Many people bought I Bonds in 2021 or 2022 because they offered great interest rates - between 6.48% and 9.62%. That was far higher than comparable investments. However, recently the I Bond inflation rate dropped to 3.38%, so that begs the question, when should you cash in your I Bond?
What is a Series I bond?
A Series I bond is an interest-bearing U.S. government savings bond that earns a small fixed interest rate plus a variable rate based on inflation. The fixed-rate component is determined by the Secretary of the Treasury and announced every six months in May and in November. This fixed rate is then applied to all Series I bonds issued during the next six months and does not change throughout the life of the bond. I Bonds have a couple restrictions around them: You can not cash out your I Bond for 12 months after purchasing it and if you want to cash in the bond in less than 5 years, you lose the last 3 months of interest.
When do I cash in my I bond?
The answer is that it depends on when you purchased the I Bond. Your personal interest rate on the I Bond resets on your I Bond’s individual 6-month reset time frame, not when new rates are announced in May and November. When it comes due for the new rate, you may be thinking you want to cash out right away. However, because you lose the last 3 months of interest rate, you want to hold onto your I Bonds until 3 months after you switch to the lower rate.
Schedule to potentially cash out based on purchase month and 3-month lower interest waiting period:
November 2021 | August 2023 |
December 2021 | September 2023 |
January 2022 | October 2023 |
February 2022 | November 2023 |
March 2022 | December 2023 |
April 2022 | January 2024 |
May 2022 | August 2023 |
June 2022 | September 2023 |
July 2022 | October 2023 |
August 2022 | November 2023 |
How do I cash in my I Bonds?
In order to redeem your I Bonds, log in to your TreasuryDirect account. Here you will have an option to redeem securities under the heading “Manage My Securities”. As you go through this process, you will have to select with securities you wish to redeem, as well as the destination for the proceeds (ie. bank account). If this is not cash that you will need in the near future, we do currently have higher-paying short-term investment options such as bonds or money market funds.
If this is something you are interested in, or if you have specific questions about your I Bonds and the best strategy for redemption, please reach out to us directly.