How much is the I bond interest rate? This is a question that many investors are asking as they consider adding I bonds to their investment portfolios. The interest rate on I bonds, or Inflation-Protected Savings Bonds, is subject to change twice a year, in May and November, and is influenced by the Consumer Price Index (CPI). Understanding the current interest rate and how it is determined can help investors make informed decisions about their financial future.
The I bond interest rate consists of two components: a fixed rate and a variable rate. The fixed rate remains constant for the life of the bond, while the variable rate adjusts every six months based on inflation. This unique structure makes I bonds an attractive option for investors looking to protect their purchasing power against inflation.
As of the most recent adjustment in May 2023, the I bond interest rate is as follows:
– Fixed Rate: 0.10%
– Variable Rate: 2.30%
The total interest rate, which is the sum of the fixed and variable rates, is 2.40%. This means that for every $100 invested in an I bond, the investor will earn $2.40 in interest over the course of one year.
It is important to note that the interest on I bonds is compounded semi-annually, and interest is credited to the bond on the first day of the month following the issue date. Additionally, I bonds can be purchased for as little as $50 and have no minimum purchase requirement, making them accessible to a wide range of investors.
The interest rate on I bonds is determined by the U.S. Treasury Department, and it is based on the CPI. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. When the CPI is rising, the variable rate on I bonds is adjusted upward to protect investors’ purchasing power.
Investors should also be aware that the interest on I bonds is taxable, although it is not subject to federal income tax until the bond is cashed or matures. This makes I bonds a good option for individuals looking to save for long-term goals, such as education or retirement.
In conclusion, the current I bond interest rate is 2.40%, with a fixed rate of 0.10% and a variable rate of 2.30%. As an inflation-protected investment, I bonds can be a valuable addition to an investment portfolio, particularly for those looking to preserve their purchasing power over time. Keep in mind that the interest rate on I bonds is subject to change, so it is important to stay informed about the latest rates and consider your financial goals when making investment decisions.
