When inflation eats away at your paycheck and savings, protecting what you’ve worked hard for becomes more urgent. That’s where Series I Savings Bonds — or I Bonds — come in. These government-backed bonds combine safety with inflation protection, making them one of the few low-risk tools that can help everyday savers keep pace with rising prices. If you’re new to I Bonds, this guide breaks down the key steps to buying them, what to expect, and how to make sure they fit into your broader financial plan.
Step 1: Understand the I Bond Program
I Bonds are issued by the U.S. Department of the Treasury and are designed to do two things:
- Provide a fixed interest rate (set at purchase and locked in for the life of the bond).
- Adjust with inflation every six months based on the Consumer Price Index for All Urban Consumers (CPI-U).
This unique combination means your investment grows with the cost of living. For savers frustrated by stagnant savings account rates, I Bonds can be a rare option that feels practical and protective.
Before buying, familiarize yourself with:
- Holding requirements: You must hold an I Bond for at least 12 months, and redeeming before five years means losing the last three months of interest.
- Purchase limits: You can buy up to $10,000 per calendar year per Social Security number through TreasuryDirect, plus an extra $5,000 using your federal tax refund.
- Tax treatment: Interest is exempt from state and local taxes. Federal taxes can be deferred until redemption, and interest may even be federally tax-free if used for qualified education expenses.
Step 2: Choose Where to Buy
The simplest and most direct way to buy I Bonds today is through TreasuryDirect.gov, the U.S. Treasury’s secure online platform. Opening an account requires your Social Security number, a U.S. bank account, and an email address. From there, you can buy in increments as low as $25.
Some financial institutions and brokerages historically facilitated I Bond purchases, but most now direct investors to TreasuryDirect. If you prefer paper bonds, your only option is to use a portion of your federal tax refund when filing with the IRS.
Step 3: Make Your Purchase
Once your TreasuryDirect account is open:
- Log in and select BuyDirect.
- Choose “Series I Savings Bonds.”
- Enter your purchase amount (between $25 and $10,000).
- Select your funding source — usually a linked checking or savings account.
The bonds will appear in your online account, and you can view their value as it adjusts every six months with inflation.
Step 4: Track and Manage Your Investment
Monitoring your I Bonds is crucial:
- Use TreasuryDirect tools: Your online account shows balances, accrued interest, and redemption eligibility.
- Plan for milestones: Decide whether to cash them after the one-year minimum, hold to five years to avoid penalties, or keep them up to 30 years for maximum compounding.
- Revisit annually: Since the annual purchase cap resets each calendar year, some investors make buying I Bonds a yearly habit — much like contributing to an IRA.
For additional oversight, you can track I Bonds alongside other savings and investments using apps like Mint, Empower (formerly Personal Capital), or Quicken.
What to Watch Out For
Even with their benefits, I Bonds aren’t perfect:
- Purchase limits cap how much you can shield from inflation.
- Lower returns in low-inflation years can make them less attractive compared to high-yield savings accounts or CDs.
- Illiquidity means you shouldn’t tie up money you might need within a year.
They’re best viewed as a complement to your emergency savings or retirement portfolio, not a replacement.
Conclusion
Buying I Bonds is a straightforward process, but the real value comes from understanding how they fit into your overall financial picture. They’re safe, inflation-protected, and backed by the U.S. government — making them one of the few “sleep easy” investments available to everyday Americans. By learning the rules, using TreasuryDirect to purchase, and tracking your holdings carefully, you can use I Bonds to protect your savings from being quietly eaten away by inflation.
FAQs
How often do I Bond rates change?
Twice a year, in May and November, based on inflation data.
Can I sell I Bonds anytime?
Not within the first 12 months. Selling before five years costs you the last three months of interest.
Are I Bonds better than CDs?
It depends. I Bonds rise with inflation, while CDs lock in a fixed rate. In high-inflation periods, I Bonds typically offer better protection.
