Understanding the Pros & Cons of I Bonds

The purchase limitations and the lock-up periods need to be evaluated

Investing Bonds

I bonds are U.S. savings bonds designed to protect the value of your cash from inflation. And with inflation surging to 40-year highs, investors are especially interested in higher-returning, lower-risk investments.

But before making a decision to rush out and buy I bonds, make sure you understand the pros and cons first. This is critically important given that most will instinctively leap to own a security that pays out an annual rate of over 9% – but like any investment – know what you're buying before you buy.

What's an I bond?

A Series I savings bond is a security that earns interest based on a fixed rate and a rate set twice a year based on inflation. The bond earns interest until it reaches 30 years, or you cash it, whichever comes first.

What's the interest rate on an I bond purchased today?

For the first six months you own it, the Series I bond purchased from May 2022 through October 2022 earns interest at an annual rate of 9.62 percent. A new rate will be set every six months based on this bond's fixed-rate (0.00 percent) and inflation.

Who may own an I bond?

Individuals: Yes, if you have a Social Security Number and meet any one of these three conditions:

  • United States citizen, whether you live in the U.S. or abroad
  • United States resident
  • Civilian employee of the United States, no matter where you live

You must establish a TreasuryDirect account to buy and own an electronic I bond.

Children Under 18

Yes, if they meet one of the conditions above for individuals.

Information concerning electronic and paper bonds:

  • Electronic bonds in TreasuryDirect. A child may not open, buy securities, or conduct other transactions in a TreasuryDirect account. A parent or other adult custodian may open for the child a TreasuryDirect account that is linked to the adult's TreasuryDirect account. The parent or other adult custodian can buy securities and conduct other transactions for the child. Other adults can buy savings bonds for the child as gifts.
  • Paper bonds. Adults can buy bonds in the name of a child.

How can I buy I bonds?

Two options:

  • Buy them in electronic form in our online program TreasuryDirect
  • Buy them in paper form using your federal income tax refund

What do I bonds cost?

  • You pay the face value of the bond. For example, you pay $50 for a $50 bond. (The bond increases in value as it earns interest.)
  • Electronic I bonds come in any amount to the penny for $25 or more. For example, you could buy a $50.23 bond.
  • Paper bonds are sold in five denominations; $50, $100, $200, $500, $1,000

How much in I bonds can I buy for myself?

In a calendar year, you can acquire:

  • up to $10,000 in electronic I bonds in TreasuryDirect
  • up to $5,000 in paper I bonds using your federal income tax refund

Three points:

  • The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year.
  • Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit.
  • The limits are applied per Social Security Number of the first person named as the owner of a bond or, for an entity, per Employer Identification Number

Two exceptions:

  • If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit
  • If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the bond amount. (The annual limit before 2008 was greater than today's limit of $10,000.)

Can I buy I bonds as gifts for others?


  • Electronic bonds: You can buy them as gifts for any TreasuryDirect account holder, including children.

  • Paper bonds: You can request bonds in the names of others and then, once the bonds are mailed to you, give the bonds as gifts.

How much in I bonds can I buy as gifts?

The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. Per calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.


One essential detail to remember is that you need to hold your I bond for at least one year. And if you hold it for less than five years, you lose three months worth of earnings when cashing out.

Maybe the tax benefits and the protection against inflation are appealing to you. But like any investment, make sure I bonds fit well within your overall financial plan.

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