Comparing EE and I bonds — TreasuryDirect (2024)

FAQs

Which is better, I bonds or EE bonds? ›

Bottom line. I bonds, with their inflation-adjusted return, safeguard the investor's purchasing power during periods of high inflation. On the other hand, EE Bonds offer predictable returns with a fixed-interest rate and a guaranteed doubling of value if held for 20 years.

Series I Savings Bonds, or I bonds, are specifically designed to protect your money from the effects of inflation. Savings accounts are not -- they simply pay interest based on prevailing rates. And these rates can be very different.

Key Points. Pros: I bonds come with a high interest rate during inflationary periods, they're low-risk, and they help protect against inflation. Cons: Rates are variable, there's a lockup period and early withdrawal penalty, and there's a limit to how much you can invest.

EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.

Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

That said, there is a $10,000 limit each year for purchasing them. There are several ways around this limit, though, including using your tax refund, having your spouse purchase bonds as well and using a separate legal entity like a trust.

The cons of high-yield savings accounts

Interest rates on high-yield savings accounts are variable and can fluctuate at any time, so while a bank may advertise a high annual percentage yield (APY) when you apply, it likely won't last forever.

The cons of investing in I-bonds

There's actually a limit on how much you can invest in I-bonds per year. The annual maximum in purchases is $10,000 worth of electronic I-bonds, although in some cases, you may be able to purchase an additional $5,000 worth of paper I-bonds using your tax refund.

Bottom line. If inflation and investment safety are your chief concerns — TIPS and I-bonds deliver both. TIPS offer greater liquidity and the higher yearly limit allows you to stash far more cash in TIPS than I-bonds.

“With I bonds, your principal is protected and safe. However, if you cash the bond out before five years, then you will lose up to the last three months of accrued interest.

What is the prediction for I bond rate in 2024? ›

If you buy an I Bond in April 2024 you will get 5.27% for 6 months, then 4.28% for the next 6 months for a combined 1 year rate of 4.83%. The April 2024 12-month I Bond rate of 4.83% is similar to CDs and Treasury Bills that are roughly 5% interest over the same time frame.

Securities purchased through TreasuryDirect cannot be sold in the secondary market before they mature. This lack of liquidity could be a disadvantage for investors who may need to access their investment capital before the securities' maturity.

All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.

More about savings bonds

The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.

You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest. See Cash in (redeem) an EE or I savings bond.