Updated I Bond Rates and Investment Considerations for 2024
Note: This article reflects the most recent I Bond rates applicable from May 2024 to November 2024.
The latest I Bond rate has been set at a composite 4.28%, down from the previous period’s 5.27%. While the rate has decreased, it’s still considerably higher than when I initially ventured into I Bonds, as detailed in my I Bond overview. You can secure this 4.28% rate if you buy I Bonds online by the end of October 2024, retaining this rate for a full six-month period post-purchase. However, if you believe there are better investment alternatives, you might want to consider cashing out your I Bonds, especially with rising inflation and decreasing I Bond rates. I’ve made the decision to sell three years’ worth of my I Bonds, and you can read about how to sell I Bonds and the factors to weigh before making that decision.
The Rise in Popularity of I Bonds
In recent years, I Bonds have surged in popularity, offering a secure investment option with guaranteed returns from the U.S. Treasury. While bank interest rates were minimal until late 2022, the landscape has now shifted, though future trends remain uncertain. I Bonds are designed to adjust in line with inflation rates.
Understanding the Current I Bond Rate
I Bonds feature a combination of a fixed rate, which remains constant for the bond’s lifetime, and a variable rate, updated every six months. As of now, the fixed rate is 1.30%, while the variable rate stands at 2.96%, bringing the composite rate to 4.28% for bonds issued between May 1, 2024, and November 1, 2024. The next update will be on November 1, 2024.
Duration of the 2.96% Variable Rate
Once you purchase an I Bond, you lock in the variable rate for six months. For example, if you buy a bond in July 2024, you’ll receive the 2.96% APR rate until January 2025. After that, the rate will adjust according to the November 2024 update for the next six months, in addition to the fixed 1.30% rate. The bond’s variable rate will again change in July 2025 following the rates determined in May 2025.
Annual Purchase Limits for I Bonds
I Bond purchase limits vary based on how you buy them:
- Individuals (Online at TreasuryDirect): Each account holder can purchase up to $10,000 per calendar year in digital I Bonds through the U.S. Department of Treasury’s TreasuryDirect website. All account holders must be at least 18 years old.
- Individuals (Tax Return): You can buy up to $5,000 per Social Security number in paper I Bonds using your tax refund, facilitated through the IRS with IRS Form 8888. Married couples filing jointly can take advantage of this for each filer.
- Living Trust (Online at TreasuryDirect): Living trusts are eligible to purchase up to $10,000 annually per trust.
In essence, one individual can purchase up to $15,000 in I Bonds each year (combining digital and paper bonds), while a couple could buy up to $30,000 annually. Trust purchases add another layer of potential investment.
Early Withdrawal Penalties for I Bonds
If you need quick access to your funds or if future I Bond rates improve and you wish to reinvest, here are the key points on early withdrawal:
- I Bonds mature 30 years from the purchase date.
- You must hold I Bonds for a minimum of one year.
- If you cash out before five years, you forfeit the last three months of interest, including the month of sale and the two prior months.
Evaluating the Investment in I Bonds
I invested in I Bonds when their rates far surpassed those of comparable investments like money market accounts, CDs, and savings deposits. Given the current decline in rates and the improved competitiveness of other investments, I am adopting a wait-and-see approach for further I Bond purchases. Monitor inflation trends and interest rates before making your decision, and always base your investment choices on your personal financial situation.
Final Thoughts
I Bonds remain a solid and secure investment, but whether to continue investing or cash out depends on fluctuating rates and your financial goals. Evaluate the current economic climate, and consider consulting with a financial advisor to navigate your investment strategy effectively.
