Remember last year when I-Bonds were the hottest ticket in town with a guaranteed 9.62%?
Well… now that they’re only paying 4.3%, they ain’t so hot anymore.
So what should you do with them?
Redeem them… BUT NOT YET!
You have to wait 12 months before they’ll let you, but you should probably wait a little longer. Like 3 months longer.
How come? Because if you redeem them sooner than 5 years, then they’ll keep the last 3 months of interest.
You lock into 6 months at the current interest rate, even if you buy them the day before the rates reset.
Let’s assume you bought them on 10/31 last year.
That means you earned 9.62% interest until April 30, 2023 even though the rate reset to 6.89% on November 1, 2022.
And then you’ll earn 6.89% until October 31, 2023.
However, the rate reset this past May 1 to 4.30% which is not so hot.
If you redeem them immediately, you’ll forfeit 3 months of interest at 6.89% which is a decent rate.
Instead, if you redeem them at month 15, you’ll forfeit 3 months of 4.37% instead. Much better.
THE BOTTOM LINE
If you bought I-bonds between May 1 and October 31, 2022, wait until you’ve held them 15 months to redeem them.
