Cash is important for many reasons including liquidity, emergencies or to make an important purchase in the near future. However, with interest rates at historic lows, it can be frustrating to see your savings account add only a few cents or dollars to your monthly bank statements.
How would you like to earn 7.12% (annualized) over the next six months compliments of the U.S. Treasury? It sound too good to be true, but it is available. We are speaking about series I savings bonds. According to treasurydirect.gov, "I bonds are a savings bond that earns interest based on combining a fixed rate and an inflation rate. A combination of a fixed rate that stays the same for the life of the bond and an inflation rate (based on an adjusted Consumer Price Index) that is set twice a year. For bonds issued from November 2021 through April 2022, the combined rate is 7.12%.
I bonds earn interest for 30 years unless you cash them first. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest. For example, if you cash an I bond after 18 months, you get the first 15 months of interest." You can cash your Series I bonds any time after 12 months, so make sure you can commit your cash for at least a year. You are allowed to invest up to $10,000 each calendar year per individual, if you purchase an electronic bond directly at treasurydirect.com. So, a married couple could invest a total of $20,000. When you file your taxes, you can buy another $5,000 paper bond with your federal tax refund (assuming you have a refund or plan to increase your withholdings to have one). The next rate will be set in May of 2022. Assuming inflation remains elevated the interest rate may be quite attractive. But, even if inflations falls to around 3%, you could still potentially net around a 4-5% return for one year. Not bad for a principal protected, essentially risk-free investment. Feel free to visit Series I Savings Bond FAQ for more information. This would be a direct transaction with you and the U.S. Treasury department. So, no Financial Advisory firms are involved, but we certainly want to make all of our readers aware of the opportunity. Feel free to reach out if we can be of assistance.