How To Buy Series I Bond Step By Step Tutorial since this October 2022 is our last chance to lock in the high yield 9.62% rate.
If you are interested in buying I Bonds, I explain instructions on how to set up a Treasury Direct account and make the I Bond purchase since the deadline to buy the I bond at the 9.62% rate is Friday, October 28, 2022.
Treasury Direct requires one business day in order to issue the savings bond, so if you buy the I Bond on October 28 you will get them on October 31, Halloween this year. You would buy I Bonds at treasurydirect.gov.
If you’d like to learn why it’s our last chance to buy the Series I Bond at the highest yield rate of 9.62%, watch this video.
Fresh off the press today: the projected I Bond November rate is 6.47% according to the Wall Street Journal, which is 3.15% lower than the current rate we are still able to buy in October.
The 9.62% rate of return is guaranteed for the first 6 months that you own the I Bond, and then it will change after 6 months and you are required to own an I Bond for at least a year. (Some exceptions are if you live in a Florida county affected by Hurricane Ian, the one year holding period has been waived).
The rates get set for I Bonds in May and November every year, so the current rate of 9.62% was set in May 2022 and will change in November 2022.
So if you bought the I Bond this October at 9.62%, by April 2023 the next rate you’ll get for the following 6 months may be around 6.47%. This averages out to 8.05% for one year of owning an I Bond between October 2022 and October 2023.
If you were to redeem the bond after owning it for one year in October 2023, in theory you would give up about the last 3 months’ worth of interest or my current estimation of 1.62%. This gives an estimated net rate of return of 6.43%. Not bad when compared to the S&P 500 being down by about 25% year to date!
Of course, this estimate is not yet adjusted for inflation so most likely you’d be close to breaking even with inflation by next year.
Since there has been high demand for Series I Bonds over the last year, the Treasury has been dealing with high call and mail volumes that it could take them up to 8 to 13 weeks to process your mail form requests.
I was on the phone for nearly 3 hours during the summer just to reset my password. Don’t make my mistake of waiting on the phone for a long time by making sure you know your login credentials!
The I Bond has a term of 30 years, and you could own it past that maturity but you won’t earn more interest on it so you might as well cash it by then. If you cash in the bond before 5 years, then you will forfeit the last 3 months’ worth of interest. So to avoid this penalty, ideally own the I Bond for 5-30 years (unless the interest you’re getting is too low, the penalty might not even be a big deal).
I Bonds are zero coupon bonds so you won’t get paid interest throughout the life of the bond, but you get all the interest when you redeem the bond.
In the video I show where you can redeem a bond in the Current Holdings tab of Treasury Direct or via the form 5512 that you can mail in.
Form 5512 can also be used to update your bank account information since Treasury Direct does not currently allow you to update your bank account information online (the edit button is a dud!).
The annual online I Bond purchase limit is $10,000. If you don’t need $10,000 for the next year, it’s nice to think of I Bonds as part of an emergency fund. There is proposed legislation to raise the annual limit to $30,000, but this has not become law yet.
Savings Bonds also make pretty decent gifts if you’d like to give someone a gift that keeps on giving!
If you’d like to learn how a Series I Bond compares to High Yield Savings, check out this video.
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.
I look forward to making more investor friends! Add me on Insta: michellemarki