without knowing any facts. I have over $400K in 401(k) and IRAs are maxed out, but you forgot my Keogh plan which is a tax-deferred pension plan and there is a substantial amount in it.
If your intend was to "mock", you missed the points on all guesses, better luck next time.
anonymous
anonymous   |     |   Comment #22
No mocking intended, just sharing information. Please understand that my point was that I-bonds are just another tax-deferred savings vehicle with yearly investment limits, like all the other wonderful plan types you mentioned.

I'll hazard another guess, that you probably didn't accumulate the $400k in these plans all in the same plan year? If you add savings bonds into the mix, in 10 years you could have $100k in face value (per person), earning over $2k per year in tax-deferred interest.

I have not purchased any I-bonds myself in several years now, due to the low fixed rate compared to my old I-bonds with 1.6% fixed rate. But fixed rates look to be finally heading back up. Not sure if I consider the current 0.3% fixed rate a great long term investment, but we don't know yet what a "good" real interest rate will be over the coming years. My guess is that 5-year TIPS real yield will top out between 1-1.5% this interest cycle, so a good I-bond fixed rate to hope for might be around 1%. But I might be guessing wrong, of course - as you pointed out.
birdman
birdman   |     |   Comment #36
seems like you have everything anyways. you should just live your life and b happy
Cracker
Cracker   |     |   Comment #16
It's not so much the limit that bothers me, but the fact that you can't get actual paper bonds any longer (except through the back door way of using your income tax refund).
bob
bob   |     |   Comment #3
They have eliminated their Savings Bond Wizard app, which was a great way to update your inventory and re-price it each month.
CuriousDave
CuriousDave   |     |   Comment #25
Try this site: https://www.treasurydirect.gov/BC/SBCPrice
DOA
DOA   |     |   Comment #34
I agree #3. I liked that Saving Bond Wizard program also.

Here is a tip that might be helpful if you happen to export your Bond inventory from your savings bond wizard to the new online savings bond calculator and have some difficulty with your inventory transferring over:

Clear your browser history and see if that solves your problem. Also take note that you can only save your inventory using the new online savings bond calculator by using internet explorer along with some other browsers, but not google chrome.
Luvcd
Luvcd   |     |   Comment #6
Very nice rate for parking up to $25K each year with no state income taxes...easy in/out, too!
QED
QED   |     |   Comment #8
Yes, you're right. Not to mention that until you redeem your bonds no interest whatsoever is reportable for tax purposes! I bonds are a great help to counteract the IRMAA, much superior to deposit certificates where, each year, interest must be reported as it is earned even if your CD remains open.
Att
Att   |     |   Comment #14
Rate can adjust down too on I bonds. But looks like inflation will be going up. I have a nice stash of I bonds that have a fixed rate of 3% that were purchased with rewards credit cards!

I opened a 2 year brokered CD with Vanguard that pays 2.75%. Took me a total of 15 seconds to open!
CuriousDave
CuriousDave   |     |   Comment #27
In the current environment of increasing interest rates, if the Treasury wants to continue selling I Bonds they will need to follow - or lead - the fixed income marketplace by raising the fixed rate component, regardless of inflation.
me1004
me1004   |     |   Comment #7
I've never really understood thee things, andvairable rate always worries me.

But that aside, is Ken saying that the only way you can buy these is with a tax rebate from the IRS, or is that just the paper bonds?! So, if you owe taxes when you file, instead of overpaid and are owed a refund, you can't buy these bonds?! Why, who cares if the money came from a tax refund?! That can REALLY limit how much you buy, you might not be able to buy $10,000 worth in a year if you didn't have a tax refund that large.
Luvcd
Luvcd   |     |   Comment #9
Amazing how facts can be distorted with opinion...suggest, if interested, read up! I stand by comment #6
scottj
scottj   |     |   Comment #10
You an buy up to $10k per person per year electronically. Then you can buy up to $5k in paper with tax refunds. Sure it's not much and I wish I had started earlier but now up to over $80k. Main reason is to show less yearly income
111
111   |     |   Comment #17
I've wondered... is the "up to $5K" that can be purchased via Federal tax refunds a hard-and-fast rule, even if one has a tax refund greater than that in a particular year? And, must this part be "in paper" - it can't be combined with the basic $10K that can be purchased electronically?

Since my state now seems bound and determined to join the Californias and the New Yorks of the world in terms of tax increases, I guess I'll have to investigate these kinds of things. Thanks in advance.
anonymous
anonymous   |     |   Comment #18
111 (comment #17), here is a link to the IRS's FAQs:

https://www.irs.gov/refunds/using-your-income-tax-refund-to-save-by-buying-us-savings-bonds

If you prefer your bonds on TreasuryDirect, they have a program called SmartExchange to convert paper bonds to electronic form. But there's really not much of an advantage to that, in my opinion. Lost or stolen paper bonds can be replaced (it would be a good idea to keep a log of the serial numbers, but I think the Treasury can identify your holdings by SSN).
CuriousDave
CuriousDave   |     |   Comment #26
....and notice how those same states are now complaining about the limitations on deductibility of their taxes on individual federal returns!
mix
mix   |     |   Comment #19
Why all the hate for I-bonds? And I have now seen it mentioned on multiple articles people claiming they have better places to put their $10k each year. But where? Not one concrete example...
DOA
DOA   |     |   Comment #20
#19, I hate those IBonds that pay a 0% fixed rate, but for those the IBonds offered back in 2001 that paid a 3.4% fixed rate, I love those. Currently those bonds are paying a combined rate of 5.92%.
Nothing
Nothing   |     |   Comment #28
And that 5.92 is why the fixed is now much lower...”they” learned by past mistakes! I cash them in if the then current rate is not competitive...That is the downside to Treasury...a draining rather than holding...which Treasury seemingly has opted for its current model/business plan.
DCGuy
DCGuy   |     |   Comment #29
I am sure the US Treasury is glad that all of those 14%+ 30 year T-Bonds issued from the mid-1980s have finally all matured and off their books. Holders who sold those securities on the secondary market got a big premium. Converting those to the much lower near zero Treasury securities will lessen the interest payouts.
IbondAdvocate
IbondAdvocate   |     |   Comment #32
All the bashing of IBonds here seldom mentions the inflation protection they are intended to afford. You don't get that in a CD or any other instrument. Buy it for its unique inflation protection.
James iBond
James iBond   |     |   Comment #30
With the exception of the 5K from a tax deduction, you have to buy iBonds from Treasury Direct.
Treasury Direct disavows any responsibility for any fraud that is the result of using its website.

This is despite the fact that if paper iBonds are lost, destroyed or stolen you will get your money back!
Yup, the government pulled a huge fast one by forcing people to use Treasury Direct starting back in 2012.

If you notify a bank within 2 days of receiving your statement, the most you can be out is a whole $50.
Regulation E imposes that restriction even if the fraud is a result of the customer falling for a phishing website.

Treasury Direct accounts are not protected by Regulation E, if your account gets hacked, you're on your own.
Brokerage accounts are also not protected by Regulation E (you're at the mercy of their individual policies).
Luvcd
Luvcd   |     |   Comment #31
The Treasury cannot excuse itself from its own fraud
Sad Santa
Sad Santa   |     |   Comment #33
What would a hacker do with an ibond?

It can't be sent to anyone else, what is the real risk?
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