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How to Buy Series I Bonds for Your Portfolio

The bonds issued by the U.S. federal government, or Treasury, are among the safest investments. Among the options of U.S. Treasury, the I Series savings bonds pay a fixed interest rate plus a rate that changes twice a year based on the Consumer Price Index (CPI).

How to Buy I Series Bonds for Your Portfolio

I Series bonds can be purchased electronically or in paper form. Bonds are purchased at their face value. Interest accumulates on the bond monthly and is compounded twice a year.

Types of I Series Bonds

You can buy electronic I Series bonds via the U.S. Department of the Treasury’s website, TreasuryDirect.gov. Electronic bonds are fully registered and tracked online, with no physical certificate. You can purchase electronic bonds for any cash amount, but paper I bonds can only be bought using your income tax refund.

Minimum Purchase for I Series Bonds

You can purchase a limited amount of I Series bonds. Electronic I bonds have a maximum purchase limit of $10,000 per year, while paper bonds bought using your income tax refund have a maximum purchase limit of $5,000. The total limit for I Series bonds is $15,000.

Selling I Series Bonds

I Series bonds can only be redeemed for cash. They cannot be sold on secondary markets. I Series bonds can be redeemed at any time after the first 12 months, but there is a penalty equivalent to three months of interest if the bond is redeemed before five years.

Buying I Series Bonds Through TreasuryDirect

The first step to electronically purchasing I Series bonds is to open an account with TreasuryDirect. Go to TreasuryDirect.gov and select “Open Account.” You will need your Social Security number, a driver’s license or another state-issued ID, and bank information.

After completing the application, you can proceed with the purchase. Go to the “Buy Direct” tab and select “Savings Bonds.” Complete the purchase details according to your needs.

Conclusion

I Series bonds are a safe and convenient way to invest your money and add protection against inflation to your portfolio. The limits on the amounts you can invest in I Series bonds apply to individual Social Security numbers. Therefore, families can save much larger amounts than the individual limit.

I Series bonds also offer tax benefits. The interest on I Series bonds is exempt from state taxes, and federal income tax is not paid until the bond is redeemed. Taxpayers may be able to exclude part of the interest from I Series bonds if used for educational purposes.

Frequently Asked Questions

When should I buy I Series savings bonds?

I Series savings bonds can be a good alternative to certificates of deposit if you’re saving to buy a home or another major purchase where keeping your money safe is a high priority. I Series savings bonds can be redeemed at any time after the first year, and after five years, there is no interest penalty. Unlike certificates of deposit, the interest on I Series savings bonds is tax-deferred and exempt from state taxes. I Series savings bonds can also be good options for education savings. Taxpayers may be able to exclude part of the interest from I Series savings bonds if used for educational purposes.

How can I buy EE savings bonds?

EE savings bonds are only available electronically. They can only be purchased and redeemed online at TreasuryDirect.gov. EE bonds can be purchased for any amount over $25. There is a limit of $10,000 per year for each Social Security number.

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Sources:

U.S. Treasury Department. “Savings Bonds Rates & Terms: Calculating Interest Rates.”

U.S. Treasury Department. “Series I Savings Bonds.”

U.S. Treasury Department. “Individual – Buying Series I Savings Bonds.”

Source: https://www.thebalancemoney.com/how-can-i-buy-series-i-bonds-for-my-portfolio-357546

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