Set a reminder to sell your I-Bonds

Suhas Joshi

Jun 29, 2023

With the variable portion of the interest rate on I-Bonds falling to 3.38%, holders of I-Bonds will most likely be better off exchanging them for other risk-free investments. However, the optimal time to do this might not be just yet. Read on to figure out when the best time for you to sell might be, and why. (Or just skip to the table if you don’t care for the “why”).

What are I-Bonds?

Series I Bonds are designed to protect investors from inflation. The return yielded by I Bonds varies with the prevailing rate of inflation. They are issued by the US Treasury and are considered a risk-free investment, since the US Treasury (debt ceiling shenanigans notwithstanding) always pays its debts.

I-Bonds were a particularly great deal around late 2021 and early 2022 when they were yielding rates as high as 9.62% compared to the measly 0.5% returned by short term treasuries.

How are I-Bond Interest Rates Set?

The interest rate paid by I-Bonds consists of 2 components: A fixed rate, and a variable rate.

The fixed rate on I-Bonds is set when the I-Bonds are issued. The fixed rate on I-Bonds issued from May 2020 through October 2022 was 0%, but has been slightly higher at other times.

The variable rate on I-Bonds is a function of the prevailing inflation rate. I-Bonds had a very high variable rate recently because inflation was so high. The variable portion of the interest rate is adjusted twice a year, in May and November, based on inflation data. The most recent variable rate, set in May 2023, is 3.38%.

Why do some of my I-Bonds show a different interest rate?

There’s a second part to how I-Bonds pay interest: The semi-annual anniversary rate. When an I-Bond is issued, the initial interest rate is the sum of the then prevailing fixed and variable interest rates. Every 6 months (based on the issue date, which is the first of the month on which the I-Bond was issued), the variable rate is adjusted to match the then prevailing variable rate.

Let’s consider an example. For an I-Bond purchased on January 20th, 2022, the issue date is January 1, 2022. The fixed rate (as set at the time), is 0%. The anniversary dates of this bond are July 1 and January 1. The current rate of that bond was set on its last anniversary date of January 1, 2023. The variable interest rate on I-Bonds at the time was 6.48% so that’s the rate the bond will continue to pay until its next anniversary, which will be July 1, 2023. Starting July 1, 2023, the bond will start paying out at the new lower rate of 3.38%. So holders of this bond are still beating the market by getting an interest rate higher than the comparable treasury rate. But the fun will stop on July 1, 2023.

So I should sell on my anniversary date?

Not so fast. Selling an I-Bond causes you to forfeit the previous 3 months of interest. So if the investor in the previous example sold their I-Bonds on July 1, 2023, they would actually forfeit 3 months of a very attractive risk-free interest rate. The ideal time for them to sell would be 3 months later, on October 1, 2023. That way the interest they would forfeit would be the lower 3.38%.

Another thing investors should be aware of is that I-Bonds only calculate interest on a monthly basis. This is different from most other investments where interest is calculated daily but paid out monthly. This means that selling your I-Bond on July 1, 2023 would yield you the exact same amount as selling it on July 30, 2023. So you’re best off selling your I-Bonds at the beginning of a month so your money has more time to work for you.

So when exactly should I sell my I-Bonds?

The exact optimal date to sell your I-Bonds depends on the month when it was issued. The following table should help.


You should set yourself one or more reminders to log in to your Treasury Direct account on the appropriate date or dates, based on your I-Bond holdings, and sell them.

When does it make sense to hold I-Bonds?

As a risk-free investment, the best alternative to an I-Bond is the 180-day treasury bill. The rates returned by I-Bonds are based on prevailing inflation rates: High inflation results in higher I-Bond rates. The rates on Treasury Bills is a function of the Fed Funds Rate. A higher rate set by the Fed means higher interest rates on Treasury Bills.

I-Bonds were such a great deal for the last couple of years because inflation was so high and the Fed hadn’t responded by raising interest rates sufficiently to combat it. The Fed seems to finally be ahead in that battle now, with inflation coming back down.

It makes sense to hold I-Bonds when inflation is high but interest rates are low. The Fed seems quite determined to not let that happen in the near future, and committed to raising the funds rate. As a result, it seems unlikely that inflation will exceed interest rates over the next few years, and therefore, it seems unlikely that I-Bonds will be a better deal than holding treasuries.

However, as with all predictions regarding the future, one should remember that unlikely is not the same as impossible. If things change, I will update my recommendation. (You should probably subscribe to my newsletter to make sure you don’t miss that update if it happens).

Questions? Comments? Feel free to reach out to me at suhas@prosperowealth.com if you would like to discuss this, or your personal situation, further.

With the variable portion of the interest rate on I-Bonds falling to 3.38%, holders of I-Bonds will most likely be better off exchanging them for other risk-free investments. However, the optimal time to do this might not be just yet. Read on to figure out when the best time for you to sell might be, and why. (Or just skip to the table if you don’t care for the “why”).

What are I-Bonds?

Series I Bonds are designed to protect investors from inflation. The return yielded by I Bonds varies with the prevailing rate of inflation. They are issued by the US Treasury and are considered a risk-free investment, since the US Treasury (debt ceiling shenanigans notwithstanding) always pays its debts.

I-Bonds were a particularly great deal around late 2021 and early 2022 when they were yielding rates as high as 9.62% compared to the measly 0.5% returned by short term treasuries.

How are I-Bond Interest Rates Set?

The interest rate paid by I-Bonds consists of 2 components: A fixed rate, and a variable rate.

The fixed rate on I-Bonds is set when the I-Bonds are issued. The fixed rate on I-Bonds issued from May 2020 through October 2022 was 0%, but has been slightly higher at other times.

The variable rate on I-Bonds is a function of the prevailing inflation rate. I-Bonds had a very high variable rate recently because inflation was so high. The variable portion of the interest rate is adjusted twice a year, in May and November, based on inflation data. The most recent variable rate, set in May 2023, is 3.38%.

Why do some of my I-Bonds show a different interest rate?

There’s a second part to how I-Bonds pay interest: The semi-annual anniversary rate. When an I-Bond is issued, the initial interest rate is the sum of the then prevailing fixed and variable interest rates. Every 6 months (based on the issue date, which is the first of the month on which the I-Bond was issued), the variable rate is adjusted to match the then prevailing variable rate.

Let’s consider an example. For an I-Bond purchased on January 20th, 2022, the issue date is January 1, 2022. The fixed rate (as set at the time), is 0%. The anniversary dates of this bond are July 1 and January 1. The current rate of that bond was set on its last anniversary date of January 1, 2023. The variable interest rate on I-Bonds at the time was 6.48% so that’s the rate the bond will continue to pay until its next anniversary, which will be July 1, 2023. Starting July 1, 2023, the bond will start paying out at the new lower rate of 3.38%. So holders of this bond are still beating the market by getting an interest rate higher than the comparable treasury rate. But the fun will stop on July 1, 2023.

So I should sell on my anniversary date?

Not so fast. Selling an I-Bond causes you to forfeit the previous 3 months of interest. So if the investor in the previous example sold their I-Bonds on July 1, 2023, they would actually forfeit 3 months of a very attractive risk-free interest rate. The ideal time for them to sell would be 3 months later, on October 1, 2023. That way the interest they would forfeit would be the lower 3.38%.

Another thing investors should be aware of is that I-Bonds only calculate interest on a monthly basis. This is different from most other investments where interest is calculated daily but paid out monthly. This means that selling your I-Bond on July 1, 2023 would yield you the exact same amount as selling it on July 30, 2023. So you’re best off selling your I-Bonds at the beginning of a month so your money has more time to work for you.

So when exactly should I sell my I-Bonds?

The exact optimal date to sell your I-Bonds depends on the month when it was issued. The following table should help.


You should set yourself one or more reminders to log in to your Treasury Direct account on the appropriate date or dates, based on your I-Bond holdings, and sell them.

When does it make sense to hold I-Bonds?

As a risk-free investment, the best alternative to an I-Bond is the 180-day treasury bill. The rates returned by I-Bonds are based on prevailing inflation rates: High inflation results in higher I-Bond rates. The rates on Treasury Bills is a function of the Fed Funds Rate. A higher rate set by the Fed means higher interest rates on Treasury Bills.

I-Bonds were such a great deal for the last couple of years because inflation was so high and the Fed hadn’t responded by raising interest rates sufficiently to combat it. The Fed seems to finally be ahead in that battle now, with inflation coming back down.

It makes sense to hold I-Bonds when inflation is high but interest rates are low. The Fed seems quite determined to not let that happen in the near future, and committed to raising the funds rate. As a result, it seems unlikely that inflation will exceed interest rates over the next few years, and therefore, it seems unlikely that I-Bonds will be a better deal than holding treasuries.

However, as with all predictions regarding the future, one should remember that unlikely is not the same as impossible. If things change, I will update my recommendation. (You should probably subscribe to my newsletter to make sure you don’t miss that update if it happens).

Questions? Comments? Feel free to reach out to me at suhas@prosperowealth.com if you would like to discuss this, or your personal situation, further.

With the variable portion of the interest rate on I-Bonds falling to 3.38%, holders of I-Bonds will most likely be better off exchanging them for other risk-free investments. However, the optimal time to do this might not be just yet. Read on to figure out when the best time for you to sell might be, and why. (Or just skip to the table if you don’t care for the “why”).

What are I-Bonds?

Series I Bonds are designed to protect investors from inflation. The return yielded by I Bonds varies with the prevailing rate of inflation. They are issued by the US Treasury and are considered a risk-free investment, since the US Treasury (debt ceiling shenanigans notwithstanding) always pays its debts.

I-Bonds were a particularly great deal around late 2021 and early 2022 when they were yielding rates as high as 9.62% compared to the measly 0.5% returned by short term treasuries.

How are I-Bond Interest Rates Set?

The interest rate paid by I-Bonds consists of 2 components: A fixed rate, and a variable rate.

The fixed rate on I-Bonds is set when the I-Bonds are issued. The fixed rate on I-Bonds issued from May 2020 through October 2022 was 0%, but has been slightly higher at other times.

The variable rate on I-Bonds is a function of the prevailing inflation rate. I-Bonds had a very high variable rate recently because inflation was so high. The variable portion of the interest rate is adjusted twice a year, in May and November, based on inflation data. The most recent variable rate, set in May 2023, is 3.38%.

Why do some of my I-Bonds show a different interest rate?

There’s a second part to how I-Bonds pay interest: The semi-annual anniversary rate. When an I-Bond is issued, the initial interest rate is the sum of the then prevailing fixed and variable interest rates. Every 6 months (based on the issue date, which is the first of the month on which the I-Bond was issued), the variable rate is adjusted to match the then prevailing variable rate.

Let’s consider an example. For an I-Bond purchased on January 20th, 2022, the issue date is January 1, 2022. The fixed rate (as set at the time), is 0%. The anniversary dates of this bond are July 1 and January 1. The current rate of that bond was set on its last anniversary date of January 1, 2023. The variable interest rate on I-Bonds at the time was 6.48% so that’s the rate the bond will continue to pay until its next anniversary, which will be July 1, 2023. Starting July 1, 2023, the bond will start paying out at the new lower rate of 3.38%. So holders of this bond are still beating the market by getting an interest rate higher than the comparable treasury rate. But the fun will stop on July 1, 2023.

So I should sell on my anniversary date?

Not so fast. Selling an I-Bond causes you to forfeit the previous 3 months of interest. So if the investor in the previous example sold their I-Bonds on July 1, 2023, they would actually forfeit 3 months of a very attractive risk-free interest rate. The ideal time for them to sell would be 3 months later, on October 1, 2023. That way the interest they would forfeit would be the lower 3.38%.

Another thing investors should be aware of is that I-Bonds only calculate interest on a monthly basis. This is different from most other investments where interest is calculated daily but paid out monthly. This means that selling your I-Bond on July 1, 2023 would yield you the exact same amount as selling it on July 30, 2023. So you’re best off selling your I-Bonds at the beginning of a month so your money has more time to work for you.

So when exactly should I sell my I-Bonds?

The exact optimal date to sell your I-Bonds depends on the month when it was issued. The following table should help.


You should set yourself one or more reminders to log in to your Treasury Direct account on the appropriate date or dates, based on your I-Bond holdings, and sell them.

When does it make sense to hold I-Bonds?

As a risk-free investment, the best alternative to an I-Bond is the 180-day treasury bill. The rates returned by I-Bonds are based on prevailing inflation rates: High inflation results in higher I-Bond rates. The rates on Treasury Bills is a function of the Fed Funds Rate. A higher rate set by the Fed means higher interest rates on Treasury Bills.

I-Bonds were such a great deal for the last couple of years because inflation was so high and the Fed hadn’t responded by raising interest rates sufficiently to combat it. The Fed seems to finally be ahead in that battle now, with inflation coming back down.

It makes sense to hold I-Bonds when inflation is high but interest rates are low. The Fed seems quite determined to not let that happen in the near future, and committed to raising the funds rate. As a result, it seems unlikely that inflation will exceed interest rates over the next few years, and therefore, it seems unlikely that I-Bonds will be a better deal than holding treasuries.

However, as with all predictions regarding the future, one should remember that unlikely is not the same as impossible. If things change, I will update my recommendation. (You should probably subscribe to my newsletter to make sure you don’t miss that update if it happens).

Questions? Comments? Feel free to reach out to me at suhas@prosperowealth.com if you would like to discuss this, or your personal situation, further.

7724 35th Ave NE #15170

Seattle, WA 98115-9955

(971) 716-1991

hello@prosperowealth.com

Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the States of Washington, Oregon, and California and in other jurisdictions where exempted. We are conditionally registered in Texas.

© Prospero Wealth 2024. All rights reserved.

7724 35th Ave NE #15170

Seattle, WA 98115-9955

(971) 716-1991

hello@prosperowealth.com

Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the States of Washington, Oregon, and California and in other jurisdictions where exempted. We are conditionally registered in Texas.

© Prospero Wealth 2024. All rights reserved.

7724 35th Ave NE #15170

Seattle, WA 98115-9955

(971) 716-1991

hello@prosperowealth.com

Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the states of Washington, Oregon, California, and in other jurisdictions where exempted.

© Prospero Wealth 2024. All rights reserved.