It’s decision time again for those considering the purchase of I-Bonds. The interest rates will adjust again on May 1. (Here are some reasons why you should consider owning I Bonds for retirement.) Let’s take a brief look at the purchase options.
If you purchase after May 1, the interest rates on your I Bonds will be different. First, the fixed rate component is unknown today. This rate is arbitrarily selected by the Treasury and is not announced in advance. Most experts seem to think it will stay low, perhaps 0.4% or even lower. The variable (inflation-adjusted) rate can be predicted from recent CPI data released by government. Thus, it is believed that the variable rate for bonds purchased after May 1 will be 1.54%. If we assume that the fixed portion of the interest rate will be 0.4% (a guess), the combined rate will be 1.94% for six months.
Obviously, these rates assume that you hold the bonds for at least five years, after which there are no penalties for redemption.
I’m going to talk to my wife and see if she agrees that we should buy some I Bonds now, and make them part of our plan for guaranteed retirement income.