Ask Terry Questions I Bonds — still not a good deal?

I Bonds — still not a good deal?

By Terry Savage on April 01, 2018 | Chicken Money

Hi Terry, I'm confused by your recent answer to the question whether I Bonds are good inflation protection. You said to avoid them because there was a change to the interest calculation. What changed? I can find no reference to any changes other than the usual twice-yearly setting of fixed and variable rate components. Thanks.

Terry Says

Good catch, and my error. I meant to say that Series EE bonds are no longer attractive because they carry a fixed (low) rate for the life of the bond. ( They used to be adjustable.)   As for I bonds, I haven't recommended them in a long time, because half of their interest is paid over the life of the bond at a fixed rate -- and until recently, that fixed rate was way too low.  I hadn't double-checked that base rate for a while, and I did so before this response, and was pleasantly surprised!  Currently, Series I bonds purchased through April, 2018 carry a fixed rate of 2.58% (with additional interest re-computed every six months).  I would wait until May to see if that base rate for the life of the bond is adjusted upward.  It's hard to imagine it declining,  given current inflation reports.

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