| The Treasury Department announced that Series I savings bonds — more commonly known as I bonds — will pay 9.62% interest through October.
Yes, indeed, you read that number correctly. That's 9.62%, folks.
I bonds are a type of U.S. savings bond designed to protect the value of your cash from inflation. With inflation hitting four-decade highs, many investors are becoming more interested in higher-returning, lower-risk investments, so this type of savings bond may make a lot of sense for some investors.
I bonds are backed by the U.S. government. They offer a guarantee that you can recover your original capital plus any increases in the official cost of living along the way. However, there is a slight catch: The maximum purchase is $10,000 per year, per account holder. (You can also purchase another $5,000 with your tax refund, upping the annual total purchase amount of series I bonds to $15,000 per person.)
Additionally, you must own the bond for at least five years to receive all of the interest that is due. You cannot cash out an I bond before holding it for a year; if you do so after that point (but before five years), you forfeit three months of interest.
There is no interest penalty for cashing in the bonds after five years.
Interest rates on I bonds are adjusted regularly to keep pace with rising prices. In addition, series I bonds are exempt from state and local income taxes, which makes them an even better low-risk investment for investors who live in high-tax states and cities. Investors can get detailed information about I bonds and can also buy I bonds annually through the government's TreasuryDirect website at Treasurydirect.gov.
Never heard of these I bonds before? Don't feel too bad.
"I bonds are the best-kept secret in America," says famous financial economist Zvi Bodie, who taught finance and investment management at Harvard and MIT and is currently Professor Emeritus at Boston University.
Depending on your situation, I bonds may be a good place to park cash or become part of your bond portfolio. In fact, an advisor said: "As it stands right now, there's really not a better deal out there."
As with any investment opportunity, do your homework and find out the various pros and cons and make sure it makes sense for you.
For more cool stuff like this, be sure to visit CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. |
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