Where to Invest During Inflation – Try I-Savings Bonds

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invest during inflation

The Bureau of Labor Statistics tracks the consumer price index (CPI) which measures the average change in prices over time that consumers pay for a basket of goods and services. In October 2021, this number was 6.2% — a 30 year high for inflation. Whether or not this inflation is short term or “transitory,” people want to know where to invest so they do not lose purchasing power. There’s a few asset classes and investments to consider when inflation is high. This post will focus on one specific type that is typically overlooked by investors – Series I Savings Bonds by the US Treasury.

Series I savings bonds can be purchased directly from the US Treasury from treasurydirect.gov. These are low risk savings products and the current interest rate is derived from a fixed rate and a semiannual inflation rate.

In May 2021 to Oct 2021, the rate was 3.56%,

from November 2021 to April 2022, the rate was 7.12%,

from May 2022 to Oct 2022, the rate was 9.62%,

and most recently, from November 2022 to April 2023, the rate is 6.89%!

You read those numbers right. When the best high-yield savings accounts are paying 0.5% to 3%, Series I Savings bonds present a good place to park your money.

Investments in series I bonds are limited to $10,000 per person per year. The minimum purchase amount is $25 and you must hold the bonds for at least a year.

You’ll earn interest up to 30 years or unless you cash in the bonds, whatever comes first.

  • If you redeem the bond before 5 years, you forfeit the three previous months of interest payments.
  • If you redeem the bond after 5 years, there is no penalty.

You will not lose your principal – this is a risk-free investment. Savings bonds are exempt from state and local taxes. You will pay federal income tax on the interest earnings.

You probably haven’t heard of these types of investments because brokerage firms make little to no commission on these since people can purchase directly from the US Treasury.

For more information, check out the details on the Treasury Direct website.

 How Do I purchase Series I Savings Bonds?

Go to TreasuryDirect.Gov and open an account.

Either Log-in and select create new account or click open an account.

Apply for a TreasuryDirect Account.

You’ll need your

  • Tax ID Number (social security number if applying as an individual or EIN)
  • Email address
  • Bank account and routing number
    • This is the bank information of how you plan to fund or purchase the I Series Savings Bond

Your account is going to require lots of security so be prepared to write a complex password.

To protect your account, you’ll need to create the following:

  • Password
  • Password reminder
    • Give yourself a hint about your password
  • Personalized image
    • Choose an image to associate with your account
  • Caption
    • Come up with a unique phrase or quote that you will remember and associate with your account
  • Security questions

Write down all this information on a piece of paper and keep in safe but hidden location in case you forget. You don’t want to be locked out of your account.

Once you submit, you’ll receive an email from TreasuryDirect with your account number. This number will be used as your log-in.

When you log in, you’ll see your personalized image and your caption.

Also, to prevent hackers, there’s a virtual keyboard to type your password.

Once you log in and you are ready to purchase your Series I Savings Bond, click BuyDirect on the top of your main dashboard screen.

Click Series I and click submit to purchase.

After a few days, log back into your TreasuryDirect account and note that your purchase should be in your holdings.

Congratulations, you purchased your I Series Savings Bond.

Don’t forget your account and check back every so often to see the updated savings bond rates.

Summary

If you have money sitting in your bank account but do not need to touch for one year, consider purchasing I-series savings bonds for their current yields.

Buying an I-Series Bond isn’t complicated if you follow the above steps.

Note: I am not a financial professional and content on this site is my personal opinion. Please consult a tax and legal professional for more information.  

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Categorized as Invest

By Adam

Hey, I'm Adam. I started Wonder of Compounding in 2021 to help others learn about financial literacy and achieve their financial goals. I’m a lifelong student and eternal optimist with a passion for investing, technology and entrepreneurship. I’ve worked in the financial services industry for more than a decade. In 2008, I earned my Bachelor of Engineering and Master of Engineering from Stevens Institute of Technology and in 2015, I received my MBA from New York University.

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