All About I-Bonds  - Adviser Investments

All About I-Bonds 

All About I-Bonds 

What are I-Bonds? Well, they won’t cure high inflation or reduce volatility in the stock market, but they have become a popular portfolio component of late. You just have to keep their limitations in mind.

Here’s a quick primer:

Like plain-vanilla Treasury bonds, Series I U.S. Savings Bonds (I-Bonds) are backed by the full faith and guarantee of the U.S. government. Their special sauce is that the income they earn is indexed to inflation.

At the moment, I-Bonds are offering an impressive guaranteed 9.62% interest rate. (Interest rates for I-Bonds are adjusted for inflation semiannually, on May 1 and Nov. 1.)

A bond, backed by the U.S. government, currently paying over 9%—which is more than junk bonds currently? Back up the truck!

But keep a few things in mind. First, I-Bonds are tax advantaged, not tax-exempt (interest is subject to federal, but not state, taxation).

And they come with some strings attached. The biggie: Investments are capped at $10,000 a year per person ($20,000 for married couples) with an additional $5,000 available if you use your tax refund for the purchase (and are willing to hold them in paper, not electronic, form).

Plus, with the inflation component of the bond’s interest reset every six months, the salad days are unlikely to last as your bonds age and inflation is wrestled to the mat.

Two other factors to be aware of:

First, you can’t redeem your bonds in the first 12 months after purchase. And if you sell before the bond is five years old, you’ll lose the last three months of interest.

Second, you can only purchase I-Bonds in electronic form through the government’s web portal, TreasuryDirect. That means these assets can’t be managed as part of your Adviser Investments portfolio.

Despite the limitations, guaranteed returns that can hang close to inflation are nothing to shake a stick at. Let us know if you’d like to learn more. We’d be happy to help you make an investment.

I Bond returns provide guaranteed rates interest which are reset every six months, thus vary period to period. Principal is backed by the full faith and credit of the government of the United States of America. This material is distributed for informational purposes only; and is not financial or investment advice. Speak to your financial adviser before taking specific action. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.  All investments carry risk of loss and there is no guarantee that investment objectives will be achieved. Past performance is not an indication of future returns. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio.

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