Savings I Bonds November 2022 Interest Rate: 6.48% Inflation Rate, 0.40% Fixed Rate

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November 2022 rates officially announced. 11/1/2022 press release. The variable inflation-indexed rate for I bonds bought from November 2022 through April 2023 will indeed be 6.48% as predicted. Every single I bond will also earn this rate eventually for 6 months, depending on the initial purchase month. The fixed rate for I bonds bought from November 2022 through April 2023 will be 0.40% (up from zero, and right in the midpoint of my guess), for a composite rate of 6.89% for 6 months. Still a good deal, either buying now or in January when the purchase limits reset.

See you again in mid-April for the next early prediction for May 2023.

Original post 10/13/22:

Inflation still 🚀 😬 Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. With a holding period from 12 months to 30 years, you could own them as an alternative to bank certificates of deposit (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the November 2022 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what a October 2022 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a November 2022 purchase.

New inflation rate prediction. March 2022 CPI-U was 287.504. September 2022 CPI-U was 296.808, for a semi-annual increase of 3.24%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be 6.48%. You add the fixed and variable rates to get the total interest rate. The fixed rate hasn’t been above 0.50% in over a decade, but if you have an older savings bond, your fixed rate may be up to 3.60%.

Tips on purchase and redemption. You can’t redeem until after 12 months of ownership, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A simple “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 – same as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time. If you miss the cutoff, your effective purchase date will be bumped into the next month.

Buying in October 2022. If you buy before the end of October, the fixed rate portion of I-Bonds will be 0%. You will be guaranteed a total interest rate of 0.00 + 9.62 = 9.62% for the next 6 months. For the 6 months after that, the total rate will be 0.00 + 6.48 = 6.48% for the subsequent 6 months.

Let’s look at a worst-case scenario, where you hold for the minimum of one year and pay the 3-month interest penalty. If you theoretically buy on October 31st, 2022 and sell on October 1st, 2023, you’ll earn a ~7.01% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. If you theoretically buy on October 31st, 2022 and sell on January 1, 2024, you’ll earn a ~6.90% annualized return for an 14-month holding period. Comparing with the best interest rates as of October 2022, you can see that this is much higher than a current top savings account rate or 12-month CD.

Buying in November 2022. If you buy in November 2022, you will get 6.48% plus a newly-set fixed rate for the first 6 months. The new fixed rate is officially unknown, but is loosely linked to the real yield of short-term TIPS. My guess is somewhere between 0.1% and 0.6%, but who knows. If I Every six months after your purchase, your rate will adjust to your fixed rate (set at purchase) plus a variable rate based on inflation.

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 (based on purchase month, look it up here) + variable rate (total bond rate has a minimum floor of 0%). So if your fixed rate was 1%, you’ll be earning a 1.00 + 6.48= 7.48% rate for six months.

Buy now or wait? Given that the current I bond rate is already much higher than the equivalent alternatives, I would personally buy in October to lock in the high rate for the longest possible time. I would grab the “bird in the hand”, even though you might get a slightly higher fixed rate in November. I already purchased up to the limits first thing in January 2022, and I’ll probably buy again in January 2023. However, I am also buying TIPS as the real yield right now is higher than that of I bonds.

Unique features. I have a separate post on reasons to own Series I Savings Bonds, including inflation protection, tax deferral, exemption from state income taxes, and educational tax benefits.

Over the years, I have accumulated a nice pile of I-Bonds and consider it part of the inflation-linked bond allocation inside my long-term investment portfolio. Right now, the inflation protection “insurance” is paying off with high yields and no principal risk.

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. You can only 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 I bonds using your tax refund with IRS Form 8888. If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number. TheFinanceBuff has a nice post on gifting options if you are a couple and want to frontload your purchases now. TreasuryDirect also allows trust accounts to purchase savings bonds.

Note: Opening a TreasuryDirect account can sometimes be a hassle as they may ask for a medallion signature guarantee which requires a visit to a physical bank or credit union and snail mail. This doesn’t apply to everyone, but the takeaway is don’t wait until the last minute.

Bottom line. Savings I bonds are a unique, low-risk investment that are linked to inflation and only available to individual investors. You can only purchase them online at TreasuryDirect.gov, with the exception of paper bonds via tax refund. For more background, see the rest of my posts on savings bonds.

[Image: 1950 Savings Bond poster from US Treasury – source]

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Comments

  1. If you met your 2022 quota, can you invest this month (10/22) for 2023 ?

  2. Thanks for the great info! You mentioned: “However, I am also buying TIPS as the real yield right now is higher than that of I bonds.” Are you investing in TIPS ETF’s such as VTIP? VTIP shows a YTD return on -4.15%.

    • Nearly all bond funds are down YTD as interest rates (and real rates) rose. That’s why everything looks better for the investor today, like 4% on Treasuries and 2% real rates on TIPS.

  3. The individual purchase limit is per calendar year, so no. From what I’ve read you can try frontloading using the gifting option, but the rules around this are murky.

  4. My guess is the fixed rated remains 0 – The Treasury has zero incentive to raise it when I Bonds have a greater-than-usual demand.

  5. Am I understanding this that if say inflation is at 10% in March ’22 and still 10% in Sep ’22 would the rate have been 0%? Is the index measuring a certain level so even if very high iso long as it doesn’t get worse the rate would be 0?

    Just not clear to me what its actually based on.

    • As I’m looking at Jonathan’s post (from 2005!) it’s calculated based on the rise of the Consumer Price Index, not inflation itself. So as long as the CPI is rising, you still have inflation. If inflation were to fall to zero (the CPI staying flat), then your rate might be down to 0% or 0.5%. If inflation stays constant at 10%, however, your rate stays pretty high.
      https://www.mymoneyblog.com/how_to_predict_1.html

  6. Note that the site has been down/slow the last few days and now has the message:

    We are currently experiencing unprecedented requests for new accounts and purchases of I Bonds. Due to these volumes, we cannot guarantee customers will be able to complete a purchase by the October 28th deadline for the current rate. Our agents are working to help customers who need assistance as quickly as possible. Learn More

  7. Where did the extra 0.01% come from? I know this was how treasury announced this, but I’ve been scratching my head at how 6.48% + 0.40% = 6.89% and not 6.88%

    • https://www.mymoneyblog.com/how_to_predict_1.html

      Total rate = Fixed rate + 2 x Semiannual inflation rate + (Semiannual inflation rate X Fixed rate)

      The last part of the equation adds the 0.01. I believe this is due to the compounding of the semi-annual rate. The fixed rate has been so low that the last part has been effectively zero for a long time.

      • Got it… so it’s not really as simple as adding the fixed and variable rate, but it is calculated separately for each issue period:

        0.0689296 = 0.004 + (2 * 0.0324) + (0.0324 * 0.004)

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