Series I Savings Bonds; What You Need to Know

Series I Savings Bonds; What You Need to Know

May 03, 2023

If you have a large amount of emergency funds in bank accounts, you should consider Series I Savings Bonds (I Bonds) as an alternative for some of the money. Transferring some of your emergency funds to Series I Savings Bonds will probably be a profitable exchange with little risk. I Bonds are government guaranteed, liquid after 12 months, pay a higher interest rate than most bank accounts and an even higher rate on an after-tax basis.

I Bonds can only be purchased directly from the U.S. Government, through TreasuryDirect. Bonds purchased from May 1 to October 31, 2023 will receive a 4.3% annualized interest rate. In November, the interest rate will be reset, partially based upon the previous six months inflation rate. That process continues every six months for the life of the bond, which is 30 years. It helps protect the the bonds' purchasing power from inflation.

I Bonds are issued and guaranteed by the U.S. Treasury. There are two sources of interest income -- fixed and variable. For bonds purchased from May 1 to October 31, 2023, the combined rate is 4.3%, which is the combination of two other interest rates:

  1. Inflation during the previous six months. That is currently 3.4%. That rate is guaranteed for six months and then adjusts for inflation over the last six-month period. The current rate will be adjusted in November, 2023.
  2. A rate fixed for the life of the bond, 0.9%.

Interest is added semi-annually to the value of the bond, so bond holders receive the benefit of compound interest. If you hold the bond for at least five years, when you cash in (redeem) the bond, you receive all the interest the bond has earned plus the amount you paid for the bond. I Bond interest is tax deferred; taxes on the interest are only due when you redeem the bond.

Advantages of Series I Savings Bonds include:

  • Guaranteed by the U.S. Government.
  • Currently, a much higher interest rate than many bank accounts.
  • Taxes on interest are postponed until a bond is sold or matures.
  • Interest is exempt from state and local taxes.
  • Because there are no state or local taxes on the interest and taxes are not due until the bond matures or funds are withdrawn, the tax equivalent interest rate is higher than the stated interest rate.
  • No commissions (to buy or sell) or any other fees.
  • Whether you sell an I Bond before it matures or hold it to maturity, you always receive full face value (plus interest).
  • Interest earnings may be excluded from Federal income tax when used to finance education (see education tax exclusions).
  • Beneficiaries may be named. Instructions available here.


  • I Bonds cannot be sold for 12 months after the original purchase. Don’t invest funds you might need to spend within the first twelve months.
  • There is a penalty equal to three months of interest if a bond is sold less than five years after purchase.
  • Purchases and sales can only occur in a TreasuryDirect® account; they cannot be purchased, held or sold through Arthur Stein Financial, a 401k, the TSP, a Registered Investment Advisor, stockbroker, bank or credit union.

The maximum investment through TreasuryDirect is $10,000 per calendar year for each social security number. An additional $5000 in paper bonds may be purchased by using a tax refund. The minimum investment is $25. Investments may be lump sums or a monthly automatic transfer.

A parent or other adult custodian may open a Treasury Direct account for a child that is linked to the adult's Treasury Direct account. The parent or other adult custodian can buy securities and conduct other transactions for the child, and other adults can buy savings bonds for a child as gifts.


This is for educational purposes only. To learn more about the topics mentioned and if they are suitable for you, consult an appropriate professional. Tax laws can change at any time.

Any information provided in this presentation has been prepared from sources believed to be reliable, but is not guaranteed and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for information purposes only and does not constitute a recommendation.

Arthur Stein and Arthur Stein Financial, LLC are not authorized to give legal or tax advice. For information on your specific situation, please consult your tax advisor regarding any tax implications and your attorney for legal implications. As required by the US Treasury Regulations, you should be aware that this presentation is not intended to be used and it cannot be used for the purposes of avoiding penalties under federal tax laws.

Keep in mind that:

Past performance is no guarantee of future performance;
Investments involve the risk of loss of principal and earnings;
None of the information provided is necessarily relevant to anyone’s personal situation. Circumstances differ among individuals and you should not assume that these generalizations or information apply to you.
Investments mentioned may not be suitable for all investors.