Series I Bonds Investments Pays More Than 9.5% Interest
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This investment pays more than 9.5% interest thanks to inflation

by | Aug 26, 2022 | Financial Services, Palma Financial Services, Pro Tips, Tax Planning, Tax Strategy

Series I bonds

You can buy Series I bonds that pay 9.62% interest through October 2022. You receive that rate for 6 months from the time of purchase.

PROs:

  1. Safety – A government bond does not have default risk, so there is no worry about getting the principal and interest the bond pays. A risk-free 9.62% is almost unheard of in the investment world. Also, there is no price fluctuation.
  2. Interest Rate – At a current rate of 9.62% annually of 4.81% semi-annually, this is much more lucrative than a US Govt Bond, Corporate Bond, CD, or savings account.
  3. Family – Each person can buy I bonds for up to $10,000 in a calendar year. For 2022, a married couple could each buy $10,000, thus investing $20,000 as a family. Then, in January 2022, they could buy $20,000 more. Also, you can purchase I bonds for each child, and if you have a trust, the trust can buy them.
  4. Gifting – An individual can buy them as a gift for other people. Remember, each person has a cap of $10,000 to purchase for themselves or gift to others. Also, the gift can work as another college savings vehicle.

Cons:

  1. Amount – Each individual can only purchase up to $10,000 in a calendar year. If the current inflation and interest rate remain the same until next May, a person will earn $962 on the $10,000 investment. This amount might not seem worth the hassle.
  2. Maturity – An investor must hold the bonds for 12 months, and if they sell the bonds before five years, they lose three months of interest. If a person sells the bonds under 12 months, they receive no interest, much like a CD.
  3. Purchasing – There are only two ways to purchase bonds. The first is setting up an online account with www.treasurydirect.gov. Then, an individual can buy up to $10,000 in I bonds. The second is to use a citizen’s Federal Income Tax refund and purchase up to $5,000. Technically, a person could buy up to $15,000 in I bonds in a calendar year.
  4. Liquidity – Tying up $10,000 from savings could be a problem using emergency funds. If so, this is probably not a good idea.

If you want to discuss the tax benefits of I bonds,
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