The new I-bond interest rate could be 5.5% or 5.4%, but that shouldn’t change your strategy The interest rates for Series I bonds reset every six months, on Nov. 1 and May 1, and at times when inflation is rising, these announcements become news events. However, if you’re using I-bonds the way they were intended, as an inflation hedge, it shouldn’t matter that much to you. Each year, no matter what, you’d be buying a set dollar amount — up to the $10,000-a-year limit for each Social Security number — and then letting it ride.
That’s what Scott Cederburg has been doing for the past five years, in a very tortoiselike approach that he calls setting up his own “retirement annuity.” It actually goes against his nature: Cederburg is a 44-year-old professor of finance at the Eller College of Management at Arizona State University, and his best-known piece of research involves putting 100% of a retirement portfolio into stocks. He not only studies this, he also practices it with his own retirement funds, which are split between U.S. and international funds. That’s real income.” His game plan is to keep putting away $10,000 a year in I-bonds for the next 20 or so years, until retirement.
He buys the bonds from TreasuryDirect.gov once a year, a 10-minute task he doesn’t think about again until it’s time to buy again the next year. When he started this process in 2021, the fixed rate on I-bonds was 0% and the inflation rate was minimal. He wasn’t making much in terms of interest, but he wasn’t losing ground, either.
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For the rate that lasts through Oct. 31, the fixed part is 0.90% and the annualized adjustable inflation rate is 3.34%, for a combined six-month rate of 4.26%. TipsWatch.com, a website from journalist David Enna that closely watches rates on Treasury products, predicts the rate announced for Nov. 1 will be a fixed rate of 1.4% and an inflation rate of 4.08%, for an annualized combined rate of 5.51%. If the fixed rate is 1.3% instead, the annualized combined rate would be 5.41%, Enna noted.
Either way, that rate is attractive compared with all the other options on the market right now, like CDs, high-yield savings accounts or short-term Treasurys. But that’s beside the point, really. The strategy for I-bonds is a long-term one.
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