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Not investment advice. Educational reading. See Disclaimer.
L.12 · BEGINNER · 2 MIN

I-Bonds and TreasuryDirect

Series I savings bonds (I-Bonds) are US government bonds whose interest is designed to keep up with inflation. You buy them at TreasuryDirect.gov. They are a useful inflation-protected supplement to an emergency fund, not a core growth investment. The catch: you cannot touch the money for the first 12 months, and selling within 5 years costs you the last 3 months of interest.

Quiz · 5 questions ↓

Rate, cap, lockup, and exit penalty

FeatureDetail
RateA composite rate = a fixed rate (set at purchase) + a variable inflation rate that resets every 6 months
Purchase cap$10,000 per person per year (electronic via TreasuryDirect; the extra $5,000 paper-bond-via-tax-refund channel was discontinued January 2025)
LockupCannot redeem for the first 12 months
Early-exit penaltyRedeem before 5 years and you forfeit the last 3 months of interest

When I-Bonds fit a portfolio

I-Bonds shine when inflation is high and you want a guaranteed, inflation-tracking home for cash you will not need for at least a year. They are not where long-term growth money goes -- that is stocks. Think of them as a better-than-savings home for part of your emergency fund. Rates reset every May and November; verify at treasurydirect.gov.

Move idle emergency cash into I-Bonds

If part of your emergency fund is sitting in a near-0% savings account and you will not need it for 12+ months, consider moving up to $10,000 into I-Bonds at TreasuryDirect.gov for inflation protection.

Why the annual cap keeps I-Bonds niche

The $10,000 annual cap means I-Bonds can never be your whole portfolio -- and that is fine. They are a niche tool for inflation-protected savings, sitting between your checking account and your stock index funds.

Check: when I-Bonds make sense

When are I-Bonds a sensible choice?
Check your understanding

Sit with the ideas.

What is a real constraint to know before buying I-Bonds?

Why:
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Other lessons in this course.

  1. 01Asset Allocation by Time Horizon
  2. 02Stocks vs Bonds vs Cash: The Numbers
  3. 03The Three-Fund Portfolio
  4. 04Target-Date Funds and Glide Paths
  5. 05Opening a Brokerage Account
  6. 06Funding Your Account and Your First Buy
  7. 07Dollar-Cost Averaging vs Lump-Sum
  8. 08Position Sizing and Rebalancing: Keeping Your Target Weights
  9. 09Rebalancing Rules: Calendar vs Threshold
  10. 10Asset Location: Which Account Holds What
  11. 11Tax-Loss Harvesting -- The Mechanics
  12. 12I-Bonds and TreasuryDirect— reading now
  13. 13Sequence-of-Returns Risk
  14. 14Equity Compensation as Concentrated Risk
  15. 15The 5 / 10 / 30-Year Checkup
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