I don't know if any of you happen to be sitting on any of these right now, but the U.S. Treasury raised the interest rate on Series I (inflation indexed) Savings Bonds to 6.73% at the beginning of the month.
If you buy any, you would be guaranteed this rate for the next six months that you hold it. With inflation likely to continue to go up, rates could possibly go even higher during the next period (rates are set at the beginning of May and November).
http://www.publicdebt.treas.gov/sav/sbiinvst.htm
Unlike bank savings and CD's, the interest on I Bonds is exempt from state income tax and you can defer your federal income tax until you cash it in, or until the bond matures (30 years from the time that you buy it).
The one catch in buying an I Bond is that your money is locked in for one year. If you cash it in less than 5 years there is a 3 month interest penalty. Not a place I would stick emergency fund money that you might need in a pinch, but if you have a small sum of cash (say $1-3K) that you can do without it for at least a year, this may be a way to go. With Christmas coming up, savings bonds also make terrific gifts for the kids.
Would I put a lot of money into these? No, but it might be a good investment alternative to a bank CD or money market account, or a place to stick some cash if you feeling too squeamish about putting it into the stock market.
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