Updated: May 19, 2024

The Basics of Series I Savings Bonds

Learn how fixed rates and inflations rates work to determine your composite rate and affect your returns on Series I savings bonds.
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Series I savings bonds offer Americans another savings vehicle to help them save towards their financial goals. In many ways, I bonds are similar to certificates of deposit (CDs) that are offered by financial institutions.

In any calendar year, you can purchase up to $10,000 in electronic Series I savings bonds (only available through TreasuryDirect.gov). The I bonds can be held for up to 30 years. However, they cannot be redeemed within the first 12 months and any redemptions within the first 5 years will result in a penalty equal to the last 3 months of interest.

The composite rate for I bonds is determined by the following formula:

  • Composite rate =

The fixed rate is set solely by the Treasury Department and it remains the same for the life of the bond.

The semi-annual inflation rate is determined by the change in the Consumer Price Index for All Urban Consumers (CPI-U) between the months of March and September of every year. The CPI-U is announced monthly by the Bureau of Labor Statistics.

The fixed rate and semi-annual inflation rate changes on the first day of every May and November.

The inflation rate for I bonds will cycle every six months starting from the day that they were purchased. When a new six-month period has arrived, the new inflation rate is used in the above formula, with the fixed rate obtained during purchase, to determine the composite rate for the next six months.

Ideally, you want to be able to a lock in the highest fixed rate possible, because it would have a long-term effect on your interest earnings if you decide to hold the Series I savings bonds for an extended period of time.

But, it is also important to keep a close eye on inflation because it represents a big part of the composite-rate calculation. See the next time to learn more.