Broker Check

Navigating a Near Zero Interest World!

December 17, 2021

With interest rates so incredibly low we are often asked “How can I make more off my cash savings?” One solution might be to consider I-Bonds offered via the U.S. Treasury Department that are backed by the U.S. government. What makes I-Bonds unique is their interest structure, which consists of a combined “Fixed Rate” and “Inflation Rate” that together make a “Composite Rate” – the actual rate of interest that an I-Bond will earn over a six-month period.

While the current Fixed Rate for newly purchased I-Bonds is 0%, the Inflation Rate for I-bonds purchased before May 1, 2022 is an annualized 7.12% as of 12/11/2021. This means the Composite Rate is also an annualized 7.12% for the first six months that the I-Bond is held, after which a new Composite Rate will be determined when there is a change to the Inflation rate. This is the highest rate for I-Bonds since May 2000! While I-Bonds have a 30-year maturity, they can be redeemed after being held for at least 12 months. Investors who redeem I-Bonds between 12 months and 5 years after issue will forfeit the last 3 months of interest, but I-Bonds held for more than 5 years can be redeemed at their current value. For example, if you cash an I-bond after 18 months, you get the first 15 months of interest along with the principal. Interest is earned on the bond every month. The interest is compounded semiannually:  twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal. The interest and principal are paid to you when you cash the bond.

If you are like me, you are currently getting close to zero interest on your savings. So even if the rate of inflation were to drop drastically in May you could still be way ahead of your current savings rate. We feel inflation is a little more than “transitory”, so this may be a place to park some savings for a few years. On Friday December 10th, the U.S. registered the highest Consumer Price Index (CPI) which is what the inflation rate on these I-Bonds is derived from since 1982 - the year after I got out of high school.

Unfortunately, there is a $10,000 annual limit on I-Bond purchases which restricts their benefit for those with larger portfolios, but there are several ways investors could increase the amount purchased at the current Composite Rate. For example, because the annual limit is a calendar-year limit, an individual could purchase $10,000 worth of I-Bonds before January 1, 2022, and then an additional $10,000 between January 1 and April 30, 2022. This means a couple could purchase a combined $40,000 worth of I-Bonds and receive the annualized 7.12% Composite Rate for the first six months the bond is held. In addition, I-Bonds can also be purchased for children or by trusts and estates, which could further increase the benefit for a family. Finally, paper I-Bonds can be purchased using a tax refund up to a $5,000-per-return limit, which is in addition to the $10,000 annual limit on I-Bonds purchased through the TreasuryDirect website.

In the current environment of low-interest rates and high inflation, I-Bonds represent a potential opportunity for investors to improve the yield for a portion of their cash savings. If this is of interest to you or to learn more, please visit the TreasuryDirect website at:

Since we are not affiliated with the U.S. Treasury, we cannot set these accounts up for you.


U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.