I bonds pay almost 10%. Shall I buy?

Q. What are your thoughts on government bonds I?

— Potential investor

A. I bonds are hot right now, thanks to higher inflation.

You can buy all kinds of Treasury bills by going online at treasurydirect.gov.

I bonds are currently experiencing high earned interest due to the high consumer price index (CPI), of about 9.6%, said Debra Ohstrom, a chartered financial analyst and financial educator.

The interest calculation on I-bonds consists of two parts.

The first part is a “fixed rate” based on current interest rates. The second component is an inflation rate.

It is important to note that the rate on I bonds can change every 6 months based on current interest rates and inflation measurements.

Also, individuals are limited to buying $10,000 worth of I-bonds in any given year (unless you buy some when you file your tax return).

“Keep in mind that you must hold an I-bond for at least one year, and if you hold it for less than five years, you could lose three months of income on payout,” Ohstrom said. “Your earned interest is added to the bond’s value on the first of each month and compounded semi-annually. This means it doesn’t pay out a quarterly income stream if you’re looking for cash flow.

Mail your questions to Ask@NJMoneyHelp.com

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly e-newsletter.

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