What Are I Bonds And How Do I Buy Them Right Now

I bonds are government-backed savings bonds designed to protect your cash from inflation, currently paying a composite rate that adjusts every six months. You can buy them right now exclusively online through the TreasuryDirect.gov website by linking a bank account, with a $10,000 annual purchase limit per individual.

How to buy I bonds and protect cash from inflation

You can buy them right now exclusively online through the TreasuryDirect.gov website by linking a bank funding source, with an annual purchase ceiling of $10,000 per individual, as set by the U.S. Treasury and confirmed on TreasuryDirect.gov. That means if you've been nervously watching prices rise, this is a concrete, low-risk tool you can set up this afternoon, no broker, no app, no minimum balance beyond the $25 electronic bond floor established by the Treasury and verifiable on the official site.

The mechanics that track rising prices

Every I bond earns a single composite rate that is actually two rates bolted together. The first is a fixed rate set at purchase, which stays locked for the life of the bond (currently 0.0% for bonds bought through April 2025, but that can change in May). The second is a variable rate recalculated every May 1 and November 1 based on the Consumer Price Index for All Urban Consumers (CPI-U). The composite rate is then the fixed rate plus twice the semiannual price-growth rate, plus the product of those two rates.

Here's the part that matters for your anxiety: the variable rate resets to match rising costs over the trailing six months, so your principal never loses purchasing power. If the pace of price increases runs at 5% for a year, your bond's value tracks that. This is precisely the mechanism that makes I bonds a favorite for the "inflation & recession investing" conversation, because the return is designed to keep you whole rather than chase market gains. The catch: the fixed rate is often zero, so you're getting purchasing-power protection, not wealth-building growth.

The liquidity rules most people miss

You cannot touch your money for the first 12 months after purchase, no exceptions, no hardship withdrawals, no penalty waiver. That's the mandatory lockup period, and it's the single biggest surprise for new buyers. If you redeem between 12 months and 5 years, you forfeit the last 3 months of earnings as a penalty. For example, if you cash out at 14 months, you lose the yield from months 11, 12, and 13, which can sting if you bought right before a rate spike. After 5 years, the penalty disappears, and the bond keeps earning until it matures at 30 years.

Another rule that trips people up: you can only buy $10,000 in electronic I bonds per Social Security number per calendar year, a limit set by the Treasury and detailed on TreasuryDirect.gov. Married couples can each buy that amount, and you can also use your tax refund to buy up to $5,000 more in paper bonds, but that's a separate process. The 30-year maturity means the bond stops earning returns after three decades, at which point you must redeem it or pay tax on the accrued earnings even if you don't cash out. That's a tax-trigger trap: the IRS treats the yield as taxable in the year of maturity, not the year you sell.

Walking through a TreasuryDirect purchase

Go to TreasuryDirect.gov and click "Open Your Account" in the top-right corner. You'll need your Social Security number, a driver's license or state ID, and a bank funding source with a routing and account number handy. The site will ask you to create a username, password, and a security image, then verify your email. This is the tedious part: you'll get a "Medallion Signature Guarantee" prompt only if you're setting up an entity registration (like a trust), but for a personal registration, you just need to answer two security questions.

Once logged in, click "BuyDirect" at the top, then select "Series I Savings Bonds." Enter the amount, anywhere from $25 to $10,000, in penny increments, and choose "Non-Competitive Bid" when asked. This is standard for I bonds; you're agreeing to accept the rate set at the next auction (the composite rate is announced every May and November, so you'll get the current rate until then). Link your bank funding source by entering the routing and account numbers, then review and submit. You'll get a confirmation, and the bond appears in your "Current Holdings" tab within two business days. The entire process takes about 15 minutes, but the registration creation step sometimes glitches if you have a pop-up blocker enabled.

When I bonds are the wrong move

I bonds shine in the short to medium term, but they're a poor fit for three common situations. First, if you think you'll need the cash within 12 months, a high-yield savings vehicle at an online bank like Ally or Marcus is strictly better, you get 4% or more currently, no lockup, and no penalty. Second, if you're investing for retirement with a 10+ year horizon, TIPS (Treasury Inflation-Protected Securities) held in a tax-advantaged retirement wrapper often beat I bonds because they can be bought in larger amounts and you don't pay annual tax on the price-growth adjustment.

Third, and most overlooked: if you have high-interest credit card debt (over 15% APR), paying that down beats any I bond return. The composite rate is currently around 3-4% (depending on the November 2024 reset), which is far less than what you're paying in borrowing costs. The same logic applies to your emergency fund, that money should be liquid, so keep it in a money market fund rather than tying it up for a year. And here's the maturity trap: when your I bond hits 30 years, the IRS taxes all the accumulated yield in that single year, potentially pushing you into a higher bracket. If you're retired and drawing Social Security, that could trigger a tax torpedo. For a deeper dive on how rising prices hit your cash, read "inflation actually erode my savings and what can I do about it" to see why even 3% annual price growth halves your purchasing power in 24 years. For the long-term picture, "what assets historically perform best during high inflation" shows that commodities and real estate have outperformed bonds over 10+ year stretches. And if you're building a safety net, "build a recession-proof emergency fund step by step" walks through why I bonds should be the last layer, not the first.

Frequently Asked Questions

Buying I bonds for a child

Yes, but the $10,000 annual limit applies per child, not per parent. You can open a minor registration linked to your own TreasuryDirect login, and the child receives the bond in their name.

Recovering a lost TreasuryDirect password

You'll need to answer your security questions and wait for a one-time code sent to your registered email. The site also offers a "forgot password" link that takes about 10 minutes to reset.

State and local tax on I bond earnings

No, I bond yield is exempt from state and local income tax, but you still owe federal tax. If you use the bonds for qualified education expenses, you may also exclude the earnings from federal tax entirely.

Unlike any other savings vehicle, I bonds are the only asset where the U.S. government contractually guarantees your principal will never lose a cent to rising prices, while simultaneously locking you into a 12-month period of zero access that no bank or brokerage can override.