Series I Savings Bonds: How They Work and When They're Worth Buying

Most people have heard of I bonds because of the headlines in 2022, when the rate briefly hit 9.62%. That number is long gone, but I bonds are still a legitimate place to park cash if you understand how the rate actually works and what the rules cost you if you get the timing wrong.

What a Series I Savings Bond Actually Is

An I bond is a savings bond issued directly by the U.S. Treasury. You buy it at face value (a $100 purchase buys $100 of bond, not a discounted price), and it pays interest that adjusts for inflation. It's backed by the federal government, so there's no credit risk the way there is with a corporate bond or even a bank CD above FDIC limits.

How the Rate Is Actually Calculated

The composite rate on an I bond has two parts: a fixed rate that's locked in for the life of the bond, and an inflation rate that resets every six months based on the Consumer Price Index. The fixed rate never changes once you buy the bond — the inflation piece is what moves.

As of this writing, Series I savings bonds issued from May 2026 through October 2026 earn a composite rate of 4.26%, a portion of which is indexed to inflation every six months. That rate breaks down into a fixed portion of 0.90%, held over from November 2025, and a variable portion derived from a semiannual inflation rate of 1.67%.

Two things matter here. First, the fixed rate never changes, while the inflation rate is reset every 6 months and, therefore, so is the overall rate. Second, although new rates are announced in May and November, the date when the rate changes for your bond is every 6 months from the issue date of your bond, not on the calendar announcement dates. Buy in June and your personal rate clock resets in December, not November.

Rates get set twice a year, in May and November, so rates for savings bonds are set each May 1 and November 1. The next reset is coming, and whatever rate is announced will apply only to newly issued bonds — existing bondholders keep their locked-in fixed rate and simply pick up the new inflation component on their own six-month schedule.

The Rules That Actually Matter

• Purchase limit: You can purchase up to $10,000 in electronic I bonds per person, per year, through TreasuryDirect, and this limit is tied to your Social Security number or Taxpayer Identification Number. A married couple can each buy their own $10,000, for a married couple could each buy $10,000, totaling $20,000 per household annually.
• No more paper-bond workaround: Buying extra paper I bonds with your tax refund used to be a way to get above the $10,000 cap, but that option was discontinued in 2025.
• You can't touch the money for a year: You can't cash in I bonds for at least one year after purchase. This makes them a poor fit for an emergency fund.
• Early redemption costs you three months of interest: If you redeem within five years, you lose your last three months of interest. After five years, there's no penalty at all.
• Minimum purchase: You have an annual purchase limit of $10,000, and for each transaction, you'll need to purchase at least $25 worth.

The Tax Angle

Interest on I bonds is exempt from state and local income tax, and federal tax can be deferred until you cash the bond or it matures — whichever comes first. That deferral is a real advantage over a high-yield savings account or CD, where you owe tax on interest every year whether you touch the money or not.

I Bonds vs. a High-Yield Savings Account or CD

The comparison isn't complicated once you strip out the marketing. If a high-yield savings account is paying more than the current I bond composite rate and you might need the cash within a year, the savings account wins on flexibility alone — you can already read our take on high-yield savings accounts for that comparison. If you have $10,000 or less you genuinely won't need for at least 12 months, want a guaranteed inflation hedge, and would like to defer the tax bill, an I bond is a reasonable place for it. Think of it as a companion to a CD ladder, not a replacement for your core emergency fund.

How to Actually Buy One

I bonds are sold in one place: TreasuryDirect.gov, the Treasury's own website. You open a free account, link a bank account, and buy directly — no broker, no fund, no fees. There's no secondary market for I bonds, so you're always buying and redeeming directly with the Treasury.

Where I Bonds Fit Into Your Bigger Picture

I bonds are a small, specific tool — good for a defined chunk of cash you can lock up for a year or more, not a strategy on their own. If you're not sure whether I bonds, a CD ladder, or just a high-yield savings account is the better move for your situation, that's exactly the kind of decision a quick check of your financial grade on Grade My Finance can help clarify, since it looks at your full cash position before you decide where the next dollar should go.

The Bottom Line

I bonds aren't a hack and they aren't obsolete. They're a government-backed way to protect a limited amount of cash from inflation, with a real tax advantage, in exchange for giving up access to that money for at least a year. Know the current rate, know the $10,000 cap, and know the penalty rules before you buy — that's really the whole strategy.