I Bonds Explained: How They Work and the Current I Bond Rate

Series I savings bonds, usually called I bonds, are issued by the US Treasury to protect your savings from inflation. They are backed by the US government, cannot lose value, and pay a rate that rises when inflation rises. This guide explains how I bonds work, how the I bond rate is calculated, the rules on buying and cashing in, how they are taxed, and when they make sense for your savings.

How the I bond rate is calculated

Every I bond earns a composite rate made up of two parts. The fixed rate is set when you buy and stays with the bond for its whole life of up to 30 years. The inflation rate is based on changes in the consumer price index and resets every six months for all I bonds, old and new.

The Treasury announces new rates on 1 May and 1 November each year. A new rate applies to bonds bought in the following six months, and each bond moves to a new inflation rate every six months from its own issue date. If inflation turns negative, the composite rate cannot fall below zero, so the value of your bond never drops.

The current I bond rate

For I bonds bought from November 2026 to April 2027, the composite rate is 5.51%, made up of a 1.40% fixed rate, the highest since 2006, and an annual inflation rate of 4.08%. At that rate, $10,000 would earn about $275 in the first six months. Check TreasuryDirect for the latest figures after each May and November announcement.

Why the fixed rate matters

The fixed rate is your guaranteed return above inflation for as long as you keep the bond. A bond with a 1.40% fixed rate will always earn 1.40% more than inflation, for up to 30 years. Many bonds bought in earlier years have a fixed rate of 0%, which means they only keep pace with inflation. That is why savers watch the fixed rate closely: a high one locks in a real return that few other safe investments offer.

The rules for buying I bonds

Purchase limit. You can buy up to $10,000 of electronic I bonds per person each calendar year through TreasuryDirect.gov, so a married couple can buy $20,000 a year between them.

Lock-up period. You must hold an I bond for at least one year before you can cash it in.

Early redemption penalty. If you cash in before five years, you lose the last three months of interest. After five years there is no penalty.

Timing. Interest is credited for the whole month in which you buy, so buying late in a month still earns that month's interest. Leave a few days for the purchase to settle.

How I bonds are taxed

Interest is exempt from state and local income tax. Federal tax can be deferred until you cash in the bond or it reaches final maturity after 30 years. If you use the proceeds for qualified higher education expenses and meet the income rules, the interest may also be free of federal tax.

Are I bonds a good investment?

I bonds suit money you want to keep completely safe from both loss and inflation for at least a year, and ideally five or more. They work well for part of a long-term cash reserve or for savings for a goal a few years away. They are less suitable for an emergency fund you might need within 12 months, because of the lock-up; a high-yield savings account fits that better. For retirement, I bonds can complement tax-advantaged accounts such as a 401(k) or IRA; see 401(k) and IRA contribution limits.

Compare the composite rate with what you can earn elsewhere, such as Treasury bills or high-yield savings, and remember that the inflation part will change every six months.

Frequently asked questions

When do I bond rates change?

The Treasury announces new rates on 1 May and 1 November each year.

How much can I invest in I bonds?

Up to $10,000 per person each calendar year through TreasuryDirect.

Can I lose money on an I bond?

No. The composite rate cannot go below zero, though cashing in before five years costs three months of interest.

I bonds explained: how Series I savings bonds work and the current rate