We want talk to you about inflation and it can be taken advantage of -- I Series Bonds. This is something that's been around for a long time. I Series Bonds have been produced by the United States Treasury for the last 15-20 years, or so, and are not really utilized because of their interest rates. Suddenly they're coming back with power. These bonds are adjusted due to inflation. So today the rate for an I Series Bond is 9.62%!  

What's the Benefit?  What's the upside?

High Interest Rates (currently) - An I Series Bond is it's backed by United States governed by the Treasury. So in theory, there's little risk there. Unlike a corporate bond or even some municipal bonds that had an inverse relationship where their value goes down as interest rates rise, I Series Bonds legally cannot lose value.  So if you lock in at this rate and you buy $10,000 worth of bonds. You're going to get paid that rate.

Exempt from state and local income taxes - Another great benefit is that unlike other bonds, the I Series Bond's interest is exempt from state and local taxes.

College Savings? - You could theoretically use these bonds to pay for college tuition and supplement a 529 plan.And that would be a tax-free if you used it that way. 

Use your refund to purchase - If you have a refund on your federal return, you can roll that into the purchase of I Series Bonds instead of receiving cash.

During high inflationary periods, like we are in right now, these bonds will continue to rise and interest. It all depends on what the Treasury publishes. The next published date will be October 2022. They're indexed every six months now. No, one's really knows what it's going to be. It could be 10% or it could drop down dramatically. That all depends on if inflation keeps rising or decreases over the next several months.

So, that's kind of the good!

What's the Risk? What's the downside?

Less liquidity - You're going to lose some liquidity. If that's important to you, please note that the rules say that you can't access these funds for one year. So you're locked up for one year.

Interest rates could go down - Every six months, the interest adjusts.So the 9.62% is now, and then October you'll reset your interest.  It could go down (or up).

Penalty to sell early - Second is if you sell or dispose of these bonds within the first five years, you technically call it pay, but they call it a penalty.But the penalty is three months of your last accrued interest. So for example, four years from now, if interest rates are down, inflation is down, and these bonds are only paying 2%, your penalty would be the last three months of 2% accrued interest.So that's not a huge hurdle to get over, but that is what the rules say. 

Limit on amount you can buy per year - Your purchasing power is $10,000 per year. That's the limit in a calendar year. 

How do you go about buying I Series Bonds?

There's there's three ways to acquire. 
1) Through treasurydirect.gov.  We recommend this method.  You can track it. You can track different metrics around it, and you also have a good online record of their ACH right from your account.
2) Most local banks will support this. You can go to the local bank and tell them you want to buy an I Series Bond.  Make sure it's the right bond and the right interest rate.  But they can do that.
3) Allocating your tax refund towards it as well. 

If you have any questions, please let our team know!