So what’s the worst case scenario with I-Bonds if you cash out in a year? Well, that would mean deflation. Contrary to what some believe, the fixed rate is not the minimum you get. The minimum return is zero (see #5 of FAQ), meaning at least you don’t lose anything.
So 6 months at 6.73%, and then 6 months at 0.0% (3-month penalty of… well, nothing). Buying late in November, you’d actually be holding it for 11 months, working out to an annual rate of about 3.67%, not including tax benefits. Of course, deflation is very unlikely. But that’s still the worse case scenario (barring Armageddon).
By Jonathan Ping | Savings Bonds | 11/3/05, 10:19pm