Are I Bonds Still a Good Place for Your Money? Spring 2023 I Bond Variable Rate Set at 3.38%
The latest recalculation of I Bond rates is out and it’s set at 3.38%.
The 3.38% will be the variable rate of return for I Bonds purchased during the following six-month period – May 1, 2023, through October 31, 2023.
And, of course, the 6-month rate of return for current I Bond holders once their current rate ends.
I Bonds currently have a fixed rate of 0.4% which when added to the variable rate will make the I Bond’s total rate 3.78%.
The fixed rate may change May 1, 2023, in which case the actual I Bond rate may be a bit higher.
All told, though, this is a significant decrease of interest paid from the past few I Bond recalculation cycles.
We’ve written about I Bonds a few times over the past year or so…you can read our last post which provides details on I Bonds and how to buy at this link.
While I Bonds remain an ok investment, their outsized returns are now gone, making similar, and potentially more lucrative, options more appealing.
U. S. Treasurys
U.S. Treasurys, especially short-duration Treasury Bills such as 13-week, 26-week, 52-week, and possibly 2-year Notes an alternative consideration. Especially if you are an investor closing in on retirement age, are retired, or want to invest more than $10,000 (the maximum amount per person, per year that can be invested in I Bonds).
You can view the most recent Treasury auctions and the interest rates associated with the Bills and Notes auctioned at the U.S. Department of the Treasury’s Treasury Direct Announcement, Data & Results webpage linked here.
As of mid-April, the 13 and 26-week rates are in the high 4% range, close to 5% and the 2-year is right around 4%.
High Yield Savings Accounts
But, an even easier option, and one that will likely provide a return better than I Bonds, are plain old savings accounts…at least the high yield variety.
We offer a page that lists a few high yield savings accounts, but there are a lot more from which to choose.
And brokerage accounts – if you have a taxable investment account or IRA account – are starting to offer similar, high yield accounts into which you can deposit your money just to earn the 4-5%.
Not to mention options that fall into the category of “I would not have thought they’d offer that.”
Keep in mind, these savings accounts that offer the 4-5% rates are primarily online financial institutions. Most banks with large brick and mortar footprints – think Bank of America, Chase, U.S. Bank, etc. – can’t/won’t offer savings rates at those levels.
And, also, know that the reason these savings accounts are offering rates up to 5% is because the Federal Reserve Bank has increased interest rates so significantly over the past year. Economic conditions may result in those increases coming to an end soon, with the possibility that the Federal Reserve will begin lowering rates within the next year. If that were to happen, the rates being paid on these savings accounts will drop as well.
Back to I Bonds
The next recalibration of I Bond rates will be November 2023, with new rates for the following 6-month period likely announced mid-October. Unless a significant economic shock occurs between now and fall, it’s unlikely I Bonds will return to offering outsized rates like we saw in 2021-2022.
So you’ll have to decide whether the 3-4% return is good for you, or if another option is beckoning for your money.
Right now there are some decent alternatives. Whether those stay as attractive over the next year is the question.
What are you doing with your savings? Keeping it invested in I Bonds? Or moving it out to other alternatives?
