What You Should Know About Savings Bonds and Inflation

There are a few details to consider when it comes to I bonds.

First, there is a limit to how much you can invest. You can purchase up to $ 10,000 per year per person in digital I-bonds through Treasury Direct, a website of the Bureau of the Fiscal Service, part of the Treasury Department. (Savings bonds can no longer be bought in bank branches.)

You can buy an additional $ 5,000 in paper I bonds each year using your income tax refund. (Buying with a tax refund is the only way to buy traditional, non-electronic savings bonds).

A couple could then buy up to $ 30,000 for themselves in I-bonds annually. You could also buy more to give to someone as a present.

Another disadvantage: you have to hold a bond for 12 months. The government won’t redeem it sooner. So be careful before investing your entire emergency fund in I-bonds, said Mr. Mardock – you can’t turn them into cash for a year.

“The catch is that it’s not as liquid as a savings account,” said Tumin.

And note that if you cash out, you must pay back the last three months of interest before you hold a bond for five years. Given the bonds currently pay a higher interest rate than other savings options, you will likely stay ahead of the curve when it comes to paying the fine, too, Tumin said.

Here are some questions and answers about Series I savings bonds:

Yes. The minimum purchase is $ 25 for electronic bonds and $ 50 for papers.

In order to purchase the bonds (unless you are using a tax refund) you will need to create a Treasury Direct account and link it to your bank account. You can buy any amount on the dime digital bonds as long as they are over $ 25.

Paper bonds bought at tax time are valued at $ 50, $ 100, $ 200, $ 500, and $ 1,000.

Savings bonds aren’t sold through brokers, which is one reason some people don’t know about them. There is no commission.

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