014 |I-Bonds - Inflation Protected Savings Bonds FILIGHTER Podcast with Lambo

FILIGHTER Episode 14 – I-Bonds
SHOW NOTES
Lets learn about I-Bonds from the US Treasury that are currently yielding 9.62% in May 2022
Treasury Direct Website
May 2022 I BOND RATE CHART.XLSX (treasurydirect.gov)
*Gotta hold them at least 12 months
*Three month penalty if held less than 5 years
*Rates are set 2 times per year and hold for 6 months (Base Rate, currently Zero, and Inflation Rate, currently 9.62%)
*Must purchase from TreasuryDirect.gov
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What is a Series I Savings Bond?
A savings bond that earns interest based on combining a fixed rate and an inflation rate for up to 30 years.
Twice a Year Rates are set and there are TWO Rate Components to a Series I Savings Bond:
Fixed Rate Inflation Rate The Composite interest rate combines these two separate rates:
A fixed rate of return, which remains the same throughout the life of the I bond.
A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Fiscal Service announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.
Because it combines two rates, the interest rate on an I bond sometimes is called the composite rate or the overall rate.
0.0% + 3.54% May 2021
0.0% + 7.12% Last November 2021
0.0% + 9.62% May of 2022
While the inflation rate can be negative, the composite rate floor is set to never be less than zero.  The only two periods since 1998 that negative rates for inflation were used took place in 2009 and 2015.
Using our 20/20 hindsight vision, Say between May 2000 and October 2000 you were buying an I-Bond, your two combination rates would be a FIXED RATE of 3.6% plus an Inflation Rate of 3.89% for a combined rate of 7.49% at the time.  ROLL THE CLOCK FORWARD TO TODAY, and that base rate bond of 3.6% and the new 9.62% Inflation Rate would take you to 13.39% composite rate for your bond.
How would you like more than 13% rates on a US Government backed savings bond?
Just FYI the last time you could have bought a bond with a fixed rate above zero, was November 2019 through April of 2020.  During that 6-month period, the fixed rate was zero point two percent. 0.2% or 20 basis points in financial rate lingo.  A basis point is 1/100th of one percent.
May 2022 I BOND RATE CHART.XLSX (treasurydirect.gov)
 
If you purchase a bond during the 6-month window your bond will receive the current rate for 6 months then interest at the end of the period will be compounded to your balance semi-annually and invested at the then new rate for the next 6 months.
If you bought a bond today, May 24th, 2022, your bond would reset rates every May 1st and November 1st
If you bought on 4th of July, your rates would reset each July 1st and January 1st
There are some opportunities to either report income