Breaking News: The November 2023 I Bond Inflation Rate will be 3.94%!
The October 2023 I Bond Rate
The October 2023 I bond composite rate is 4.30% (US Treasury) which is 2.15% earned over 6 months.
Read on to decide if you’d rather buy your I Bonds in October or November.
Also consider if and when you may want to cash out your existing I Bonds.
November I Bond Inflation Rate and Fixed Rate Projection
What is the October 2023 I Bond inflation rate?
The October 2023 I Bond inflation rate is announced at 3.38%* based on the March 2023 CPI-U data.
What is the November 2023 I Bond inflation rate?
The November 2023 – April 2024 I Bond inflation rate is announced at 3.94%* based on the September 2023 CPI-U data. This rate is over .5% higher than the current rate. This inflation rate will be applied to your individual I Bond on its own 6-monthy cycle. For example, if you bought in October 2022, your I Bond won’t renew at 3.94% until April 2024!
What is the October 2023 I Bond fixed rate?
The October 2023 I Bond fixed rate is 0.90%. This rate lasts for the 30 year life of the bond you purchase between now and October 2023.
What will the November 2023 I Bond fixed rate be?
The November 2023 I Bond fixed rate is very likely to be higher than the current 0.9%. You won’t know for sure until the November 1 Treasury announcement since there is no published formula. Real yields in the economy, as measured by Treasury Inflation Protected Securities (TIPS), are hovering around 2.4%.
This is much higher than the last fixed rate reset and indicates a high probability of the fixed rate going up significantly.
How is the I Bond Composite Rate Determined?
The composite rate is a combination of the fixed rate and the semiannual inflation rate.
The fixed rate for I Bonds issued in October 2023 is 0.90%.
The semi-annual inflation rate is 3.38%.
When you combine the two, and the fixed rate itself gets an inflation adjustment, you get the composite rate of 4.30%. Here is the exact math on the I Bond composite rate.
How long do I get the current I Bond interest rate for?
This fixed rate stays with those I Bonds throughout the 30 years that they earn interest.
The current semiannual inflation rate of 3.38% will reset every 6 months following the purchase, or renewal, of your I bond.
What will be the November I Bond inflation rate?
We are keeping a close eye on the latest CPI-U numbers, which you will see below determine the inflation rates for I bonds. The latest CPI numbers were released on October 12, 2023.
The November I Bond inflation rate is projected at 3.94%!
CPI-U Data to Project the November 2023 Inflation Rate
|
March 2023 CPI-U: |
301.836 |
|
September 2023 CPI-U: |
307.481 |
|
November Inflation Rate Projection: |
3.94% |
*November 2023 Inflation Rate Projection = [(307.481/301.836)^(12/6)]-1 = 3.56%
How does the current I Bond rate compare to historical rates?
When we compare the 6-month I Bond rates against 12-month Treasuries at the time we see that the 6-month I bond rate is an average of 1% lower.
At an initial rate of 4.30%, buying an I bond in April gets roughly 1.1% less compared to the 5.44% 12-month Treasury Bill rate (October 12, 2023).
Unlike 2021 and 2022, I Bond rates are more in line with other similar interest rate products.
One big difference between a Treasury Bill and the I Bond is that you can get out of Treasury Bills before 12 months AND you don’t have to give up the prior 3 months’ interest if you cash out in the first 5 years. You could be subject to changes in the price of the Treasury Bill if you don’t hold it to maturity, however.
What to consider when buying I Bonds in October 2023
You are required to hold I bonds for 12 months, yet you generally only know the rate you’ll get over the next 6 months.
There are 2 rates you need to keep in mind:
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The current rate for October 2023 purchases is 4.30%
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Your renewal rate, which will go into effect 6 months after your purchase, of 4.88%
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This combines to a 4.64% rate over the next 12-months
The October 12-month I Bond rate of 4.64% is not nearly as high as CDs and Treasury Bills that are approaching 5.5% interest over the same time frame. Also consider the 3-month recent interest penalty if you cash out in the first 5 years.
If you buy an I Bond in October 2023 and cash out in 12-months you’ll only get 3.4% interest after that penalty!
Should you buy I Bonds in October or November?
If you like the certainty of the current 0.9% fixed rate and you’re willing to take the current 12-month rate of 4.64% (compared to CDs & Treasuries at almost 5.5%) then October looks like a good month to you.
If you are looking at I Bonds for the long run, and are willing to take the uncertainty of the November rate, all the signs are pointing towards a higher rate in November, and you might want to wait until then.
What if You’re Considering Cashing Out Your I bonds?
If you’re considering cashing out your I Bonds make sure you find the best time that gets you the most interest at my blog on When to Cash Out Your I Bonds.
What you need to know about I Bonds
An I bond is a U.S. Government Savings bond that carries a fixed interest rate, plus an additional inflation adjuster, so that you get an inflation-adjusted real rate of return. In a world of inflation worries and few inflation-adjusted investments, the I Bond is a great place to look for savers.
What are the details with an I Bond?
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You have to hold them for 12 months minimum. You can’t cash out before then.
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If you cash out between the end of year one and the end of year five, you lose your prior three months interest as a penalty.
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You can only buy $10,000 per person, per year, and you have to do it at TreasuryDirect.gov
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I bonds are a great place for part of your emergency fund money
Bonus: Listen to our podcast with savings bond expert David Enna from TipsWatch.com on I bonds: US Series I Savings Bonds Simplified
Why I Bonds are so interesting right now
I Bonds were somewhat unknown until they started offering eye-popping yields, based on the inflation rate, in May 2021 with the 3.54% rate.
Then, in November 2021 I bond rates doubled to 7.12% and then 9.62% in May 2022! The last super-high inflation rate was 6.48% in November 2022, which also came with a 0.4% fixed rate.
Now, for purchases in October 2023 the rate is 4.30%.
More importantly, the fixed rate is 0.90%. The fixed rate hasn’t been this high since April 2008.
We’ll see what the November fixed rate is, but all signs are pointing towards it being higher.
I Bonds got famous for the high inflation rates in 2021 & 2022 – they may become popular again for new purchases based on the projected high fixed rates in November 2023.
How do I Bonds work?
When the US Government announces the 6-month inflation rate, you’ll be earning double that amount for half the year. Most interest rates are quoted in annual terms, but I bonds are quoted in semi-annual 6-month terms.
To calculate the annualized rate and to compare it to other rates just double the 6-month inflation rate, add in the fixed rate and then multiply the fixed rate times the inflation.
That last factor is quite small, so feel free to ignore it to get a rough sense of the current rate. To see the math on each factor go to Treasury Direct I Bonds Interest Rates.
The current composite rate of 4.30% is only earned for the first 6 months of your I Bond. Your October 2023 I Bonds purchase will turn your $100 into $102.15 just 6 months later. This is a 4.30% annualized rate.
When do I get the next interest rate with I Bonds?
Six months after your purchase you’ll get the new six-month inflation rate, still get the same fixed rate from the start of your I Bond, and your money will grow by your new composite rate.
Your interest will be added every six months to the principal of your I Bond, and you’ll get the next 6 months interest applied to that new principal amount. This is called semiannual compounding.
You are required to hold I bonds for 12 months, and you only know what the next 6 months will bring for interest, but what’s the worst that could happen?
What’s the worst-case scenario when I buy an I Bond?
The worst-case scenario for purchases in October 2023 is you earn 4.30% interest for the 6 months after you buy your I bond, followed by the next composite rate of 4.88% after that. (0.9% fixed + 3.94% inflation + 0.04% fixed * inflation multiplier)
If this worst-case occurred, your October 2023 I Bond purchase would turn $100 into $102.15 6 months later. With your 6 month renewal at 4.88% you would have $104.64 exactly 12-months later.
If you cashed out your October 2023 I Bond 12-months later you would lose the recent 3 month interest penalty and walk away with 3.40% interest.
While your current 12-month guaranteed rate doesn’t compare to other 12-month investments, you are guaranteed, that every 6 months your renewal rates will be 0.90% above inflation for the 30 year life of your I Bond.
What are the interest rates on investments that are similar to I Bonds?
(based on Bankrate.com and Federal Reserve Data from October 12, 2023)
Unlike most of 2021 and 2022, I Bond rates are now more in line with other similar time frame savings options.
What should I do if I’ve already maxed out I Bonds purchases for 2023?
Wondering what to do if you’ve already maxed out your I Bonds purchases for 2023? You may want to look into the gift box method for buying more than $10,000 in I Bonds.
If you don’t want any more I Bonds, consider short-term Treasury Bills!
For guidance on buying Treasury Bonds and Treasury Bills check out our blog: Get More Interest From Buying Treasury Bonds and Bills (T-Bills) Through Treasury Direct.
How to Get Strategic with Your I Bonds Purchase
With the November fixed rate likely to go higher you should really consider the trade-off being the certainty of the 0.9% fixed rate (a 15-year high) and the large probability of the fixed rate going up starting in Novemer.
At the same time you should know that there are no partial months in I Bond world. When you are buying I Bonds it serves you best to buy towards the end of the month, and to sell towards the beginning of the month.
David Enna, author of Tipswatch.com suggests being even more strategic, “You can buy an I Bond near the last day of the month and get credit for a full month’s interest, so you can effectively cut the one-year holding period to 11 months and a day, but realistically, you may want to extend the holding period to 14-15 months.
If you lose the prior three months of interest by cashing in early and are unhappy with the new 6-month rate, you would want to hold on for the full higher interest period in months six to twelve and wait for another full three months of lower interest before cashing in after month fifteen.”
How to Take Action On Your Interest Rate Money
When saving your money over a 12-month time frame I Bonds are just one of many investments to consider. Zvi Bodie likes to call I bonds “America’s Best Kept Investing Secret.” Consider your I bonds purchase not just for the short run, but also over the long run as part of a healthy emergency fund savings balance. To buy your I Bonds, go to TreasuryDirect.gov.
Bonus: Listen to the podcast with David Enna from TipsWatch.com for more in depth analysis on I bonds: US Series I Savings Bonds Simplified
Bonus: For guidance on buying Treasury Bonds and Treasury Bills check out our blog: Get More Interest From Buying Treasury Bonds and Bills (T-Bills) Through Treasury Direct.
Related: What Are the Secrets To Retiring Happy, Healthy, and Free?