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The U.S. Treasury said Series I bonds will pay an annual interest rate of 5.27% from November 1 through April 2024, up from the 4.3% annual interest rate offered since May.
Depending on inflation, investors can claim 5.27% for six months – the fourth-highest I-bond interest rate since 1998 – by purchasing any time from November 1 through the end of April 2024.
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How to Calculate I Bond Interest Rates
The Treasury adjusts I-bond interest rates in May and November every year, and I-bond yields consist of two parts: a variable part and a fixed part.
The variable interest rate changes every six months based on inflation, and the Treasury can change the fixed interest rate every six months, but this is not always the case.
(The fixed portion of the I-Bond interest rate remains the same for investors after purchase. The variable interest rate resets every six months, starting from the investor’s I-Bond purchase date, not when the Treasury announces new interest rates. The interest rate by date of purchase can be found here.)
Currently, the variable interest rate is 3.94% and the fixed interest rate is 1.30%, giving a rounded total return of 5.27% for I bonds purchased between November 1st and April 30th.
“The new fixed rate makes it a very good deal” for long-term investors, said Ken Tumin, founder and publisher of DepositAccounts.com, which tracks I bonds, among other things.
How new interest rates affect older I bonds
If you already own I bonds, your interest rate change will depend on the bond’s issuance date.
For example, if you purchased I bonds in September of a given year, your interest rates will reset on March 1 and September 1 each year, according to the Treasury Department.
However, the prime interest rate may differ from the one you receive, as the fixed interest rate remains the same throughout the life of your bond.
What you should know before buying I bonds
Before buying I bonds, experts say it’s important to think about your goals.
One of the downsides of I-bonds is that you won’t have access to the money for at least a year and will have to pay a three-month interest penalty if you draw on the funds within five years.
“I don’t view I-bonds as part of a long-term portfolio,” said certified financial planner Christopher Flis, founder of Resilient Asset Management in Memphis, Tennessee.
I-bonds could be useful as a supplement to savings that can be accessed more quickly, such as checking, savings or money market funds, he said.
Frequently Asked Questions About I Bonds
1. What is the interest rate from November 1st to April 30th, 2024? 5.27% annually.
2. How long will I receive 5.27%? Six months after purchase.
3. What is the deadline to receive 5.27% interest? The bonds must be issued by April 30, 2024. The purchase deadline may be earlier.
4. What are the purchase limits? $10,000 per person in each calendar year, plus an additional $5,000 in Paper I Bonds via your federal tax refund.
5. Do I have to pay income tax? You must pay federal income taxes on the interest earned, but not state or local taxes.