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I-Bond RateThe Current I-Bond Composite Rate = 4.82% (through October 31, 2008 - this includes a 0.00% fixed rate and 4.82% variable rate)
I-bond rates changes every six months. The I-bond rate is based on a combination of two separate rates: a fixed rate of return and a semi-annual inflation rate.
The fixed rate is announced by the Treasury each May and November, and this rate remains effective throughout the life of the I-bond. In addition, a semi-annual inflation rate based on the Consumer Price Index for all Urban consumers (CPI-U) is announced at the same time. The inflation rate is a variable rate which changes every six months over the life of the I-bond. The fixed rate and the semi-annual inflation rate are combined each May and November to determine the I-bond's earnings rate for the next six months.
The semi-annual inflation rate announced each May measures the inflation from the previous October through March while the inflation rate announced in November measures the inflation from the previous April through September. The Department of Labor's Bureau of Labor Statistics publishes the CPI-U on a monthly basis.
You must hold I-bonds for a minimum of 1 year, but you can hold them up to the maximum term limit of 30 years. If you sell the I-bond between 1 year and 5 years, there is a 3 month interest penalty for withdrawals.
I-bonds are guaranteed by the United States government. You can't loose your principle and will earn a set variable interest rate which changes and is set every 6 months.
As of January 1, 2008, the annual limitation on purchases of I-bonds is set at $5,000 per Social Security Number. Under these new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds I-bonds a single calendar year, or a total of $10,000. Previously to this change the limit had been $60,000 ($30,000 of electronic and paper I-bonds each).
Electronic I-Bonds can be purchased directly at TreasuryDirect. Paper I-Bonds can be purchased at most local financial institutions. To do so, you must fill out a purchase order and pay for the I-Bond. The I-Bond will then be mailed to you within three weeks.
I-Bonds can also be purchased through employer-sponsored payroll savings plans. Contact your employer to see if I-Bonds are available where you work. There is also a new payroll feature at TreasuryDirect which allows you to send funds to your TreasuryDirect account through a direct deposit deduction.
I-Bonds can be purchased and owned by U.S. citizens, residents, or worker of any age with a valid U.S. social security number.
A discussion about I-Bonds
Next: I-Bond Fixed Rate History
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