Have I Bonds? Your New Rate Is Likely 3.94%—Not the 5.27% You Read About

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You can earn more by strategically cashing out and buying a top-ranked CD

Updated November 03, 2023

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Key Takeaways

  • The U.S. Treasury announced this week that I bonds purchased between November 2023 and May 2024 will earn 5.27% for the first six months.
  • If you already own I bonds, however, your next six-month rate will be considerably lower, since every I bond’s rate calculation is specific to its issue date.
  • If you got an I bond between November 2021 and October 2022—when the rate climbed as high as 9.62%—your new six-month rate will be 3.94%.
  • Today’s best CDs are paying record rates—ranging from 5.00% to 6.50% APY—which you can lock in for months or years down the road.
  • If you’ve held your I bond for at least a year, you can move your funds to a better-paying CD. The issue date of your bond can tell you the optimal time to cash in, with 15 months being the sweet spot for many 2022 bond purchasers.

Understanding the New I Bond Rate Announcement

The way I bonds work is that their rate changes every six months based on current inflation rates—which is why they’re called I bonds. But the rate is actually made up of two parts. One is fixed for the life of the I bond—assigned to your bond at the time of purchase—while the other component is indexed to inflation and adjusts every six months.

Adding the fixed and variable components together provides the composite rate for a particular I bond for a current six-month period. Then six months later, the variable inflation portion will adjust, and be added again to the original fixed rate. This continues for as long as you own the bond.

Treasury announced this week a new six-month rate that has both a higher inflation factor and a higher fixed-rate factor. First, everyone will receive a new inflation component of 3.94% (i.e., an annualized figure for the 1.97% semiannual inflation rate). For the previous rate announcement, on May 1, the inflation factor was 3.38%, meaning the new six-month rate increased about a half percentage point due to higher inflation readings this time.

But what has an even bigger impact this cycle is that anyone buying a new I bond between November 2023 and May 2024 will receive a fixed-rate component of 1.30%. That is notably higher than the 0.00% fixed rate assigned to I bonds purchased last year, and explains why new I bonds purchased today will pay a higher rate of 5.27% for the initial six months, while 2022 I bonds will only pay 3.94%.

I Bond Issue Date Fixed-Rate Assigned for the Life of the Bond  Current Inflation Component Today’s Composite Rate*
Nov 2023 – May 2024 1.30% 3.94% 5.27%
May 2023 – Oct 2023 0.90% 3.94% 4.86%
Nov 2022 – Apr 2023 0.40% 3.94% 4.35%
May 2022 – Oct 2022 0.00% 3.94% 3.94%
Nov 2021 – Apr 2022 0.00% 3.94% 3.94%
* A few basis points are gained in the composite rate due to compounding effects.

As a result of different fixed rates being assigned to each group of I bonds at the time of purchase, you can see below how the six-month composite rates vary over time for different bond issue dates.

 Bond Issue Date APY for Months 1-6 APY for Months 7-12 APY for Months 13-18 APY for Months 19-24 APY for Months 25-30
Nov. 1, 2023 – Apr. 30, 2024 5.27% Unknown Unknown Unknown Unknown
May 1 – Oct. 31, 2023 4.30% 4.86% Unknown Unknown Unknown
Nov. 1, 2022 – Apr. 30, 2023 6.89% 3.79% 4.35% Unknown Unknown
May 1 – Oct. 31, 2022 9.62% 6.48% 3.38% 3.94% Unknown
Nov. 1, 2021 – Apr. 30, 2022 7.12% 9.62% 6.48% 3.38% 3.94%

Today’s Best CDs Pay More than 2022 I Bond Rates

If you don’t need your funds for a while, the decline of I bond rates at the same time that CD rates have skyrocketed presents a lucky opportunity. For instance, you could cash in your I bonds and move that money to a 6-month or 1-year CD paying above 6%. Or you could lock in a record rate for longer, such as a 2-year CD paying 5.60%. Maybe you don’t need your money for years, and are interested in guaranteeing a 5.00% rate for five years.

While it’s possible I bond rates could climb higher again, odds are arguably greater they’ll decline in 2024. That’s because the Federal Reserve remains committed to fighting inflation until it comes down to the Fed’s target level of 2%. There’s of course no crystal ball to show if and when inflation will fall to that level. But the Fed’s focus on its inflation goal is strong and persistent.

Unlike I bonds, certificates of deposit have the great advantage of promising one APY that you will be guaranteed for the CD’s full term. So there is no guessing game about what you’ll earn in the future, and what the Fed does with rates will have no bearing on the return of any existing CD you already hold. With CD returns at their highest levels in more than 20 years, it’s an excellent time to secure one of these locked-in rates.

Don’t want to commit your I bond funds to a CD? You can also move your money to one of the best high-yield savings accounts or best money market accounts, which are currently paying rates as high as 5.40% and 5.35% APY, respectively. But keep in mind that savings and money market account rates are variable, meaning they can go down at any time and without notice.

Choose Your I Bond Withdrawal Date Carefully

Money held in I bonds can be withdrawn anytime after you’ve held the bond for a year. But there’s a catch—and you’ll want to choose your timing carefully. For any I bond cashed in sooner than five years from its issue date, you’ll incur a penalty. Fortunately, the penalty can be fairly mild if you time it right.

The early withdrawal penalty is calculated as the last three months’ worth of interest. But since your I bond rate changes every six months, that means your penalty will depend on when you withdraw. If you cash out during a high-rate period, you’ll have a bigger penalty, while your penalty will be reduced if you withdraw during a lower-rate period.

Using I bond buyers who bought between May and November of 2022 as an example, if you cash out right at 12 months, the last three months of your interest rate was 6.48%. And as a result, your penalty will cause you to forfeit three months of earning that stellar return.

Best Day of the Month to Withdraw I Bond Funds

Monthly interest for I bonds is always paid on the first of the month, and is not pro-rated throughout the month. So whether you cash out on Dec. 2 or Dec. 30, you’ll receive the same interest payment on Dec. 1 and nothing more that month. So it’s smart to withdraw as soon as possible after the 1st so you can begin earning higher interest elsewhere.

But if you can wait until you’re three months into the lower rate tier—so at the 15-month mark or beyond—your penalty will forfeit three months of the much lesser 3.38%. Since that rate is not especially competitive—and you can do much better elsewhere—it’s a minor penalty, making it a smart time to move your money somewhere new.

Although the above example applies to bonds purchased between May and October of 2022, the same logic applies to bonds purchased in the previous 6-month period, but with a slightly later sweet spot. That’s because I bonds purchased between November 2021 and April 2022 are still earning 6.48% through Month 18, so it’s better to wait until Month 21, when that rate has dropped to 3.38%, to cash out.

Fortunately, it’s easy to determine your own penalty-minimizing withdrawal date. Just identify the issue month of your I bond and then find it in one of our tables below.

For I Bonds Issued November 2021 – April 2022

 I Bond Issued on Any Date in This Month If you cashed in after 12 months, you gave up 3 months of this rate If you cashed in after 15 months, you gave up 3 months of this rate If you cash(ed) in after 21 months, you gave up/will give up 3 months of this rate Date you reach(ed) 21 months and minimize(d) your penalty
Nov 2021 9.62% 6.48% 3.38% Aug. 2, 2023
Dec 2021 9.62% 6.48% 3.38% Sep. 2, 2023
Jan 2022 9.62% 6.48% 3.38%  Oct. 2, 2023
Feb 2022 9.62% 6.48% 3.38% Nov. 2, 2023
Mar 2022 9.62% 6.48% 3.38% Dec. 2, 2023
Apr 2022 9.62% 6.48% 3.38% Jan. 2, 2024
All I bonds cashed in earlier than five years after issue date will be assessed a penalty equal to the last three months of interest.

For I Bonds Issued May 2022 – October 2022

 I Bond issued on any date in this month If you cash in after 12 months, you’ll give up 3 months of this rate If you cash in after 15 months, you’ll give up 3 months of this rate Date you reach 15 months and minimize your penalty
May 2022 6.48% 3.38% Aug. 2, 2023
Jun 2022  6.48% 3.38% Sep. 2, 2023 
Jul 2022  6.48% 3.38% Oct. 2, 2023 
Aug 2022  6.48% 3.38% Nov. 2, 2023 
Sep 2022  6.48% 3.38% Dec. 2, 2023 
Oct 2022  6.48% 3.38% Jan. 2, 2024 
All I bonds cashed in earlier than five years after issue date will be assessed a penalty equal to the last three months of interest.

If you have an issue date between November 2022 and April 2023, you’re better off cashing out after the 12-month mark than the 15-month mark. That’s because the rate for I bonds issued during that time declined to 3.79% already in Month 6, and by Month 13, the rate increases to 4.35%. So if cashing out is your goal and you want to minimize your penalty, it would be wise to withdraw just after hitting your 1-year anniversary.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

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