How to buy a US Series I Savings Bonds (I Bonds) and why you should consider buying one
The current economy (in late 2022) is an ideal time for you to consider buying I Bonds, so we put together this guide to help explain why we think this is a good time for you to consider buying I Bonds and also show you how to buy a US Series I Savings Bonds (I Bonds).
The primary reasons this is a good time to consider buying I bonds is:
- High Inflation
- There is currently a way to combat high Inflation (earning high returns)
What is the Current Inflation Rate?
As of October 2022, Inflation in the United States is 8.26% (based on 12 months ending August 31st, 2022) according to the Wall Street Journal.
So, unless you’re earning more than 8.26% interest per year on your savings accounts, your money’s value is actually decreasing over the same period of time (you’re essentially losing money).
What is an example of Inflation?
For example, the average price of a cup of coffee in the year 2000 was $1.00; however, the average price for the same cup of coffee in the year 2022 is $1.85. The price increase is not due to coffee becoming more scarce. In fact, the opposite is true; the popularity is coffee is growing.
The price difference actually reflects the gradual decrease in the value of money. With $100 in 2000, you would have been able to buy 100 cups of coffee, but with $100 in 2022, you can only buy 54 cups of coffee. The value of your $100 went down.
What is the current savings rate?
So, we’ve discussed Inflationary pressures, which decrease the value of your money. How can you fight those inflationary pressures?
One way to fight against the pressures of Inflation is by increasing the amount of interest you earn from the money you already have.
Unfortunately, as of October 2022, the average savings rate yield is a measly 0.17%, according to the FDIC.
That interest rate yield is no match for the Inflation rate, so what can you do?
What options do I have to fight Inflation better?
Not many people are familiar with the US Series I Savings Bonds. It’s a great way to fight Inflation as I Bonds are backed by the US government. As of October 2022, the US Treasury was offering a fantastic annualized return of 9.62%.
The rate offered by the US treasury for these I Bonds was actually 4.81% for six months (annualized 9.62%). After the initial six months, a new rate will be determined for the rest of the year.
Every May 1st and November 1st, the US Treasury offers a rate for 6 months. The current annualized rate of 9.62% is guaranteed until the end of October 2022.
The worst-case scenario is that after the initial six months, the rate becomes 0%, which means at the end of the year, you would end up with 4.81% per year which is still better than what banks are offering.
Here are a few additional facts about the I Bonds:
- You can only buy $10,000 per person (based on your social security number), per year, and you have to buy it at TreasuryDirect.gov
- You have to hold the bonds for 12 months minimum (similar to a 1-year CD).
- If you decide to cash out between the end of the minimum 12 months and the end of year five, you lose your prior three months’ interest as a penalty.
- For example, if you cash out after 20 months, you will only earn interest for the initial 17 months (20 – 3 months interest penalty)
- If you cash out after 5 years, you will keep all interest earned up to that point.
How to buy a US Series I Savings Bonds
First, you have to register
To do this, open an account on TreasuryDirect.gov by following the steps below.
- Step 1 – Choose your account type.
- Step 2 – Provide your personal information.
- Step 3 – Choose your password.
Once you register for an account, you can add your bank info.
Second, you have to add your bank account information.
To do this, click on Account Information.
Then, Bank Information (towards the bottom of the screen)
Then click “ADD”
Third, you have to transfer funds to your Treasury Direct account
To do this, click on BuyDirect at the top of the page, as shown in the below image.
Then, select the Series I Savings Bonds as shown in the above image.
After that, make sure you select the correct:
- Registration (drop-down)
- Purchase Amount
- Source of funds
- Desired date of transfer (calendar select)
And click “Submit”…if you try to transfer funds today and initiate the transfer in the late afternoon or later, the system may automatically move the transfer date to the next day. See image below
You have now initiated the transfer of funds to your Transfer Direct Account to purchase the I bonds.
Once the transfer is successful, your account will show the amount in the appropriate “Security Type”. See the below image…
We hope this post helped you learn about a great way to fight against Inflation by growing your bank account. However, during this time being stingy also might help you to grow. Learn more from our blog about the 7 ways to save money by living stingy
Feel free to add comments on other ways to grow your bank account.
How long does the bank transfer take?
It should be 2 days.
I initiated my transfer on October 5th, 2022. The funds were removed from my bank the following day, and on October 7th, 2022 the funds were in my Treasury Direct Account.
Great article! The instructions are clear and easy to follow. I purchased the bonds after reading this.
Thanks for sharing Jen Y.!
We tried to give the guideforbuyer’s all the info needed to buy the bonds and fight inflation. We documented our process to make that easier for our readers.
A little late to the party… this still a good idea?