There haven’t been many safe investments that could beat inflation except for the I bond, but even that safety net may soon not pack as heavy an inflation-fighting punch.
That’s because the record high 9.62% interest rate on I bonds issued through October will drop Nov. 1 to 6.48%, significantly lower but still one of the best investments out there, experts say.
The rate change is based on the change in the consumer price index (CPI) from March to September. The new rate is below the 8.2% annual rate of inflation in September, which means when the rate is adjusted for inflation, you’re looking at a negative interest rate.
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What is an I bond and how do they work?
It’s a 30-year Treasury bond that protects you against inflation. It pays both a fixed interest rate and a rate that changes twice a year with inflation.
Interest is compounded semiannually, meaning every 6 months a new interest rate is applied to a new principal value that equals the prior principal plus the interest earned in the last 6 months. The bond’s value grows because it earns interest and because the principal value gets bigger.
You can buy $10,000 worth from the Treasury and another $5,000 using your tax refund. You can cash them in after 12 months, but if you do so in less than 5 years, you lose the last 3…
