Comparing EE and I bonds — TreasuryDirect (2024)

FAQs

What's better, EE bonds or I bonds? ›

Bottom line. I bonds, with their inflation-adjusted return, safeguard the investor's purchasing power during periods of high inflation. On the other hand, EE Bonds offer predictable returns with a fixed-interest rate and a guaranteed doubling of value if held for 20 years.

Cons of Buying I Bonds

I bonds are meant for longer-term investors. If you don't hold on to your I bond for a full year, you will not receive any interest. You must create an account at TreasuryDirect to buy I bonds; they cannot be purchased through your custodian, online investment account, or local bank.

TIPS offer greater liquidity and the higher yearly limit allows you to stash far more cash in TIPS than I-bonds. If you're saving for education, I-bonds may be the way to go.

Securities purchased through TreasuryDirect cannot be sold in the secondary market before they mature. This lack of liquidity could be a disadvantage for investors who may need to access their investment capital before the securities' maturity.

Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

Therefore, when you cash in your series EE bonds, you can simply use the proceeds to purchase I Bonds, he said. When you cash in your EE bonds, you will pay federal but not state income taxes on the interest portion of the redemption, he said.

You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline. Question: What is the inflation rate? November 1 of each year. For example, the earnings rate announced on May 1 reflects an inflation rate from the previous October through March.

I bonds' variable rate aligns with CPI, protecting your savings from eroding due to rising prices. For retirees, this means I bonds can help maintain the actual value of their investments over time, safeguarding against the effects of inflation and ensuring their financial security in retirement.

I bonds issued from May 1, 2024, to Oct. 31, 2024, have a composite rate of 4.28%. That includes a 1.30% fixed rate and a 1.48% inflation rate. Because the U.S. government backs I bonds, they're considered relatively safe investments.

Paper I bonds are only available in multiples of $50.” There are also limits on how many I bonds you can buy each year. Individual purchase limits for I bonds are $15,000 per calendar year — $10,000 worth of electronic I bonds and $5,000 worth of paper I bonds.

Are I bonds worth the hassle? ›

Depending on the inflation rate, I-bonds can offer returns that are significantly higher than those of other low-risk investments like certificates of deposit (CDs) or high-yield savings accounts. I-bonds are also attractive because investors bear almost no risk of losing their principal.

The 4.28% composite rate for I bonds issued from May 2024 through October 2024 applies for the first six months after the issue date. The composite rate combines a 1.30% fixed rate of return with the 2.96% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U).

Bottom Line. I bonds offer inflation-adjusted interest rates, which can make them a popular option for investors looking to preserve the purchasing power of their investments. EE bonds, on the other hand, may appeal to those seeking predictable, long-term returns, due to their fixed interest rates and tax advantages.

For many people, TreasuryDirect is a good option; however, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange-traded funds (ETFs). Treasury money market accounts also offer more convenience and liquidity than TreasuryDirect.

If you're holding the bond to maturity, the fluctuations won't matter—your interest payments and face value won't change.

EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.

Series EE bonds mature in 20 years but earn interest for up to 30 years. The U.S. Treasury guarantees Series EE bonds will double in value in 20 years. You don't receive the interest on your Series EE bond until you cash it.

How long should I wait to cash in a savings bond? It's a good idea to hang on to your bond for as long as possible, ideally until it matures, so you can take full advantage of compound and accrued interest.