Looking for higher interest rates? It may be time to consider iBonds.

I Bonds - Pros and Cons

If the low interest rate environment hasn’t made interest bearing accounts challenging, inflation doesn’t help. Increasing prices can outstrip the value of fixed interest rates. Fortunately, there’s an option: I bond.

I bonds, issued and backed by the US Government, are bonds that carry two interest rates: one for the life of the bond and an extra interest rated tied to current inflation. This second interest changes every six months in May and November based on the inflation rate that exists at that time. I Bonds purchased now have a 0% base rate but a 9.62% inflation rate. The bonds cannot be cashed in for one year and if redeemed within five years, the last three months of interest is lost. They can be held for up to thirty years.

I Bonds are purchased directly through Treasury Direct.  No more than $10,000 per calendar year can be purchased by an individual.

However, on top of that limit, taxpayers can purchase an additional $5,000 of I bonds each year by using their tax refund. The purchase has to be ordered as part of your tax return. This allows up to $15,000 per year, per person, that can be purchased.