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What is a Government Issued I Bond?

August 17, 2011 | Investing | 1 Comment

I Bonds are a low-risk, liquid savings product that earns interest which resets twice per year to keep up with inflation.  Currently, I Bonds are paying an amazing 4.6% annualized because of the recent increase in gas prices.

I Bonds are sold at face value, meaning, you pay $50 for a $50 I Bond.  You purchase in amounts of $25 or more.  If you redeem I Bonds in the first 5 years, you’ll lose the 3 most recent months’ interest; after 5 years, you will not be penalized.

If you purchase an I Bond before rates are adjusted in November 1, you’ll receive a 4.6% interest rate for the next 6 months. Even if you take into account the penalty for cashing in the bond before 5 years, you will earn a minimum of 2.3% if you withdraw your money out after 12 months.  Additionally, if the new rate is higher that 0, you will earn more.

I Bond Restrictions

Keep in mind that you can’t redeem I Bonds for at least 1 year.  Your investment is limited to $10,000 annually.  You can invest $5,000 at TreasuryDirect.gov and $5,000 at a bank.

How to Purchase I Bonds

To purchase I Bonds check with your bank or visit TreasuryDirect.gov.

 

 

 

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One Comment to “What is a Government Issued I Bond?”

  1. Mynette Green
    8:49 am on August 18th, 2011

    Definitely information I can use. Thanks.

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