I Bonds (Inflation-Protected) – Time to Redeem

If you purchased I bonds (inflation-protected) a couple of years ago, you did well with the 9% interest rates they paid at the time.  However, with the new lower rates as of 11/1/2024, they are no longer attractive to own, so you should consider redeeming them.

You may recall us discussing the Series I Savings Bonds from the US Treasury over the last couple of years. In late 2022 and early 2023, they paid out high returns of around 9% when inflation was high and bank accounts were paying just above 0%.  Since then, inflation has dropped and the most recent round of I bonds is no longer attractive to own.

The mechanics for how I bonds work can be a little complicated.  However, the short version is:

    •    Investors who bought I bonds a couple of years ago are now receiving only 1.9%.
    •    Investors who bought new I bonds just before 11/1/2024 were able to lock in a rate of 4.3% for six months.
    •    Investors who buy new I bonds now will only be able to get a rate of 3.11%.

With many cash equivalents such as high-yield savings accounts or money market funds paying 4% - 5%, it is no longer attractive for many investors to hold I bonds.

If you do have I bonds, it is now relatively easy to redeem them by logging into the TreasuryDirect website:

    •    Select the I Bonds you would like to redeem
    •    Click Redeem
    •    Choose Redeem Full Amount
    •    Select Payment Destination (may be the bank account you originally used)
    •    Click Submit

Please note – you may need to repeat this process several times.  If you bought $20K under your own name, you will need to go through the process above for each $10K tranche you bought.  If you are married, you may also have bought I bonds under your spouse’s name.  Your spouse will also need to log in and repeat this process for their I bonds as well.  The good news is that the whole process only takes a few minutes.

A few items to note regarding redemption – the interest you earned will be taxable at the federal level in the year you redeem the I bonds.  Also, if you have owned the I bonds for less than 5 years (which is the case for many people who bought I bonds in the last couple of years), you will need to give up 3 months’ of interest to redeem them.

If you have any questions about this process or related financial matters, please don’t hesitate to reach out to us.