Get inflation-proof bonds paying 9.62 percent while there’s still time
But you only have a short window, until the end of October, to take advantage of the price. Savers who want to lock in this interest rate for another six months have until Friday 28 October to make the I-bond purchase to ensure that it will be issued by the deadline of 31 October.
Here’s why the cutoff period is important.
There are two components to the yield for an I-bond: a fixed interest rate and an inflation-adjusted interest rate. The fixed rate of return and the half-yearly inflation rate are announced by the Ministry of Finance at the beginning of May and November each year.
While the fixed rate remains the same over the life of the 30-year bond (and is zero right now), the inflation rate is adjusted every six months based on changes in the consumer price index for all urban consumers.
Although inflation remains at historically high levels, the latest numbers show a slight decline, according to recently released data from the Bureau of Labor Statistics.
Some indexes fell in September, including those for used cars and trucks and clothing. The consumer price increases were partially offset by a 4.9 per cent decline in the petrol index. So it is likely that the inflation index portion of the I bond could see a rate cut in November.
However, investors who buy I bonds before November 1 will still get 9.62 percent interest for the first six months they hold the bonds. But you must receive your email confirmation for the purchase of your I-bond by 11:59:59 PM Eastern Time on October 28th to ensure you lock in your prize.
Here are some things you need to know about buying an I-bond.
— To purchase an electronic I-bond, you must first create an account at TreasuryDirect.gov.
— Individuals may purchase up to $10,000 in I-bonds during a calendar year. For married couples, each spouse can purchase up to the $10,000 limit.
— Do not buy an I-bond with money you think you will need soon. This is not the place to deposit money you need access to in case of an emergency expense like a major car repair. These funds should remain in your savings account. You must hold an I-bond for 12 months from the date of issue before it can be redeemed.
— If you redeem the bond in less than five years, you lose the last three months with interest. When your I-bond is five years old, there is no interest penalty if you redeem it.
— If you have never set up a TreasuryDirect account before, take the guided tour of the website and be sure to read the instructions carefully to minimize any problems. People facing problems will find it difficult to reach a live person for help. Wait times for assistance at 844-284-2676 can be long. (Calls are accepted from 8:00 AM to 5:00 PM Eastern Time, Monday through Friday).
— Given the problems some have had setting up a TreasuryDirect account, don’t delay. Get it done now. Don’t wait until October 28. Savers searching for information or help solving an I-bond problem have flooded TreasuryDirect, causing much longer than usual wait times.
— If you have problems setting up an online account, you must get the papers signed by your bank. If that happens, you are unlikely to meet the October 28 deadline.
I first tried to buy an I-bond in June. TreasuryDirect said it was having trouble verifying the information I provided. I was not told why it was a problem.
“We are not receiving any information related to account verification issues,” said an automated email from TreasuryDirect.
Because of the problems verifying my information, I had to fill out an account authorization form and send it to a financial website in Minneapolis. The initial email from TreasuryDirect said “average approval takes 10-15 days, but may be longer based on the volume of forms we receive.”
A few weeks after submitting the form, I received an email confirming that Treasury had received my form and that the approval process could take up to 13 weeks for review and processing. It was good that they met my expectations. Two weeks later I received another email from TreasuryDirect saying that the freeze on my account had been lifted and that I could buy I-bonds.
If you have trouble setting up a TreasuryDirect account on your first try, it’s unlikely you’ll be able to meet the Oct. 28 deadline to take advantage of the 9.62 percent rate. There just isn’t enough time to navigate the verification process.
But with inflation still high, I-bonds will continue to pay significantly more than a savings account or certificate of deposit even after the rate resets in November. So don’t give up if you hit a snag in the process.
