Singletary: the new I bond rate is still advantageous for savers

Singletary: the new I bond rate is still advantageous for savers

It’s not every day that bonds spark the kind of investor frenzy often displayed on Wall Street or among cryptocurrency enthusiasts.

But that’s where we were a week ago on Friday, when thousands of people crashed a Treasury Department website in the race to beat a midnight deadline.

People scored nearly $1 billion in I bonds on TreasuryDirect that day, locking in 9.62% for six months. And while that jaw-dropping fare is no longer available, the new one is still great.

Beginning Nov. 1, Series I Savings Bonds will yield 6.89% for six months. That’s considerably higher interest than a savings account, which averages just 0.16%, according to Bankrate’s Nov. 1 survey. And while many online financial institutions can do better, their accounts still only pay 2-3%.

To purchase an Electronic I Bond, you must create an account at

On Oct. 28, nearly 100,000 accounts were created and $979 million worth of I bonds were purchased, with the overwhelming majority of buyers getting the 9.62% rate, according to a Treasury Department official.

That’s 14% of the $6.9 billion in savings bonds the department sold in the entire month of October.

Here’s what to know about this little-known government-backed bond.

Why have people flocked to bonds?

Investing is taking risks. The stock market has been everywhere – high, low, very low – so people are looking for a safe place to park their money.

Year-to-date, the S&P 500 is down 19% and the Dow Jones Industrial Average is down 10%, according to Bloomberg. The tech-heavy Nasdaq fell 30%.

After years of pitiful interest on savings and checking accounts, federally backed I bonds are a beacon of financial security.

From November 2021 to the end of October, the Treasury Department sold more than $35 billion in electronic savings bonds.

That’s a staggering amount of money people were transferring from their savings and checking accounts — and in stark contrast to the financial situation of other Americans struggling to cope with high inflation. This shows that there are plenty of Americans out there with cash to spare, especially since you can’t sell an I bond for 12 months.

Generally obscure I bonds have resonated with investors because they address two of their biggest concerns right now, said Christine Benz, director of personal finance and retirement planning for Morningstar and co-host of the podcast. “The Long View”.

“They provide security in a year when stocks and bonds have fallen, and they help preserve purchasing power in an inflationary environment,” Benz said.

How long will bonds pay 6.89%?

The rate is good until April 30, 2023.

If you buy an I bond, the rate applies for the first six months after the date of issue.

Can I still get the higher rate if the website keeps kicking me out?

The Treasury Department had been warning people for weeks that unprecedented interest in I bonds could delay purchases.

Even if you waited until the last minute and couldn’t make your purchase, it’s not your fault. TreasuryDirect is an outdated site that needs an overhaul. The site also crashed in May, when the 9.62% rate was announced.

How many I bonds can I buy?

You can buy an I bond for any amount from $25 to $10,000. You can specify a specific penny amount. So you can buy an I bond for $49.99.

Be careful not to exceed the $10,000 per calendar year limit for I Bonds purchased electronically. If your purchase is rejected, it may take weeks to get your money back.

But if you’re expecting a big tax refund next year, you can use it to buy an additional $5,000 in paper I bonds, bringing the possible I bond total to $15,000 per person. .

To purchase paper savings bonds, you use IRS Form 8888.

Is it still worth buying bonds?

Yes, the current rate still beats other conservative options.

But don’t confuse the safety of I bonds with the need for cash, Benz said.

“Bond investors cannot redeem their bonds in the first 12 months, and if they cash out before five years have passed, they will lose three months of interest,” Benz pointed out. “But I bonds can be a great choice for safe reserves that investors don’t need easy access to.”

Singletary is a personal finance columnist for The Washington Post.

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