Using Inflation to Your Advantage

May 9, 2022 | Garrett Van Nostrand, Van Nostrand Wealth Management LLC


I Bonds – A Rare Life Raft in Turbulent Waters

High inflation has opened a unique opportunity to take advantage of I Bonds. I Bonds are offered by the Treasury Department and offer 100% principal protection backed by the U.S. government. This is an incredibly safe investment and I Bonds Composite Rate – which consists of a combination of an inflation-adjusted rate and fixed rate – is at its highest level since their inception at a 9.62% annualized return. The Composite Rate is determined every six months – fixed rate is determined by the Treasury and inflation-adjusted rate is determined by the change in CPI over the past six months – and the last change came days ago meaning the 9.62% Composite Rate will last until October.

I Bonds have a thirty-year maturity but can be redeemed after being held for at least 12 months. Between the first year and five years after issue, the funds can be redeemed with the forfeit of interest for the three months prior. After being held for five years, I Bonds can be redeemed at their current value.

How to Purchase

I Bonds can be purchased through the Treasury Direct Website.

Fill out your name and email and write “I Bonds” in the comment section to receive a detailed step by step guide for how to purchase I Bonds from the Treasury Direct Website.

Limits: Purchases are limited to $10,000 annually per person. This is per social security number so a married couple could purchase a total of $20,000 per year. ($10,000 per person.) Everyone is required to establish a separate account.

Paper I Bonds can be purchased using a tax refund for up to $5,000 in addition to the $10,000 annual limit. The Treasury Direct Website allows for an easy paper-to-electronic conversion. The amount purchased can be further increased by purchasing I Bonds for children or by trusts and estates. The income from I Bonds can also be tax-exempt for those using the bond to pay college tuition if all five of the following qualifications apply to you:

You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.

You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.

Your filing status is any status except married filing separately.

Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.

You were 24 or older before your savings bonds were issued.

Fill out your name and email and write “I Bonds” in the comment section to receive a detailed step by step guide for how to purchase I Bonds from the Treasury Direct Website. 

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