Everyone understands the uncomfortable side of inflation. We pay more for gas, more for groceries, and more for lumber. We've recently discussed these topics in our podcast episodes about how to beat inflation and how to invest during uncertain times. So what's the other side? How might one take advantage of inflation? Let's consider Series I bonds.

When the inflation rate rises, you get paid a higher rate for owning I bonds. These government-backed investments currently boast a staggering 9.62% composite rate.

cash in wallet during inflation

Series I Bond Benefits:

  • As interest rates rise, composite rates rise
  • Redemption value cannot decline
  • Smart for 5-30 year investments
  • Can be given as a gift

Series I Bond Considerations:

  • Rate adjusts every six months
  • Can't withdraw funds during the first 12 months
  • Penalized 3-months interest if withdrawn before five years
  • Purchase limit of $10k per person, per year

What's a composite interest rate?

Series I bonds pay interest based on a composite interest rate. Part of the rate is fixed and doesn't change for 30 years. The other part of the rate adjusts every six months, based on the Treasury inflation rate.

From May through October of this year, the annual rate for Series I bonds is 9.62 percent.

Where do you buy series I bonds?

Investors purchase I bonds from the government at treasurydirect.gov. The restrictions are minimal. You can buy I bonds if you have a social security number and you're a US citizen (or a US resident, or a civilian employee of the United States). The limit is $10,000 per person, per year.


Should I invest in I bonds?

Everyone has different goals, and those goals often guide investors on where to put their money. Series I bonds don't lose value like other investments. They're also worth consideration for anyone who wants to protect the value of their investments against inflation. Just don't expect market-tracking results. In short: Talk to a fiduciary financial advisor to get specific feedback on your situation.

Of course, inflation affects other areas of our financial lives. If you're looking for information on homeownership, for example, we recently discussed what higher mortgage rates mean for home buyers.