We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. Learn more.

By:
Editor:
Published: Nov 07, 2024 5 min read

Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.

A pile of bonds in the background with a decreasing graph
Money; Getty Images

As inflation continues to cool, the yield on Series I Savings Bonds, aka I bonds, is falling in tandem.

On Friday, the U.S. Treasury Department set the new rate to 3.11%, which is in effect for I bonds purchased this month through the end of April 2025.

This new rate is a far cry from the record-setting 9.62% reached in 2022 at the height of the pandemic-induced cost-of-living crisis. Looking for a hedge against inflation, investors and everyday savers then snapped up billions of dollars worth of I bonds.

But even as consumer prices moderate, the low-risk government bond remains an attractive choice for long-term savers and investors. That’s because today’s I bonds have a perk that the bonds purchased back in 2022 did not have: a 30-year fixed rate of 1.2%.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
Make sure your hard-earned money is protected with a Gold IRA
Gold IRAs help you protect your investments by providing the asset diversification and stability you need. Click on your state to get started.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
Invest in Gold

What to know about the new I bonds rate

The newly announced headline rate of 3.11% is known as the composite rate. It is an annualized version of two separate rates that are announced every six months.

One is the inflation rate. This inflation rate changes every six months based on the preceding six-month fluctuations in the consumer price index, which is the most commonly used measure of inflation. This six-month rate is currently 0.95%, which is the rate of inflation from April to September.

The other is the aforementioned fixed rate. As its name suggests, this rate is set in stone at the time of purchase and lasts for up to 30 years or until you sell your bond(s). Right now, the Treasury Department has set the fixed rate at 1.2%.

While the inflation rate is predictable, the fixed rate is a bit of a wild card. The Treasury Department does not publicly reveal exactly how it comes up with it.

Since I bonds were created in 1998, the fixed rate has ranged as high as 3.6% and as low as 0%. And since the Great Recession, the fixed rate has mostly stayed under 1%, meaning that the inflation rate of I bonds did most of the heavy lifting in recent years.

In fact, when I bonds went mainstream in 2022 with that blockbuster 9.62% annualized rate, the fixed rate was 0%. The entire composite rate was due to sky-high inflation. Now as inflation falls, folks who bought I bonds at the time still have that 0% fixed rate locked in. So their yield is actually less than the newly announced 3.11% — it's 1.9%.

Because of this caveat, some investors are cashing in their 2022 I bonds with a 0% fixed rate to re-purchase ones with a 1.2% fixed rate. When considering whether to cash in I bonds, it’s important to keep in mind that they can’t be redeemed within one year of purchase, and I bonds redeemed within five years have a three-month interest penalty, similar to that of certificates of deposit (CDs).

Alternatives to I bonds

When comparing annual percentage yields, or APYs, there are plenty of alternatives that are currently beating the I bond’s 3.11%.

For instance, some CDs and high-yield savings accounts still boast rates above 5%. Though with more benchmark interest rate cuts from the Federal Reserve coming as soon as Thursday, the days of 5% APY are numbered.

The national average rates on these types of deposit accounts are far lower. According to the Federal Deposit Insurance Corporation, the average APY is 0.45% for savings accounts and 1.81% for 12-month CDs.

Savers and investors sizing up I bond’s new rate should factor in the caveats and perks: namely, the interest penalty, inflation protection and the $10,000 annual purchase limit. (The Treasury Department previously allowed you to use up to $5,000 of your tax refund money to purchase paper I bonds, though it is now discontinuing paper versions entirely.)

In the short term, CDs and high-yield savings accounts offer more attractive APYs.

For long-term savers: Even though I bonds’ rates have fallen considerably since 2022, the current fixed rate ensures that bonds purchased today outperform inflation by at least 2.4% annually for up to 30 years.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer

Top Precious Metals Company on Inc. 5000

Top Ranked Gold Company on Inc. 5000

  • Up to $15,000 in Free Silver on Qualifying Purchases
  • 100% Free IRA Rollover & Buyback Commitment
  • Free Storage & Maintenace for Up to 3 Years
  • Exclusively Recommended by Bill O'Reilly & Rick Harrison

Qualify for up to 10% in FREE silver

Qualify for up to $10k in FREE precious metals*
  • Diversify your portfolio by investing in a precious metal IRA or buy gold and silver directly
  • Highest price buyback guarantee
  • A+ Rating from BBB, AAA Rating from Business Consumers Alliance

5-star rating with the BBB & Trustpilot

Qualified Orders can get up to $20k in Free Metals

  • 100% American Owned
  • Free shipping and insurance on all orders
  • 5-star rating with the BBB and Trustpilot
  • Authorized retail dealer for United States Mint

View Thor Metals Offer

Price Match Guarantee, No Buyback Fees

$3 Billion In Trusted Transactions

  • Limited Offer: Up to $15,000 in Bonus Coins on New Orders*
  • 24-hour Risk-free Purchase Guarantee
  • Zero Fees on All First-year Trades
  • AAA Rating from Business Consumer Alliance

Gold IRA Company Scam Guide

Provides Guide on Gold IRA Company Scams
  • Augusta representatives available for 1 on 1 sessions
  • Recommended by Hall of Fame Quarterback Joe Montana
  • Available help from Augusta representatives while creating an account
  • Only 3 simple steps to open an account

More from Money:

Money Classic: How I Bonds Went From Not to Hot (1998)

What Is a Savings Bond?

How to Buy I Bonds

Ads by Money. We may be compensated if you click this ad.Ad
Goldco can help you take control of your financial future