Paulina Cachero at Bloomberg asked whether it is time to buy I bonds again, as the conflict with Iran pushed inflation higher and investors went looking for a government-backed hedge. The composite rate stood at 4.26%, with a 0.9% fixed rate, well below the 9.62% peak that started the I bond rush in 2022.
I gave her the test I use with clients. Do you want to lock in 0.9% above CPI for 30 years on this $10,000? If yes, buy. If no, don't. The headline rate resets every six months and simply tracks inflation, so it is not the number to decide on. The fixed rate is the only part of the deal that is permanent, and it is the only part that varies meaningfully between purchase windows.
The reason to own I bonds is not to beat the market. It is to hold a piece of savings that cannot lose purchasing power, backed by the Treasury, with federal tax deferred until redemption and no state tax at all. For long-term emergency reserves or a conservative slice of a retirement plan, that is a rare combination.
The reason not to buy is timing. Every time CPI makes headlines, people rush in, hold for the 12-month lockup, and sell when the rate cools, giving back three months of interest and never capturing the benefit. I bonds belong in a plan as a standing allocation, sized to the annual limit, bought whether or not inflation is in the news.
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