Key Takeaways
- The U.S. Treasury announced today that I bonds purchased between May and October this year will earn 4.28% for their first six months.
- If you already own I bonds, however, your next six-month rate will likely be lower.
- For anyone who purchased I bonds between November 2021 and October 2022—when returns climbed as high as 9.62%—your new six-month rate will be 2.96%.
- Whatever your new rate, the date it will begin depends on your I bond's issue month (see our tables below).
- Today's best CDs are paying record rates up to 5.65% APY, making now a good time to swap existing I bond funds into a top-paying CD.
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Today's New Rate for I Bond Purchases
I bond rates change twice a year based on the inflation trend of the previous six months—which is why they're called I bonds. But the rate is actually made up of two parts. One is fixed for the life of the I bond—assigned to your bond at the time of purchase—while the other component is indexed to inflation and adjusts every May and November.
Together, the fixed and variable components make up the composite rate for a particular I bond, which is applied for a six-month period. Then six months later, the variable inflation portion adjusts and will be added again to each bond's fixed rate. This continues for as long as you own the bond, and you always receive each interest rate for a full six months.
The U.S. Treasury today announced its May 1 rate, unveiling the same fixed-rate component as the previous period (1.30%), but a lower inflation component, coming in at 2.96% (i.e., an annualized figure for the 1.48% semiannual inflation rate). Combining the two results in a new composite rate of 4.28% for I bonds purchased anytime in the six-month period from May 1 to Oct. 31 this year. (The full calculation for the new composite rate is actually [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)].)
If you buy anytime during this period, you'll earn 4.28% for your first six months of interest payments. After that, your return will depend on the Nov. 1 rate announcement, which in turn will be determined by future inflation rates. If inflation goes down, your next six-month rate will decline. But if inflation rises, your 4.28% rate could rise in the next period.
The New Rate for Existing I Bonds
No matter whether you buy new I bonds tomorrow or already hold I bonds, the same inflation component of 2.96% will be incorporated into your next six-month interest rate. But your return can still vary if you have a different fixed rate than newly purchased bonds. Remember: Your fixed rate component is assigned to your bond at the time of purchase and never changes.
For many current I bond holders, the new rate announced today means their upcoming return will be much lower than new bonds are paying. That's because purchases between May 2020 and October 2022—which includes a time period when I bonds were extremely popular due to paying their highest rate on record—have a fixed-rate component of 0.00%. That's notably lower than the current 1.30% fixed rate and means your 0% fixed-rate bond will have a new rate of just 2.96%.
In the previous rate announcement, on Nov. 1, 2023, the inflation factor—and resulting composite rate— were 3.94%. That means today's new six-month return, based on a downward inflation trend this past half year, is about a full percentage point lower than your previous rate.
To see what the new rate will be on existing I bonds going back to May 2020, look up the issue month of your bond and consult the table below. If you hold I bonds purchased earlier than those shown, you can find all of your historical interest rates in the U.S. Treasury's I Bond Rate Chart.
| Newly Announced Rates for Recent I Bond Issues | ||||
|---|---|---|---|---|
| I Bond Issue Date | Fixed-Rate Component Assigned for Life of the Bond | New Inflation Component | New Composite Rate* | Previous 6-Month Rate |
| New purchases May 2024–Oct 2024 | 1.30% | 2.96% | 4.28% | N/A |
| Nov 2023–Apr 2024 | 1.30% | 2.96% | 4.28% | 5.27% |
| May 2023–Oct 2023 | 0.90% | 2.96% | 3.87% | 4.86% |
| Nov 2022–Apr 2023 | 0.40% | 2.96% | 3.37% | 4.35% |
| May 2022–Oct 2022 | 0.00% | 2.96% | 2.96% | 3.94% |
| Nov 2021–Apr 2022 | 0.00% | 2.96% | 2.96% | 3.94% |
| May 2021–Oct 2021 | 0.00% | 2.96% | 2.96% | 3.94% |
| Nov 2020–Apr 2021 | 0.00% | 2.96% | 2.96% | 3.94% |
| May 2020–Oct 2020 | 0.00% | 2.96% | 2.96% | 3.94% |
Figuring out when your new rate above will begin depends on the specific issue month of your existing bond. For instance, if you bought your I bond in May—of any year—you'll start earning your new rate tomorrow, on May 1. But if you bought in, say, September, your current rate won't change to today's new rate until Sept. 1.
| When I Bond Rates Will Change for Each Bond Issue Month | |
|---|---|
| I Bond Issue Month | When Your Rate Will Change Each Year |
| January | July 1 and Jan. 1 |
| February | Aug. 1 and Feb. 1 |
| March | Sept. 1 and March 1 |
| April | Oct. 1 and April 1 |
| May | Nov. 1 and May 1 |
| June | Dec. 1 and June 1 |
| July | Jan. 1 and July 1 |
| August | Feb. 1 and Aug. 1 |
| September | March 1 and Sept. 1 |
| October | April 1 and Oct. 1 |
| November | May 1 and Nov. 1 |
| December | June 1 and Dec. 1 |
Today's Best CDs Pay More Than Most I Bonds
If you don't need your funds for a while, the decline of I bond rates at the same time that 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 more than 5.50%. Or you could lock in a record rate for longer, such as a 2-year CD paying 5.30%. Maybe you don't need your money for years and are interested in guaranteeing a 4.70% rate for five years.
While it's possible I bond rates could climb higher again, odds are arguably greater that they'll decline in 2024. That's because the Federal Reserve remains committed to fighting inflation until it comes down to the Fed's target level of 2%. There's of course no crystal ball to know if and when inflation will fall to that level. But the Fed's focus on its inflation goal is strong and persistent.
Unlike I bonds, certificates of deposit (CDs) have the advantage of promising one APY that you're guaranteed for the CD's full term. So there is no guessing game about what you'll earn in the future, and what the Fed does with interest rates will have no bearing on the return of any existing CD you already hold. 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.
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 do 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.
21 Best CD Rates for July 2024: Up to 6.00% APY
Don't want to commit your I bond funds to a CD? You can also move your money to one of the best high-yield savings accounts or best money market accounts, which are currently 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 go down at any time and without notice.
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—and you'll want to choose your timing carefully. For any I bond cashed in sooner than five years from its issue date, you'll incur a penalty. Fortunately, the penalty can be fairly mild if you time it right.
The early withdrawal penalty is calculated as the last three months' worth of interest. But since your I bond rate changes every six months, that means your penalty will depend on when you withdraw. If you cash out during a high-rate period, you'll have a bigger penalty, while your penalty will be reduced if you withdraw during a lower-rate period.
Now that the new I bond rate is dropping further, anyone cashing in may want to wait until they are three months into the new rate (based on their start date for the new rate in our table above). By doing that, your penalty will forfeit three months of the lower-rate earnings.
That said, if your existing rate is already well below what you can earn by moving your money elsewhere, one could argue that the sooner you get to a new higher rate—especially if it's one you can lock in for the long haul—the better off you'll be.
Best Day of the Month to Withdraw I Bond Funds
Monthly interest for I bonds is always paid on the first of the month and is not pro-rated throughout the month. So whether you cash out on May 1 or May 31, you'll receive the same interest payment and nothing more until June 1. So it's smart to withdraw as early as possible in a month—ideally on the 1st—so you can as quickly as possible begin earning higher interest elsewhere.
Rate Collection Methodology Disclosure
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.
Banks must be available in at least 40 states. 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.
