Got an I Bond? Your Rate Might Drop a Percentage Point on July 1 (2024)

Key Takeaways

  • With I bond rates changing every six months, roughly one in six current I bond holders will see their rate fall on July 1.
  • Because inflation has been cooling, the latest I bond rate is approximately 1 percentage point lower than the previous rate.
  • The rate has already dropped for about a third of I bond holders, while those with a January or July issue date will see their rate fall Monday. Others will see a reduction in the coming months.
  • Our tables below can tell you exactly what rate your I bond is earning now—and when its new, lower rate will kick in.
  • With I bond rates heading under 3% for many bond holders, it's a great time to swap I bond money for one of today's best CDs—where you can guarantee a rate up to 6% for months or years down the road.

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Current and New Rates for Existing I Bonds

U.S. Treasury I bonds take their name from being pegged to inflation. Instead of offering a fixed interest rate, I bonds pay a variable rate that adjusts every six months to make sure your return keeps pace with the latest inflation rates.

Over the last two and a half years, I bond rates have experienced a heyday due to post-pandemic inflation that rose to a 40-year high in 2022. As a result, I bonds purchased by October of that year enjoyed 6-month rates of 9.62% or more—the highest rates paid since I bonds were launched in 1998.

Today, however, I bond rates are dramatically lower. That's because the Federal Reserve's aggressive rate-hike campaign has managed to tamp inflation down. And as a result, the most recently announced yield for newly purchased I bonds fell almost a full percentage point—from a previous 5.27% to now 4.28%.

If you have existing I bonds, your actual rate may differ from the new issue rate of 4.28%. But no matter when you bought your bond, your rate dropped or will drop about a percentage point between May 1 and Oct. 1, 2024. So it's smart to find out what your particular bond rate is now—and what it will be changing to.

To figure out your current and upcoming rates, you must first determine the month of your I bond's issue date. Once you have that, you can reference the table below to find out your bond's particular rate details.

As you can see, anyone with an I bond issued in May, June, November, or December has already had their rate reduced. If you find yourself in that camp (and you've had your I bond for at least the minimum 12-month holding period), you should consider if the current rate is appealing enough to stick with the I bond. Otherwise, you may find that now is a good time to exit so you can earn a higher return elsewhere.

For those with a January or July issue date, regardless of the year issued, your new lower rate will begin next week with the July 1 rate adjustment. Like the I bond holders who are already in the new lower rate tier, you should consider if you want to keep the I bond in light of this new rate.

Anyone with an issue date in a different month (February, March, April, August, September, or October) still has some runway left on their current rate. For these I bonds, your rate won't change until the first of August, September, or October, depending on your bond's issue date.

Have an Older I Bond?

If you hold I bonds purchased earlier than November 2021, you can find your current and upcoming interest rates in the U.S. Treasury's I Bond Rate Chart. Then, use the table below to determine what month the newest rate will take effect for your particular bond.

Moving to One of Today's Top-Paying CDs Could Be a Smart Move

If you don't need your I bond money for a while, the decline of I bond rates at the same time that certificate of deposit (CD) rates have skyrocketed presents a lucky opportunity. For instance, you could cash in your I bonds and move that money to a 6-month or 1-year CD paying in the mid-5% range—or even as high as 6.00% APY. Or you could lock in a record rate for longer, such as a 2-year CD paying 5.10%. Maybe you don't need your money for years and are interested in guaranteeing a 4.80% rate for five years.

Taxable Status of I Bonds vs. CDs

Interest paid on CDs is taxed like all other income at the federal and state level, but I bond earnings are exempt from state and local taxes. So, to make a direct comparison between I bond and CD earnings, you’d need to account for any state income tax you’d pay on the CD interest. Still, if a CD rate is substantially higher than your current I bond rate, you’ll end up earning more with the CD.

While it's possible I bond rates could climb higher, odds are arguably greater they'll instead fall further. That's because the Federal Reserve remains committed to fighting inflation until it comes down to the Fed's target level of 2% (the latest reading was 3.3%). Of course, there's no crystal ball to know if and when inflation will drop as far as the Fed's target, but the central bank's focus on its inflation goal is strong and persistent.

Unlike I bonds, CDs have the advantage of promising one annual percentage yield (APY) that you're guaranteed for the certificate's full term. So there's no guessing game about what you'll earn in the future because the Fed's interest rate moves will have no bearing on existing CD rates. With CD returns near their highest levels in more than 20 years, it's an excellent time to secure one of these locked-in rates.

Deciding if I Bonds or CDs Are Better for You

Choosing between today's I bonds and CDs can come down to how long you want to leave your money untouched. If you're stashing cash for just a few years, locking in one of today's historically high CD rates is the better bet. But for long-haul savings, I bonds can provide the peace of mind that your cash will always safely out-earn inflation.

The Best Month—and Day—to Cash Out I Bonds

Money held in I bonds can be withdrawn anytime after you've held the bond for a year. But there's a catch. For any I bond cashed in sooner than five years from its issue date, you'll incur a penalty. Fortunately, the penalty is fairly mild, calculated as the last three months' worth of interest.

If you decide you want to cash in your I bond, it's useful to choose the best withdrawal date. Monthly interest for I bonds is always paid on the first of the month and is not pro-rated throughout the month. Whether you cash out on July 1 or July 31, you'll receive the same interest payment on July 1—and nothing more until August 1. So it's smart to withdraw as early as possible in a month—ideally on the 1st—so you can move the money somewhere it can start earning a higher interest rate as quickly as possible.

Unsure About Committing to a CD?

If you're not keen on locking your funds into a CD, you can also move your I bond money to one of the best high-yield savings accounts or best money market accounts, which are paying rates as high as 5.55% and 5.35% APY, respectively. But keep in mind that savings and money market account rates are variable, meaning they can be lowered at any time.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that's below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

Got an I Bond? Your Rate Might Drop a Percentage Point on July 1 (2024)
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