09 Aug I’m confused about I Bond interest. How does it work?

Q. I bought a $10,000 I Bond on May 13, 2022. When I go to my Treasury Direct account, it shows the $10,000 purchase but no interest. My brother-in-law bought one in April and it shows $60.When will interest show up on my account?
— Investor

A. I Bonds have been very attractive in this rising interest rate environment.

They’re paying nearly 10%, better than you’ll find just about anywhere.

The I Bond interest that is viewable online is the actual money you can take out after all the rules have been applied, said Jim McCarthy, a certified financial planner with Directional Wealth Management in Rockaway.

The first important rule is that you cannot redeem an I Bond within a year, he said. The second is that you will be penalized on the last three months’ worth of interest if you redeem within five years. The last rule is that you will not earn interest for the month that you redeem the I Bond, he said.

On your purchase, if you bought your I Bond in May, you have held the bond for 3 months (May-June-July) and the U.S. Treasury will penalize you for the previous three months (May-June-July), McCarthy said. The other rule is that the month that you redeem, the current month, you will not earn interest, he said.

In September, your account will start to show interest earned in April 2022, which would be out of the penalty months. In September, the penalty months would be June-July-August.

Your brother in law is currently seeing interest earned for the month of April.

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This story was originally published on Aug. 9, 2022.

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