The Rate on I Bonds Just Dropped to 6.89%. How to Decide If They’re Still Worth It

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The interest rate on Series I savings bonds just got a reset.

With a hopeful eye toward slowing inflation in the coming months, the rate dropped from a historic high of 9.62% to 6.89% Tuesday. The new rate — which shifts every six months —will remain active through May 2023, offering a low-risk way to grow your money while prices are still high. It’s the main reason I bonds have exploded in popularity among savers and investors this year.

“I expected the new rate to be lower, but it’s still higher than most high-yield savings account interest rates,” says Rita-Soledad Fernández Paulino, a personal finance expert and creator of Wealth Para Todos.

The previous rate of 9.62% garnered a heap of demand, so you may be wondering whether I bonds are still worth it. Here’s what you need to know.

Are I Bonds Still Worth Buying?

Despite the new lower rate, that doesn’t mean you missed the boat on I bonds. Experts say the new I bond rate is still an attractive option.

As long as Series I bonds have a higher interest rate than certificates of deposit (CD) and high-yield savings accounts, Fernández Paulino recommends them for any savings goal with a time horizon of one to three years. That’s the catch: You won’t be able to touch that money for at least a year because of the withdrawal rules. If you cash out your I bond before five years, you’ll lose three months’ worth of earned interest. 

Say you buy a $10,000 I bond today and lock in the 6.89% rate for six months, you’d earn a little less than $700 on your savings in your first year. Even if you cash out after a year and lose the last three months of interest, you’ll still earn more than $500. In comparison, the best CDs or high-yield savings accounts would earn you between $200 to $400 on $10,000 at most in a year. 

“I would encourage everyone to make sure they get the highest rate of return on their savings as possible,” Fernández Paulino says. 

How to Buy I Bonds

If you want to buy an I bond, you’ll need to go to TreasuryDirect.gov. You’re able to purchase up to $10,000 in electronic bonds per calendar year, but you can also use your tax refund to purchase up to an additional $5,000 in paper bonds. 

The Bottom Line

While I bonds are considered one of the safest investments, they have some downsides. There’s a limit on how many you can buy, and as with CDs, there are penalties for tapping out early. Still, you’ll earn more on your savings with an I bond than with a high-yield savings account or certificate of deposit. The decision to invest in an I bond will ultimately depend on your long-term savings goals.