Personal Finance

Series I Savings Bonds Earn 9.62%…But Not For Long

Savings Bonds Earning 7.12%

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Looking to earn a bit more on your cash but not ready to invest it? Or have cash set aside for a specific financial goal or purpose in the next few years and wish you could be earning more than 0.50% in a savings account at the bank? There may be a good alternative out there for you. Series I Savings Bonds.

Series I Savings Bonds – What’s the Scoop?

It was announced by the Treasury on May 1, 2022 that the new composite interest rate on Series I Savings Bonds would be 9.62% over the next 6 months – May 1 through October 31. It will then be reevaluated and reset come November 1, 2022.

Our time of seeing a close to 10% guaranteed/risk-free rate of return on these bonds may be coming to an end on November 1st. They are making predictions that the new rate may be approximately 6.5%. Still a great rate, but nothing like 9.62%.

So if you have been wondering if the Series I Savings Bonds makes sense for you – read on.

If you’ve been kicking the can and telling yourself you want to invest in the Series I Bonds but you just haven’t gotten around to it yet – I would strongly encourage you take action prior to November 1st, to get the benefit of this strong risk-free rate of return locked in for the next 6 months.

NOTE: Treasury Direct advises to complete the purchase of this bond in TreasuryDirect by October 28, 2022 to ensure issuance by October 31, 2022.


Here are the Facts I Want You to Know About Series I Savings Bonds

How much can I invest?

You are able to purchase…

  • Up to $10,000 in electronic I Savings Bonds per person, per year
  • Up to $5,000 in paper I Savings Bonds per person, per year

In addition, you are able to use your tax refund as a means to purchase up to $5,000 of a Series I Savings Bond in paper. So you could effectively invest $10,000 in electronic form, and an additional $5,000 in paper form when you file your tax return using Form 8888 to allocate your refund to purchase the bonds.


How long do I need to hold the bond for?

Series I Savings Bonds earn interest for 30 years unless they are cashed out and redeemed first.

  • You are required to hold the savings bond for a minimum of 12 months.
  • If you redeem the bond within the first 5 years, at redemption, you will forfeit the last 3 months of interest as a “penalty”. So, for example, if you redeem a savings bond after 18 months, you will receive 15 months’ worth of interest.
  • If you redeem the bond after 5 years, there are no penalties or forfeiture of interest.


What is the risk?

These savings bonds are backed by the US Government and are not subject to market risk. Meaning that, according to the Treasury, it is promised that you receive your principal and interest earned at the time you redeem your bond. You may redeem the bond at your discretion, so long as it is after 12 months.

The way I see it, is that the only risk you take on is the risk that inflation decreases and the interest you earn will decrease over time as a result. We are experiencing this now ever so slightly, but the rate on the Series I Savings Bonds continue to exceed the interest rates promised for other cash alternative options.

How am I taxed?

You will not be required to report the interest earned on the Series I Savings Bonds until you redeem them.

The interest earned on these bonds are taxed at the Federal level – but state and local income tax FREE.

You may be able to exclude federal income tax on the interest earned if used to pay for qualified higher education expenses. Refer to IRS Form 8815 to learn more about this exclusion.

How Do the Savings Bonds Work?

There are two components to the Series I Savings Bonds that impact the stated composite interest rate:

  1. Fixed rate – which is fixed for the life of the bond and currently at a whopping 0%.
  2. Inflation rate – which is variable and will reset every 6 months over the course of the life of the bond. Right now, this rate is 9.62%.

So together, the composite rate for Series I Savings Bonds issued in October 2022 is 9.62% and will be until October 31, 2022.

Interest is earned on a monthly basis and is compounded semi-annually. Meaning that every 6 months, the interest your bond earned over the past 6 months, will then be added to the principal value of the bond.

When you redeem the bonds, the principal and interest earned will be paid directly to you.

Why I Think These Savings Bonds are an Attractive Option Right Now

If you purchase this bond on October 28, 2022 at 9.62%, you will lock in this rate for the next 6 months. After that 6 month period, you will then receive the new lower rate that will be announced on November 1, 2022.

This is easily the largest risk-free rate of return offered to investors right now and although it won’t cash flow millions – it is a fantastic option to hold cash that isn’t need in the next 12 months and that you don’t want to invest at the moment.

From October 28, 2022 to October 28, 2023 you have $10,000 of cash in a…

  • Savings account earning 0.50% – You will earn $50
  • High yield savings account earning 2.50% – You will earn $250
  • Series I Savings Bond held for 1 year earning 9.62% between October 28, 2022 – April 28, 2023 and (estimated) 6.50% between April 28, 2023 – October 28, 2023 – You may earn $651.

Look at The Numbers In an Example

  1. You purchase $10,000 worth of Series I Savings Bonds on October 28, 2022 at a current rate of 9.62%. You have 6 months’ worth of earning that stated 9.62% annual rate (or 4.81% over 6 months) before the rate for newly issued bonds hypothetically goes to 6.5% on November 1, 2022.


  2. Over the course of October – April, you will have earned roughly $481 off of your $10,000 purchase.


  3. Interest is compounded semi-annually and thus your interest previously earned over the last 6 months will now be added to your principal. Your principal went from $10,000 to $10,481.

  4. Starting April 28, the bond will now reflect the new stated rate of 6.5% annual interest rate (or 3.25% over 6 months).

  5. Between April 28 – October 28, you will have earned roughly $341.


  6. You have now held the bond for 12 months and you want to redeem it on October 29, 2023. You will have to forfeit the last 3 months of interest. You will receive roughly $651 from your original $10,000 investment. That’s roughly 6.51% over the course of the year.

With the current interest “offerings” from banks, these inflation protected savings bonds are a wonderful opportunity to earn a bit more for your cash as a short term option.

Who Should Consider Looking Into These Bonds

For anyone who has cash that they are saving for a specific purpose over the next few years, or those of you who are not interested in investing more at this time, or are simply looking to earn more interest but not take on a lot of risk…These savings bonds are a great option.

Again, the maximum purchase is $10,000 for the electronic savings bonds per person, per year. You could purchase $10,000 in 2022, $10,000 on January 1, 2023, and $5,000 with your income tax refund in the spring and successfully set aside $25,000 of savings to earn a bit more interest than in your savings account.

If you purchase these savings bonds, it will be important to monitor the rates going forward.

You will want to compare your interest rate offerings at the bank, CDs, high yield savings accounts and the composite rate for your savings bonds as it will change every 6 months.

But again, as a short term option over the next 12 months at a minimum – it seems like no-brainer to me!

How Do You Buy Them?

By going to the Treasury Direct website and setting up an account to purchase the Series I Savings Bonds.

Or filing Form 8888 with your tax return to buy up to $5,000 of paper I Savings Bonds using your refund.



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