Legislation introduced Tuesday by Sens. Deb Fischer, R-Neb., and Mark Warner, D-Va., the Savings Security Act of 2022, would raise the limit to $30,000 in I Bond purchases annually when the average six-month annual Consumer Price Index for all Urban Consumers exceeds 3.5%.
It will also be interesting to see whether (and to what extent) the Treasury will raise the fixed rate component of the composite I-Bond rate effective November 1, bearing in mind that (1) the fixed rate has tended to follow the Fed rate, which has been near zero for a long time but is now much higher; (2) current I-Bonds give no real return on top of inflation and what inflation protection does exist, although currently very high, is only partial, because that inflation protection is in most cases eventually subject to federal income tax; and (3) new issues of 5 year Treasuries are currently yielding more than 4.00%, though without inflation protection. To be sure, no one is sneezing at the current I-Bond rate, but if inflation eventually settles to much lower levels while CD rates are higher, savers may head for the exits from I-Bonds in even larger droves, at a time when the Treasury may prefer to maintain stable I-Bond levels. Will it increase the fixed rate component only in that eventuality?
Please keep us notified if the amount you can actually invest changes any time soon.
