Series I Savings Bonds Rates – May 2011

Series I Savings Bonds Rates

This is just a quick note to say that the March inflation numbers are out, so we can now calculate the new Series I Savings Bond rates that will go into effect in May.

As I’ve noted in the past, the Series I Savings Bond rate is composed of a fixed and a variable portion. Based on recent inflation data, it looks like the variable portion of the rate will be roughly 4.60%. The fixed rate currently stands at 0%, and it seems unlikely that it will be rising in the current interest rate climate.

If you buy before May, you’ll get the current annual rate of 0.74% for six months, followed by six months at an annual rate of 4.60% (including the current fixed rate of 0%). Personally, I’ll wait and see what the new fixed rate brings. Assuming that it’s still 0%, we may wait until November (when rates change again) to buy more.

While it’s possible to buy and break Series I Savings Bonds after a year for a solid 2.5% CD-like yield, there’s an annual purchase limit on I Bonds, and we’re planning on buying and holding these for the foreseeable future.

6 Responses to “Series I Savings Bonds Rates – May 2011”

  1. Ginger: The variable rate is pegged to inflation, whereas they can set the fixed rate themselves. The bad news is that the variable rate can move down as quickly as it moves up, and it only guarantees (more or less) that you will track inflation. Without a positive fixed rate, you will actually match inflation on a pre-tax basis, and trail inflation after taxes are taken out (unless you use them for education in which case you can avoid taxes).

  2. Anonymous

    @RC – You cannot buy I-Bonds inside an IRA. There is little reason to do so because interest in I-Bonds is not taxed until you redeem them.

    You can own TIPS inside an IRA.

  3. Anonymous

    Can you buy series I savings bonds in a Roth IRA? My wife is very conservative with her Roth, and this sounds like a good move for her…

  4. Anonymous

    I-Bonds are a great way to save with almost zero risk. The $5,000 per year purchase limit is its’ biggest negative. Everyone should have a diversified equity portfolio, but I-Bonds are a perfect diversification strategy.

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