Important points
I Bond interest rates are adjusted twice a year based on the past six months of inflation. New inflation data released today can be used to calculate the next six-month interest rate for all existing I-bond holders. As expected (because inflation is falling), the next I bond rate will be lower than the current six-month rate, by more than 1 percentage point. For some companies, interest rate adjustments occur as early as November 1st, while for others, they occur between December 1st and April 1st, depending on the month the bond was issued. Masu. With I-bond interest rates so low right now, you can earn even more by paying 4.00% to 5.50% APY to buy one of America’s top CDs. Additionally, CD returns are predictable and guaranteed for years into the future. I The first day of the month is always the best day to sell bonds.
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You can now calculate the next interest rate for your existing I-bonds
I Bonds are so called because they are adjusted for inflation. As inflation rises, I bond payments increase. If you currently own I bonds, you most likely purchased them within the past few years, when the U.S. was experiencing the highest inflation in decades and I bond returns were at their highest levels.
However, inflation has fallen from a high of 9.1% in June 2022 to 2.4% in the September 2024 reading released this morning. As inflation has declined, interest rates on I bonds have also fallen, making them less competitive as a savings option.
Investopedia uses today’s Consumer Price Index (CPI) to calculate what the next six-month interest rate on existing I bonds will be, which will be formally announced by the U.S. Treasury on November 1st. Now you can. , On May 1st and November 1st of each year, the Treasury announces new interest rates that are good for the next six months.
To understand how this works, here is a quick primer on I bond rates. The I bond rate consists of two components.
The first component is a fixed interest rate, which is assigned to all I bonds based on their issue date. This interest rate is fixed for the life of the I bond up to the 30-year maturity date. The second factor is the inflation rate, which is adjusted twice a year based on CPI measurements over the past six months.
Adding these two factors together will give you an accurate estimate (within a few basis points) of the six-month headline interest rate that the Treasury will release in three weeks.
To calculate the future overall interest rate for a particular I bond, you need to know what the latest inflation factor is in addition to the fixed rate. Luckily, we’ve done the math for you. For all I-bonds issued after November 2021, see below. Find the issue date of the bond in the first column and find the yield for the next six months in the last column.
The Treasury Department will announce these new interest rates on November 1st, but note that the month in which the new interest rates start is based on the month in which the I bond is issued. As shown below, only those who own I bonds purchased in May or November (of any year) will earn the new interest rates listed above on November 1st. For other issuance dates, the start of the new interest rate will be delayed accordingly. schedule.
How will the new rates compare to the existing rates?
As inflation has declined over the past six months, the new inflation component of the I bond rate is calculated to be approximately 1 percentage point lower. So those who bought during the particularly popular I-bond period from May to October 2022 would see their current interest rate of 2.96% drop to about 1.90%. Below you can compare the new and current rates for several publication dates.
Want to know how future interest rates compare to more historical periods for I bonds? The table below shows the various six-month interest rates each bond has or will earn. Masu.
Consider moving your money to CDs to earn more
With interest rates on recently issued I bonds moving to the 1.90% to 3.20% range, you can earn even more money on your savings elsewhere. In fact, you can now benefit from lucky timing, as certificate of deposit (CD) rates spiked in 2023, and you’re still paying interest rates not far below historic peaks. Payment rates for numerous certificates available nationally range from 4% to 5%, with national leaders offering as high as 5.50% APY.
This means that if you cash out your I-bond (which is possible if you’ve held it for at least 12 months) and move that money into a top-end CD, your interest rate can immediately increase by 1-2 percent or more. It means something. While it is true that there is a penalty if the I bond has been issued for less than five years, the amount is relatively modest and is only three months of the most recent interest rate.
Another reason to exchange security deposits for CDs is that your future returns are more certain. Unlike I-Bonds, where rates change twice a year, Open Today CD locks in the APY for the entire lifetime of the certificate. So if you open a multi-year CD, you’ll find that your rates are guaranteed for two, three, or even five years. That’s a smart move at this point, given that U.S. interest rates are falling.
I Best day of the month to convert bonds into cash
Monthly I bond interest payments from the U.S. Treasury are always paid immediately on the first of the month and not until the first of the following month. Therefore, once you collect interest in a given calendar month, say the following November 1st, there is no reason to hold the funds any longer during November and earn additional income.
Also, if you move your I-bond funds elsewhere, you can withdraw them on May 1st, receive May’s interest payment, and earn interest on that money elsewhere, such as in CDs or high-yield savings, as soon as possible. You can start receiving them. account. So, by acting quickly, you can receive your November interest in two different places.
Even if you simply want to cash out and use your I-bond funds, there is no financial benefit to waiting until the first of the month to withdraw.
Daily ranking of best CDs and savings accounts
How to find the best savings and CD rates
Every business day, Investopedia tracks interest rate data from more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide to determine a daily ranking of the most expensive accounts. To be on our list, a financial institution must be federally insured (FDIC for banks, NCUA for credit unions) and have a minimum initial account deposit of $25,000. Must not be exceeded.
Banks must be available in at least 40 states. Additionally, some credit unions may require a specific charity or We ask that you donate to the association, but credit unions with contribution requirements of $40 or more are excluded. To learn more about how to choose the best rate, read our full methodology.
