Series I savings bonds bought between November 1, 2026, and April 30, 2027, earn 5.51% for their first six months, the highest starting rate since late 2022. That headline has many of our clients asking whether I Bonds belong in their savings plan.
Below, we walk through how I Bonds work, how to buy them, how the rate resets every six months, how they are taxed, and the main pros and cons to weigh before you buy.
What is an I Bond?
An I Bond is a savings bond issued and backed by the U.S. Treasury that is designed to keep your money ahead of inflation. You lend the government money, and it pays you interest that rises and falls with the Consumer Price Index.
A few basics:
- Term: I Bonds earn interest for up to 30 years, or until you cash them in.
- How interest is paid: Interest is added to the Bond’s value every six months and compounds. You receive it all when you redeem the Bond, not as periodic payments.
- Safety: The Bond’s value can never go down. Even if inflation turns negative, the rate floors at zero.
How the interest rate is built
Every I Bond earns a composite rate made of two parts:
- A fixed rate. Set when you buy the Bond and locked in for its entire 30-year life.
- An inflation rate. Reset every six months based on the change in the CPI-U (the Consumer Price Index for All Urban Consumers).
Treasury combines them with this formula:
\text{Composite} = \text{Fixed} + (2 \times \text{Semiannual inflation}) + (\text{Fixed} \times \text{Semiannual inflation})
The fixed rate is what separates a good I Bond from an ordinary one over the long run. The inflation rate is the same for every I Bond ever issued; the fixed rate is the part you keep forever.
The current I Bond rate: 5.51%
Treasury announced new rates on November 1, 2026. I Bonds issued from November 1, 2026 through April 30, 2027 earn a composite rate of 5.51% (TreasuryDirect).
| Component | Nov 2026 – Apr 2027 | Previous (May – Oct 2026) |
| Fixed rate (locked for life) | 1.40% | 0.90% |
| Semiannual inflation rate | 2.04% | 1.67% |
| Composite rate (annualized) | 5.51% | 4.26% |
The math: 1.40% + (2 × 2.04%) + (1.40% × 2.04%) = 5.51%.
The bigger news may be the fixed rate. At 1.40%, it is the highest fixed rate Treasury has offered since November 2006. Anyone who buys during this window keeps that 1.40% on top of inflation for as long as they hold the Bond.
Older bonds also pick up the new 4.08% annualized inflation rate at their next reset, but their own fixed rate still applies. For example, a bond with a 0% fixed rate will earn 4.08%, one bought in May 2026 (0.90% fixed) will earn about 5.00%, and one bought in November 2024 (1.20% fixed) will earn about 5.30%.
How the rate adjusts every six months
Treasury announces new rates every May 1 and November 1, but your Bond’s rate changes every six months from the month you bought it. A bond’s “anniversary” months drive everything.
- What changes: Only the inflation portion. Treasury measures how much the CPI-U moved over the prior six months (for example, March to September) and sets a new semiannual inflation rate.
- What stays the same: Your fixed rate, for the full 30 years.
- When your Bond resets: Six and twelve months after its issue month. A bond bought in February resets every August 1 and February 1; a bond bought in November resets every May 1 and November 1.
Example
Say you buy a $10,000 I Bond in November 2026.
- November 2026 – April 2027: It earns 5.51% (1.40% fixed plus the current inflation rate).
- May 1, 2027: The Treasury announces a new inflation rate based on CPI-U from September 2026 to March 2027. Your Bond keeps its 1.40% fixed rate and takes on the new inflation rate for the next six months.
- Every six months after that, the same thing repeats. If inflation rises, your rate rises; if it cools, your rate falls, but never below zero.
That is the core trade-off: you are guaranteed to keep pace with inflation plus your fixed rate, but you don’t know exactly what you will earn beyond the first six months.
How to buy I Bonds
I Bonds are sold only electronically through TreasuryDirect.gov, the Treasury’s own website. Banks and brokerages do not sell them.
- Open a TreasuryDirect account. You’ll need your Social Security number, a U.S. address, an email address, and a checking or savings account.
- Choose BuyDirect, then Series I. Pick the amount and purchase date.
- Fund the purchase from your linked bank account. The Bond is issued as of the first day of the month you buy it, so a purchase late in the month still earns interest for the whole month.
Purchase limits and rules
| Rule | Detail |
| Minimum purchase | $25 |
| Annual limit | $10,000 per person (Social Security number) or entity (EIN), per calendar year |
| Minimum holding period | 12 months; you cannot cash out before then |
| Early redemption penalty | Lose the last 3 months of interest if cashed before 5 years |
| Maximum term | 30 years, then interest stops |
Ways families buy more
- Spouses each have their own $10,000 limit.
- Children can have bonds bought in their name through a parent’s linked minor account.
- Trusts and businesses with their own EIN can each buy up to $10,000.
- Gifts: You can buy I Bonds as a gift for someone else. A gift counts against the recipient’s limit in the year it is delivered, not the year you buy it.
Note: You may see older articles mention buying an extra $5,000 in paper I Bonds with your federal tax refund. That program ended January 1, 2025, and IRS Form 8888 no longer offers it (TreasuryDirect timeline).
How I Bonds are taxed
I Bond interest is subject to federal income tax but exempt from state and local income tax.
- Federal tax can be deferred. Most owners report the interest only when they cash the Bond, or it reaches 30 years. You can instead elect to report it each year as it accrues, which can make sense for a child or anyone in a very low bracket. Changing methods later requires following IRS procedures, so choose deliberately.
- No state or local income tax . This benefit matters most if you live in a state with an income tax.
- Possible exclusion for education. If you use the proceeds for qualified higher-education expenses (or roll them into a 529 plan or Coverdell ESA in the same year), some or all of the interest may be tax-free under the education exclusion, claimed on IRS Form 8815. Income limits apply, and the Bond must be owned by a parent who was at least 24 when it was issued, not by the student.
- Gift and estate rules still apply to bonds you give away or leave to heirs.
Timing your redemptions, such as cashing bonds in a lower-income year or spreading them over several years, can noticeably reduce the tax bill. This is an area where a short conversation with your CPA pays off.
Pros and cons of I Bonds
Pros
- Inflation protection. Your return adjusts with CPI every six months, so your purchasing power is protected.
- A strong fixed rate right now. The 1.40% fixed rate is locked in for life and is the best since 2006.
- Very low risk. Backed by the full faith and credit of the U.S. government; the value never declines.
- Tax advantages. No state or local income tax, federal tax deferral for up to 30 years, and a possible education exclusion.
- Low cost to start. $25 minimum, with no fees or commissions.
Cons
- Money is locked up for a year. You cannot touch it for 12 months, so it is not a replacement for your emergency fund.
- Early-redemption penalty. Cashing out before five years costs the last three months of interest.
- Purchase limits. $10,000 per person per year limits how much you can put to work.
- Variable returns. If inflation falls, your rate falls with it. High-yield savings accounts, CDs, or Treasury bills may pay more at times.
- TreasuryDirect can be clunky. The site is less user-friendly than a bank or brokerage, and bonds can’t be held in an IRA or brokerage account.
- Not a growth investment. Over long periods, I Bonds are unlikely to match stocks; they are a place for safe money, not your retirement engine.
The bottom line
With a 1.40% fixed rate and a 5.51% starting composite, I Bonds bought before April 30, 2027 are among the most attractive in nearly 20 years. They work best for money you won’t need for at least a year, and ideally five, that you want shielded from inflation and market swings.
They are not right for everyone. Your tax bracket, your timeline, education plans, and how much cash you already hold all affect whether I Bonds make sense and how to structure purchases across your household.
Have questions about I Bonds or how they fit your tax picture? Contact KG Meyer PC to talk through your situation before you buy or cash in.
This article is for general educational purposes and is not individualized tax, legal, or investment advice. Rates and rules are current as of November 1, 2026, and may change; confirm current details at TreasuryDirect.gov.
