It’s tough to find a guaranteed rate approaching 7%, and that’s what you’ll get for your first 6 months if you buy I Bonds between November 2022 until the end of March 2023.
While you may not be a huge fan of the issuer — that would be the U.S. Treasury, you cannot find a safer source of fixed income. After all, the Treasury has the power to create money and the U.S. dollar still holds prestige.
These bonds are not new, but they’re newly enticing. You see, the interest rate is tied to one of the U.S. Governments measure of inflation, the CPI-U, which has been rather high throughout 2022.
For the same reason that Social Security benefits will receive a 8.7% boost as a cost-of-living adjustment for 2023, I Bonds have been paying a higher rate than they have in years.
Interest in I Bonds is credited twice a year, but you do not pay taxes on that interest until you decide to cash out your bond. It is automatically reinvested.
“High Yield” savings accounts are paying about anywhere from a few basis points up to about 3% interest in late 2022. Typical savings accounts pay even less.
Vanguard’s Total Bond Fund yields 1.5% and the value of the underlying fund is subject to change, unlike the value of an I Bond, which can never drop (or rise) in value.A 6.89% return is awfully good for fixed income at the moment.
Sure, Congress will play games and kick the can down the road, but the odds of our government actually defaulting on debts owed to investors is exceptionally low.