Bond rates are the interest paid on a bond and they can be used to help determine the value of your investment. However, when you invest in bonds, there is tax liability associated with it which will increase what you pay for every dollar invested. To see how much money that would be, we calculated an I Bond rate chart using data from May 1st 2017 through April 30th 2018

The “i bond rates prediction 2022” is a forecast that the interest rate for i bonds will increase to 9.62% in May 2022.

I Bonds Rates Will Increase To 9.62% (May 2022 Update)

When the rates on I Bonds change in May, they are predicted to rise, therefore it’s time to pay attention to them once again. This is the finest investment you can make this year, and it is also the safest.

Have you ever heard of an I Bond? You’re not alone, so don’t worry. I Bonds haven’t been popular in 20 years, but here’s why they’re going to be big this year.

Ninja Update: See the bottom of the page for a new projection for I Bond rates beginning in May 2022. TL;DR = Investing in I Bonds today is the safest and most profitable investment you can make in 2022. Don’t stroll; RUN.

Overview of I Bonds

Inflation seems to be everywhere these days. Gas prices are skyrocketing, building expenses are skyrocketing, and Uber trips are becoming prohibitively costly. There’s a lot to be dissatisfied with!

Complaining, on the other hand, will not get you anywhere. Instead, think of I Bonds as a way to gain money when inflation rises.

What exactly are I Bonds?

I Bonds, or Series I Savings Bonds, are inflation-indexed savings bonds issued by the United States. Its purpose is to keep the value of your money safe from inflation.

I Bonds are a one-of-a-kind, very low-risk investment guaranteed by the US Treasury, with a holding duration ranging from 12 to 30 years. Series I Bonds are similar to bank certificates of deposit (CDs) that mature after 12 months.

An I Bond cannot be redeemed inside the first 12 months, and if you pay it out before five years, you will be charged three months’ interest.

It earns a composite rate, with one rate being a fixed interest rate set at the moment you purchase an I Bond and the other being a variable inflation rate updated every six months for inflation. When you add all of the rates together, you obtain the composite rate (which is the total rate you earn interest on).

The variable rate effectively ensures I Bond purchasers that their money will never lose value due to inflation.

I know, it’s not as exciting as flaunting your free bitcoins, but you’ll earn a lot more money with Series I Bonds right now than you would with a regular savings account.

Why didn’t you suggest I Bonds earlier?

I Bonds haven’t been relevant in 20 years or more. For the last two decades, inflation has been so low that there have been better areas to securely put your money for a larger return.

When I Bonds were initially introduced in 1999, they offered a staggering 7% composite rate. I Bond rates have plunged to the ocean’s depths since then, with a fixed interest rate of 0% and a middling inflation rate.

The next inflation adjustment, though, will be in May 2022, and that is what everyone is looking forward to!

I Bond Rates from November 2021 to April 2022

New inflation data was issued by the Bureau of Labor Statistics (BLS.gov), allowing us to forecast what I Bond rates will be in November 2021.

We can only compute the variable inflation rate, but not the fixed interest rate, thus I say forecast. It’s important to remember that I Bonds is a combination of the two rates.

Ninja Note 11/1/21: If you purchase between November 2021 and April 2022, the interest rate is currently guaranteed at 7.12 percent.

New Inflation Rate Variable

In September 2021, the Consumer Price Index for Urban Consumers, or CPI-U, was 274.310, up from 264.877 in March 2021.

274.3/264.9 = 1.0356, representing a 3.56 percent rise semi-annually. So…

Inflation rate for the first half of the year is 3.56 percent. Currently, the fixed interest rate is 0%. (determined separately)

We can calculate the minimal rate an I Bond buyer will get beginning in November 2021 using the method below:

2 x Semiannual inflation rate + Fixed rate = Total rate (Semiannual inflation rate X Fixed rate) 0.000 + 2 x 3.56 + 0.000 + 0.000 + 0.000 + 0.000 + 0.000 + 0.000 + 0.000 + (3.56 x 0) 7.12 percent is the total rate.

I Bond Rates from November 2021 to April 2022

If you purchase I Bonds between November 2021 and April 2022, you will get at least a 7.12% return plus whatever the new fixed interest rate is for the first six months.

The methodology for the fixed rate is unclear, however it is related to the yield on short-term Treasure Inflation-Protected Securities (TIPS). Because short-term TIPS are near zero, the fixed interest rate on I Bonds is anticipated to remain around 0%.

Ninja Note 11/1/21: The fixed interest rate has been reset to 0%, which implies the interest rate on I Bonds will be 7.12 percent if purchased before April 30, 2022.

Your I Bonds rates will change every six months. The fixed rate will always be the same at the moment of purchase, but the variable rate will fluctuate according to inflation.

In May 2000, the fixed rate went as high as 3.60 percent. Those fortunate I Bond holders will now earn an amazing 10.72 percent for the next six months (3.60 percent fixed + 7.12 percent variable) commencing in November.

What happens if I purchase I Bonds before the rate changes?

You’ll be assured a total rate of 3.54 percent for the following six months if you purchase I Bonds before the end of October 2021. (based on the previous six months formula).

For the next six months, your total rate will be at least 7.12 percent after that time period (based on November 2021 rate adjustments).

Consider the most worst-case situation, in which you:

  • On October 31, 2021, purchase the I Bond.
  • On October 1, 2022, sell the I Bond (hold the I Bond for the minimum 12 months and incur a three-month interest penalty)

For an 11-month holding term, you’ll receive a 3.87 percent annualized return.

You may be wondering why 11 months rather than 12 months was chosen. It’s because you acquired the I Bond at the end of October in this situation. You earn the whole month’s interest even if you only held the I Bond for one day that month.

Buying towards the end of the month and earning the whole month’s interest is a close little trick.

Let’s pretend you had that identical bond but decided to sell it on January 1, 2023. For a 14-month holding period, you’d get a 4.57 percent annualized return in this example.

In any case, this is far greater than any money market or CD rate now available.

Is it better to purchase now or wait?

There is no incorrect decision since both the old and new prices are excellent when compared to other comparable options. Find me another savings vehicle that is as secure as a government bond and pays more than 3.87 percent over the course of 11 months.

You can’t do it.

In comparison to a money market account or a CD, I Bonds provide the following advantages:

  • Income tax exemption from the state
  • Higher education redemption is tax-free in the United States.
  • Deferred taxation until the bond is redeemed
  • Protection against inflation

How to Purchase I Bonds

Buying savings bonds used to be as simple as stepping into a bank, but that is no longer the case. You can only acquire bonds in electronic form since the government no longer issues them in paper form (save for tax refunds – see below).

Through an electronic TreasuryDirect account, you may purchase up to $10,000 in I Bonds each calendar year. To do so, go to TreasuryDirect.gov and create an account. A $25 minimum purchase is required.

The $10,000 restriction applies to each individual, not each family. In other words, a couple may invest a total of $20,000 each year in I Bonds. As long as they have a Social Security Number, a family with children may purchase extra $10,000 per kid.

If you obtain a tax refund when you submit your federal income tax return, you may purchase an additional $5,000 in paper I Bonds. If you’re due a refund, tax software like TurboTax will give you this choice. You’ll need to fill out IRS Form 8888 if you’re doing your taxes by hand.

When using a tax refund, the minimum purchase amount is $50 (Paper I Bonds are available in denominations of $50, $100, $200, $500, and $1,000).

Most folks don’t receive a $5,000 tax refund – at least not if they complete their taxes correctly.

In situations like these, when you want to purchase more I Bonds and so get a larger tax refund, one method is to pay more taxes during the year than you really owe.

Rates on I Bonds for the period of May 2022 to October 2022

With inflation figures from March 2022 in hand, it seems that I Bonds will yield a minimum of 9.62 percent beginning in May 2022. (and could be even higher if the fixed interest portion is revised).

I-Bonds-May-2022-Rate-CalculationI-Bonds-May-2022-Rate-Calculation (Image courtesy of TipsWatch)

This implies that I Bonds acquired before the end of April will earn 7.12 percent for the first six months and at least 9.62 percent for the next six, for a total return of 8.37 percent for the year.

THIS IS OBSCENE. We all know that inflation is increasing, and I Bonds are an excellent way to offset the dollar’s declining buying value.

In my view, a rate this high will never be seen again. The present interest rate of 7.12 percent was already a high for I Bonds, which were initially offered in September 1998. The new rate of at least 9.62 percent will be the all-time high starting in May 2022.

Final Thoughts

I acquired $20,000 worth of I Bonds for myself and my significant other towards the end of October 2021. I intended to lock in the previous six-month rate of 3.54 percent and the next six-month rate of 7.12 percent at the moment.

I want to purchase an additional $20,000 by the end of April 2022 in order to lock in the current rate (7.12 percent) and the rate hike projected next month (9.62 percent ). I Bonds are very secure investments, and this combined rate is much too attractive to pass up.

Outside of investing, the majority of my money is spent on pursuing the highest bank bonuses and collecting stablecoin interest (a less volatile cryptocurrency).

Before you look into all the numerous methods to make your money work harder for you, make sure you have an enough emergency fund in a high-yield savings account.

The “i bonds maturity” is a fixed-income investment that allows investors to earn interest for up to 30 years. The current rate of return on i bonds is 9.62%.

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