How to Play I Bonds in 2024? - (2024)

Remember buying I bonds a couple of years ago when the rate was 9.62%? What should you do with your I bonds in 2024? Sell, buy more or do both?

If you have Series I bonds in your investment portfolio, you may wonder what to do with I Bonds in 2024. While there’s no one-size-fits-all answer, there are a few options for you to consider. I bonds aren’t currently in the news much, not like back in 2022 when the rate was 9.62%. Despite this, let’s not forget about them.

Sell and Rebuy at the Higher Fixed Rate

If you’re holding onto Series I bonds that your purchased when the fixed rate was 0%, you may want to consider cashing them out. Then reinvesting the proceeds in the current I bonds with a 1.3% fixed rate and 5.27% combined rate.

The payback is a quick two months if you sell I bonds that earn 3.38% to buy new I bonds at 5.27%. See this post where the payback is explained. Should You Convert Old 0% Fixed Rate I Bonds to New 1.3%

However, before doing so, consider the tax implications and any penalties you may incur for early redemption. Remember you must pay taxes in 2024 on the interest you earned on the I Bonds you sell. Also, if you have not owned the I Bonds for 5 years, you forfeit three months of interest.

The fixed rate of 1.3% as compared to zero may not seem like much of a difference. However, 1.3% on a $10,000 investment over 30 years is close to $15,000. This is why we love the power of compound interest. Here is a compound interest calculator if you would like to calculate it for yourself.

Compound Interest Calculator | Investor.gov

Keep in mind that if your I bonds are your only source of emergency funds this may not work for you. If you buy new, you can’t sell the new I bonds until you have owned them for 12 months. Also, if you sell and rebuy the amount of I bonds you buy in 2024 needs to stay within your annual purchase limit.

Buy the Annual Limit of I Bonds Each Year

If you want to build up a bucket in your portfolio of safe inflation-protected investments, continue to buy your annual limit of new I Bonds each year until that bucket is full.See this post on how to buy more than the $10,000 annual limit.

Do You Want to Buy More I Bonds than the $10,000 Limit?

If this is you, buy before the end of January to get the January interest rate, unless you think rates will go up in May. These bonds offer a relatively safe and stable investment option, especially for those who are risk-averse so some people keep buying until their I Bond bucket is filled.

Wait for the New Rates on May 1

I Bond rates are changed each May 1 and November 1. You can use a formula on the Treasury Direct website to calculate the inflation rate once CPI data is published. There is no reliable way to forecast the fixed rate portion ahead of the announcement by the Treasury. We need the CPI data for the six months from from September 2023 to March 2024 to forecast the May 1 2024 inflation rate. This post from last year shows how to forecast the I bond inflation rates.

I Bond Rates Prediction for May 1 2023 is 3.39%

Keep or Sell I Bonds in 2024 Depends on Your Situation

Ultimately, the decision to keep or sell Series I bonds in 2024 will depend on your individual financial goals and circ*mstances. You may choose one of the options in this article or a combination of the options. You could choose to just stay the course and keep the I bonds you currently own. It’s always a good idea to consult with a financial advisor before making any major investment decisions.

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