How is I-bond interest calculated?


Q. Do I-bonds keep earning the same interest over time as they earn when bought? For example, at present, I-bonds earn about 3.5% interest. Will they still earn that interest when the new rate is announced in October?
— Investor

A. This is a great question.

The actual rate of interest that you earn on I-bonds can indeed change after you purchase the bond.

I-bonds earn interest in two ways, said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn.

First, there is a fixed rate that’s determined at the bond’s issuance, he said.

Second, there is an adjustable rate depending on the inflation rate, Scheibner said.

The total interest rate will be the combination of the two – fixed and adjustable.

“The fixed-rate portion of the bond will not change for the duration of the bond,” Scheibner said. “However, the adjustable inflation-linked rate may change every six months depending on the CPI-U — Consumer Price Index for all Urban Consumers.”

You can learn more on the TreasuryDirect, which provides information about the current rates for I bonds, and the historical rates:

“I-bonds should only be purchased with money that you do not need within 12 months,” he said. “Also, if you cash the bond in before five years, you’ll lose the last three months of interest.”

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This story was originally published on Sept. 16, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.