Savings I Bonds November 2015 Interest Rate

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New fixed rate for November 2015 is 0.1%. The most recent official announcement states that effective November 2015, the new fixed rate on Series I savings bonds is 0.1%, up from the previous 0.0%. The variable inflation-indexed rate is 1.54% (as was predicted). Thus, buying a new I Bond between November 2015 through April 2016 will earn a composite rate of 1.64% for the first six months, and after that 0.1% plus the current inflation-indexed rate updated every 6 months.

If you theoretically bought on November 30th, 2015 and sell on November 1st, 2016, at the very minimum you’d earn a ~.89% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. As long as inflation isn’t zero or negative over the next 6 months, you’ll earn more. Not a bad minimum short-term return for what could be a good long-term investment. I’m buying some after mid-November (don’t want to cut it too close to the deadline).

Existing I Bonds will earn their fixed rate plus the semi-annual inflation rate (adjusts every 6 months based on the original purchase date, eventually will be 1.54%).

Original mid-October post below:

New inflation numbers were announced, which allows us to make an early prediction of November 2015 savings bond rates before their official semi-annual announcement on the 1st of the month. This also allows us the opportunity to know exactly what a October 2015 savings bond purchase will yield over the next 12 months, instead of just 6 months.

New Inflation Rate
March 2015 CPI-U was 236.119. September 2015 CPI-U was 237.945, for a semi-annual increase of 0.77%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be approximately 1.54%. The new fixed rate won’t be announced until November 1st, but unless something very extraordinary happens, this is going to be a very accurate prediction. You add the fixed and variable rates to get the total interest rate. If you have an older savings bond, your fixed rate may be different.

Purchase and Redemption Timing Reminder
You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time though, since if you wait too long your effective purchase date may be bumped into the next month.

Buying in October
If you buy before the end of October, the fixed rate portion of I-Bonds will be 0%. You will be guaranteed the current variable interest rate of -1.60 for the next 6 months, for a total rate of zero (it can’t be negative). For the 6 months after that, the total rate will be 1.54%. Add in the last-3-months-of-interest penalty for holding less than 5 years, and I just wouldn’t buy in October.

Buying in November
If you wait until November, you will get 1.54% plus an unknown fixed rate for the first 6 months. The fixed rate is likely to be zero. There may be a small chance it is 0.1%, and an even smaller chance it will be 0.2%. Every six months, your rate will adjust to the fixed rate plus a variable rate based on inflation. At least here if inflation picks up, you’ll get a hiked rate earlier than versus buying in October.

If you buy on November 30th, 2015 and sell on November 1st, 2016, at the very minimum you’ll earn a ~.84% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. As long as inflation isn’t zero or negative over the next 6 months, you’ll earn more. That still isn’t a slam dunk short-term play, but if you want to buy it anyways for a long-term investment, it’s not bad. Keep your money in an online savings account earning 1% or more until then.

Existing I-Bonds
If you have an existing I-Bond, the rates reset every 6 months depending on your purchase month. Your bond rate = your specific fixed rate + variable rate (minimum floor of 0%). Again, this new rate update isn’t terribly high, but due to their annual purchase limits, you should still consider their unique advantages before redeeming them. These include ongoing tax deferral, exemption from state income taxes, and being a hedge against inflation (and even a bit of a hedge against deflation).

Annual Purchase Limits
The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. Buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. You can also buy an additional $5,000 in paper bonds using your tax refund (see IRS Form 8888). If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number.

For more background, see the rest of my posts on savings bonds.

Comments

  1. I am holding an I bond that is less than 5 years, but over a year old. I know that I will lose 3 months of interest if I redeem before 5 years, but what happens when the interest rate is 0? My rate just reset this month, so I will get 0% for 6 months. If I redeem in Jan or Fed, will I “lose” the previous 3 months of $0 interest, or will it go back to the last months that I actually earned something?

    • Let’s say your I Bond started its 6 month cycle of 0% in October, that means October November December would all be 0%. If you redeem on January 1st, you would lose the interest earned in October November December, in your case 0%. It would not go back to other months where the interest was non-zero.

  2. Brandt, if you wait for 3 months of it earning 0% before redeeming you won’t lose anything (last 3 months of interest will be $0). I was redeeming some of mine throughout this year for the same reason and did not see any surprises. Last three months it is regardless of how much it was earning.

  3. J – Are you buying this year since rates have been so low? Do you buy bonds for your daughters?

  4. With a fixed rate likely to be 0.0, I’m disappointed (again). But I figure I have enough T-bills and they are yielding lower. I will sell these I-bonds after a year or so and take the 3 month penalty and probably come out ahead on the paltry amount I buy.

    Thanks again Jonathan, I always look forward to your articles.

  5. hooray 0.1% fixed rate!!

    • Ha, I guess they wanted some people to buy savings bonds this year after the negative variable rate.

      • Yeah I already bought $2,000 worth on November 2 when I noticed the 0.1 rate. T bills held a year only pay 0.2. So ending up with 0.89 if I sell in November 2016 is a better deal. Shoot. This is a better deal than two year notes too, and I have a few of those. I might buy more I bonds this six month period. And I am considering withholding more money in 2016 to get series I bonds in paper form for a refund in 2017.

  6. Jonathan…I still don’t grasp this line ” Existing I Bonds will earn their fixed rate plus the semi-annual inflation rate (adjusts every 6 months based on the original purchase date, eventually will be 1.54%). I have older bonds stretching back over 3 years which all are still listed at 0.0% even though the current rate as you mention is 1.64%. When do the older bonds reset and what do they reset to?

    • It all depends on the month of your anniversary date. You’ll earn 0% for 6 months, and then you’ll earn your fixed + 1.54% for 6 months. You probably haven’t finished your 6 months of 0% yet.

  7. M schureman says:

    I have I bond purchased 10/2001. Why no change in value from October 2015 to November 2015?

  8. 0.16% for the May 1, 2016 reset according to the Seeking Alpha website

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