I-Bonds: Highest Interest Savings Bonds
I-Bonds (Series I Savings Bonds) are among the highest interest savings bonds available, backed by the U.S. government. They protect your money from inflation and offer tax advantages that other savings options don't.
How I-Bonds Work
The Composite Rate Formula
The rate you earn combines a fixed rate (set when you buy) and an inflation rate (adjusts every 6 months based on CPI-U):
Why the Fixed Rate Matters
The fixed rate is locked for the life of your bond (30 years). When fixed rates are high (like the current 0.90%), it's a good time to buy because you'll always earn at least that rate on top of inflation adjustments.
Purchase Rules
Annual Limits
- •$10,000 per person per calendar year (electronic)
- •Additional $5,000 in paper bonds with tax refund
- •Trusts and businesses can also purchase separately
How to Buy
- 1.Create account at TreasuryDirect.gov
- 2.Link your bank account
- 3.Purchase any amount from $25 to $10,000
I-Bonds vs EE Bonds: Which Has Higher Interest?
The U.S. Treasury offers two types of savings bonds: I-Bonds and EE Bonds. For most savers, I-Bonds offer significantly higher interest rates.
I-Bonds (Recommended)
- • Current rate: 4.03%
- • Rate adjusts with inflation every 6 months
- • Never lose value (rate can't go below 0%)
- • Best for: protecting purchasing power
EE Bonds
- • Current rate: 2.60% fixed
- • Guaranteed to double in 20 years (3.5% effective)
- • Rate stays the same for 20 years
- • Best for: 20-year education savings goals
Bottom line: I-Bonds typically offer higher interest rates than EE Bonds, especially during periods of elevated inflation. EE Bonds only make sense if you plan to hold for exactly 20 years to get the guaranteed doubling.
Redemption Rules
Holding Period
- Minimum: 12 months
- Early penalty: 3 months interest if redeemed before 5 years
- Maximum: 30 years (stop earning interest after)
Tax Treatment
- ✓State and local tax exempt
- ✓Federal tax deferred until redemption
- ✓Tax-free if used for qualified education