With U.S. Savings Bonds, consumers and businesses can receive a guaranteed interest rate on their savings. These bonds help fund federal spending with terms of up to 30 years. The U.S. government currently issues two types of savings bonds–Series EE and Series I–that can be bought online through its Treasury Direct website. Although there are only two types of U.S. Savings Bonds, their uses can be quite flexible and each one can be an ideal investment in certain situations. To determine the best U.S. Savings Bonds for a variety of situations, we analyzed the benefits of each type of savings bond, their interest rates, maturities, and other relevant factors. The best savings bonds are easy to purchase, offer attractive interest rates, and include tax benefits on the interest they earn. Why We Chose It Series I Savings Bonds are the best overall because their earnings adjust with inflation, come in both paper and electronic forms, and may avoid Federal taxation when used to pay for education. Pros & Cons Pros Interest rate adjusts every six months based on inflation Can purchase electronic or paper bonds Earnings exempt from state income tax May avoid Federal taxes when used for education Can purchase for as low as $25 Cons Must own for one year before selling Lose three months' of interest if sold before five years Interest rates are not guaranteed Maximum purchase of $10,000 per year of electronic bonds and $5,000 of paper bonds May only buy paper bonds with a Federal tax refund Overview Series I Savings Bonds are our choice for the best U.S. savings bonds because they offer a higher return that adjusts with inflation, can be delivered electronically or in paper form, and may avoid Federal taxation when used to pay for higher education. Series I Savings Bonds are also the best choice for education savings because of the tax break when paying for college and inflation adjustment. Bondholders will continue to earn interest for up to 30 years or until the bond is cashed in, whichever comes first. The current rate is 6.89% for bonds issued between November 2022 and April 2023. Interest rates are a combination of a fixed rate plus a semi-annual inflation rate that adjusts every six months. These bonds can be purchased for as little as $25, with a maximum of up to $10,000 per calendar year per Social Security Number. Electronic bonds have a minimum purchase of $25 and a maximum of $10,000 with denominations of any amount in between in penny increments. Paper bonds start at $50 each, come in denominations of $50, $100, $200, $500, and $1,000, and have a maximum purchase amount of $5,000 per year. Electronic savings bonds can be purchased at any time through Treasury Direct, while paper bonds are only available with your IRS tax refund. Series I Savings Bonds must be held for at least one year before they can be redeemed. These bonds are known as zero-coupon bonds, which means that they do not receive regular interest payments. The interest accrues and is paid out when the bond is cashed. If you redeem them during the first five years, you'll forfeit the interest earned from the previous three months. After five years, there is no penalty. Interest earned is taxable at the Federal level, however, it may be excluded when used to pay for education. Savings bonds are exempt from state and local income taxes but you may owe estate or inheritance taxes, depending on your personal circ*mstances. Why We Chose It Series EE Savings Bonds are the best gift, retirement planning, and for diversifying a portfolio because they provide a guaranteed rate of return and, even if interest rates are lower, the savings bond will be worth double its face value after 20 years. Pros & Cons Pros Fixed-rate of interest Worth double face value after 20 years Earnings exempt from state income tax May avoid Federal taxes when used for education Can purchase for as low as $25 Cons Must own for one year before cashing in Lose three months of interest if cashed in before five years Interest rates are lower than alternatives Maximum purchase of $10,000 per year Cannot buy paper savings bonds Overview Series EE Savings Bonds are the best savings bonds for gifts, retirement planning, and diversifying a portfolio. These bonds are available in any amount to the penny ranging from $25 to $10,000 with a maximum purchase of $10,000 per year for each Social Security Number. Investors can purchase them directly through Treasury Direct on a one-off purchase or through regular recurring payroll deductions. Series EE Bonds are only available in electronic form. The interest rate on Series EE Savings Bonds varies depending on when they are purchased. The current interest rate is 2.10% (as of January 2023). The U.S. Treasury Department updates the rates on new bonds each May 1 and November 1. When you buy a saving bond, the rate is fixed until it reaches maturity 30 years later. Series EE Savings Bonds are a good choice for gifts, retirement planning, and diversification because they are guaranteed to double in value if held for at least 20 years. Even if the interest rate is low, the U.S. government will make a one-time adjustment to fulfill this guarantee. This guarantee provides assurances for investors who are planning for retirement or diversifying their portfolios with less risky assets. You cannot sell a Series EE Savings Bond until you have held it for at least one year. After that, it is completely liquid and can be cashed at any time. If you redeem the savings bond during the first five years, there is a penalty of three months' interest. After five years, there are no more penalties. Interest earned on these savings bonds can be reported yearly or all at once when the bonded is cashed in and the money is received. Investors pay federal income taxes on the earnings, but they are exempt from state and local taxes. The earnings may avoid federal taxes when used to pay for higher education expenses. Best Savings Bonds Best Savings Bonds Final Verdict Compare Providers How to Choose Savings Bonds vs. CD The Best Time to Cash Savings Bonds Are Savings Bonds a Good Investment? How Much Do Savings Bonds Cost? Methodology Our choice for the best savings bond is the Series I Savings Bond. It offers a more competitive rate of interest that adjusts with inflation and you can purchase both digital or paper versions of the bond. The interest rate adjusts every six months, which allows investors to benefit from rising inflation rates and avoid locking in a low, fixed rate when interest rates are below historical averages. You can buy digital Series I Savings Bonds in any denomination above $25 with a maximum of $10,000 per year for electronic bonds, so they are a good fit for anyone's budget. When choosing the best savings bonds for your situation, it helps to know what features are most important to you. Series I and Series EE Savings Bonds have many similarities, but there are a few key differences that can impact your decision. Savings Bonds and CDs are both popular choices for risk-averse investors. They have a lot of similarities in that they are easy to purchase and offer interest rates that are fixed for periods of time. For short-term investors of less than one year, CDs are the better choice. You cannot cash out a savings bond until you've owned it for one year. Most banks offer CDs with a variety of terms that typically range from one month to five years. There are many advantages to savings bonds though. You can purchase a savings bond today and allow it to grow for the next 30 years without worrying about what the interest rates are when your CD matures. Additionally, savings bonds offer tax advantages that CDs do not. Your interest earnings are not subject to state or local income taxes and may be exempt from Federal income taxes when used to pay for education expenses. Currently, Series I Savings Bonds also offer rates that are substantially higher than most short-term CDs. Investors can take advantage of these higher rates and have full liquidity after just one year. While there is a three-month interest penalty if you redeem a savings bond in the first five years, many longer-term CDs have interest penalties that have higher penalties. The best time to cash savings bonds is after holding them for at least five years. You cannot sell them until after you've held them for one year, and if you sell before five years, you'll owe three month's interest as a penalty. Ideally, Series EE Savings Bonds should be held for at least 20 years in order to benefit from the guarantee that they'll be worth double their face value. It depends, savings bonds can be a good addition to your portfolio for retirement. However, the interest rates tend to be low because of their government guarantees. Other investments, such as stocks, tend to outperform savings bonds over time. Investors who are looking to balance out their portfolio, reduce risk, and add guaranteed rates of return can consider adding savings bonds to their portfolios. Savings bonds are sold at face value with minimum values starting at just $25. They can be purchased in any amount to the penny above $25, including specific dollar and cents amounts, such as $25.63. The maximum savings bond face value is $10,000. To pick the best savings bonds, we analyzed the savings bonds currently offered by the U.S. Treasury Department. At this time, only two savings bonds are available for purchase, so we compared the bonds against each other. We gathered data about purchase methods,minimum purchase amounts, interest rates, penalties, maturities, taxation, and other features to determine which savings bond is best for a variety of uses. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.Best Overall & Education Planning : Series I Savings Bonds
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Best Gift & Retirement Planning : Series EE Savings Bonds
Final Verdict
Compare the Best Savings Bonds
Company Type of Savings Bond Interest Rate No. of Years Minimum Purchase Maximum Purchase per year U.S. Treasury Series EE 2.10% (January 2023) fixed Updated every 6 months Guaranteed to double in value after 20 years Up to 30 years $25 $10,000 U.S. Treasury Series I 6.89% (January 2023) variable Updated every 6 months Up to 30 years $25 electronic; $50 paper $10,000 electronic; $5,000 paper How to Choose the Best Savings Bonds
Savings Bonds vs. Certificates of Deposits (CDs)
When Is the Best Time to Cash Savings Bonds?
Are Savings Bonds a Good Investment for Retirement?
How Much Do Savings Bonds Cost?
How We Chose the Best Savings Bonds
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U.S. Savings Bonds vs. CDs: What’s the Difference? How to Give Bonds as a Gift Great Financial Gifts for Kids for the Holidays Do CDs Make Sense in a Rising Inflation Environment? U.S. Savings Bonds Series EE vs. Series I: Knowing the Difference Time to Cash in Your U.S. Savings Bonds?
FAQs
What is the best bond to buy in 2024? ›
The Vanguard High-Yield Corporate Fund (VWEHX) takes the top spot on our list of the best high-yield bond funds for June 2024 thanks, largely, to its low expense ratio.
Are I bonds still a good investment in 2024? ›June 2024 I Bond Fixed Rate is 1.30%!
If you liked having I Bonds and matching inflation then you might love having I Bonds that beat inflation over the next 30 years. The current fixed rate of 1.30% is one of the best fixed rates in the past 21 years.
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.
Which savings bond is better, EE or I? ›The upshot: Although EE Bonds were a sound investment, paying 90% of the prevailing yield on five-year Treasuries, while providing their owners the additional benefits of a put option and a tax shelter, I Bonds were far superior.
What are the highest paying bonds right now? ›Here are the best High Yield Bond funds
- iShares BB Rated Corporate Bond ETF.
- Xtrackers Low Beta High Yield Bond ETF.
- Xtrackers Short Duration High Yld Bd ETF.
- JPMorgan BetaBuilders $ HY Corp Bnd ETF.
- iShares Broad USD High Yield Corp Bd ETF.
- Xtrackers USD High Yield Corp Bd ETF.
- SPDR® Portfolio High Yield Bond ETF.
In line with the outlook from other investment providers, the firm is forecasting a 5.7% gain in 2024 for U.S. investment-grade bonds, versus 4.9% last year and 2.3% in 2022. (All figures are nominal.) Schwab's 10-year return expectations are well below each asset class' returns from 1970 through October 2023.
How much is a $100 savings bond worth after 30 years? ›How to get the most value from your savings bonds
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|---|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
I bonds have earned their reputation as an inflation-fighting tool for retirees. As of May 2024, I bonds are returning 4.28%, which is lower than the same period in 2023 but still well ahead of the inflation rate of 3.5%. The previous I bond rate stood at 5.27%, set in November 2023.
Can I bond lose value? ›You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.
What kind of bonds does Suze Orman recommend? ›I bonds are backed by the government and protect you from inflation because when inflation increases, the combined rate increases. While I bonds are still a great investment, Orman says CDs and Treasury Bills may be better for the long run.
Are CDs better than bonds? ›
CDs are usually best for investors looking for a safe, shorter-term investment. Bonds are typically longer, higher-risk investments that deliver greater returns and a predictable income.
How to avoid paying taxes on savings bonds? ›You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
Is there a downside to I bond? ›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.
Interest earned on I bonds is exempt from state and local tax but subject to federal tax. The interest is taxed in the year the bond is redeemed or reaches maturity, whichever comes first.
What is the rate of I bonds in May 2024? ›May 1, 2024. Series EE savings bonds issued May 2024 through October 2024 will earn an annual fixed rate of 2.70% and Series I savings bonds will earn a composite rate of 4.28%, a portion of which is indexed to inflation every six months.
Which funds will perform best in 2024? ›Top 10 most-popular investment funds in April 2024
| Rank | Fund | One-year return (%) |
|---|---|---|
| 1 | Vanguard LifeStrategy 80% Equity | 12% |
| 2 | Fundsmith Equity | 9.1% |
| 3 | L&G Global Technology Index | 44% |
| 4 | Royal London Short Term Money Market | 5.34% |
May 1, 2024
Invest in safer portfolio without compromising returns.
| Bond name | Rating |
|---|---|
| 9.73% BANK OF BARODA INE028A08059 Unsecured | CRISIL AAA |
| 12.50% GUJARAT NRE co*kE LIMITED INE110D07093 Secured | CARE Suspended |
| 9.55% TATA MOTORS FINANCE LIMITED INE601U08192 Unsecured | ICRA A+ |
| 9.48% PNB HOUSING FINANCE LTD INE572E09239 Secured | CRISIL AA |
Sovereign Gold Bonds (SGBs):
These bonds are issued by the government and denominated in grams of gold. Their value fluctuates with the price of gold, providing a hedge against inflation. Additionally, investors receive regular interest payments exempt from income tax.
- Fidelity 500 Index Fund. : Best overall.
- Fidelity Large Cap Growth Index Fund. : Best for growth investors.
- Fidelity Investment Grade Bond Fund. ...
- Fidelity Total Bond Fund. ...
- Vanguard Wellesley Income Fund Investor Shares. ...
- Schwab Fundamental US Large Company Index Fund. ...
- Schwab S&P 500 Index Fund. ...
- Vanguard High-Yield Tax-Exempt Fund.
Mar 26, 2024