In a world where the stock market is unpredictable and interest rates are still at a premium, many investors may be looking for someplace to put their money that is as close to risk-free as possible — even if it means forgoing the chance for a bigger reward. One popular pick are I Bonds: savings bonds issued by the U.S. government. These bonds are virtually risk free and have a robust fixed interest rate. There is generally a $10,000 limit per year for purchasing I Bonds, but there are a few ways to get around this limit.
For more help working I bonds into your financial strategy, consider working with a financial advisor.
I Bonds Basics
I Bonds are issued by the federal government and carry a zero-coupon interest rate — plus, they are adjusted each year for inflation. The return will sit at 3.11% for I bonds issued through April 2025.
Unlike other U.S. securities, these bonds are sold at face value — meaning if you purchase a $100 bond, the price will be $100. The bond duration runs from one year to 30 years.
Interest is paid on a monthly basis and compounds every six months. The following deadlines apply to I Bonds:
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Within one year of purchase: You cannot cash the bond.
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Within one year and five years of purchase: You can cash the bond but forfeit the previous three months’ interest payments. This is known as “early redemption.”
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After five years of purchase: You can cash the bond with no penalty.
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After 30 years of purchase: The bond ceases to pay interest.
You don’t have to cash the bond after 30 years, but it will start to lose value against inflation.
How to Get Around the $10,000 I Bond Limit
These bonds are popular, but there is a limit of $10,000 per year that an individual can purchase. That said, there are some loopholes you can exploit if you want to put even more money into these bonds to nab that healthy 3.11% yield:
Tax Refunds
If you are expecting to get a tax refund, you are able to purchase an additional $5,000 in I Bonds. There is one catch, though — they have to be paper I Bonds, not the more popular digital I Bonds. While this adds a bit of a rigamarole, you can eventually convert these paper bonds to digital.
Family Ties
The limit is per person — so if you’re married, each spouse is allowed to purchase $10,000 in I bonds (plus the paper bonds if they have a tax return).
You can also purchase up to $10,000 in I Bonds for your children, but they must be used for the child, to save for college, perhaps.
Businesses and Trusts
Entities like businesses and trusts can also purchase up to $10,000 in I Bonds. This means that if you own a business and you have a living trust, you can purchase up to $30,000 in I Bonds each year.