Timing Your Savings: Is Now the Right Time to Invest in I Bonds?

Published on: 04-17-2023

Robert Wickboldt believes that when it comes to investing in savings bonds , the decision to buy now or wait can be tricky. In the case of I bonds, it's important to consider both current interest rates and potential future changes to make an informed decision.

First, let's review what bonds are. I bonds are a type of savings bond issued by the US government that offers a combination of a fixed interest rate and an inflation rate that changes twice a year based on the Consumer Price Index (CPI). They are a popular investment option for those seeking a low-risk way to earn a return on their savings.

As of April 2023, the current fixed rate for I bonds is 0.0%, while the current inflation rate is 2.03%. This means the composite rate for I bonds purchased between now and September 2023 is 2.03%. This rate will change again in November 2023 based on the CPI. Should you buy the Bond now or wait until November 2023? The answer depends on a few factors.

Buying an I bond now may be a good idea if you want to invest longterm. The current inflation rate is relatively high, so buying now means you'll lock in a relatively high composite rate for the next six months. Additionally, if inflation continues to rise, the composite rate

for I bonds may increase in November, meaning waiting could result in a higher return. However, if you're looking to invest for the short term, waiting until November may be a better option. The CPI could decrease in the coming months, resulting in a lower composite rate for I bonds. Waiting until November means you'll have a clearer picture of the composite rate for the next six months, allowing you to make a more informed decision.

It's also worth noting that I bonds have a few unique features that make them a good choice for certain investors. For example, the interest earned on I bonds is exempt from state and local income taxes and can be tax-free at the federal level if used for qualified educational expenses.

In conclusion, buying a bond now or waiting until November 2023 depends on your investment goals and time horizon. If you're looking to invest long-term and believe that inflation will continue to rise, buying now may be a good option. However, if you're investing for the short term, waiting until November may be a better choice. Regardless of your decision, I Bond offers a low-risk way to earn a return on your savings and should be considered part of a diversified investment portfolio.