I Bonds: Savings Bonds on Steroids
With inflation rates hitting fresh new highs, a curious, almost forgotten investment vehicle is gaining in popularity: US Savings Bonds.
For many of us, the last time we got excited about a US Government Savings Bond we were in grade school. Remember gazing in wonderment at the savings bond given to you as a gift? ‘Wow, 50 dollars! How cool, I'm rich!’ Truthfully, we likely haven't given savings bonds much thought since then.
US Government Savings Bonds have been around for a long while. Over the decades they have evolved and now include a type of savings bond called Series I or I bond.
I bonds include a special feature that makes them somewhat unique. The interest rate they pay adjusts with inflation, and with inflation on the rampage, this feature is intriguing.
In concept, a dollar invested in an I bond today should maintain its purchasing power and buy an equivalent amount of goods in future dollars. In contrast, unhedged against inflation, $50 in 1980 dollars buys about $15 worth of goods in today’s dollars.
There are caveats to consider. The government puts limits on the amount of I bonds each person can buy for themselves in any given year. Also, the investment can't be accessed in year one, and some interest is forfeited if redeemed in years 2-5, but even so, for some they might make an interesting choice for an "emergency" fund or for gifting.
We never imagined that savings bonds would be the topic of "cocktail party" conversation, but here we are.
If you'd like to learn more about I bonds, and explore how they might fit into your overall financial plan, please let us know.