Originally posted on 10/13/23 when the initial estimates came out. I’ve updated the post below and reposted on 10/31/23 now that the official numbers have come out on the TreasuryDirect website.
We’ve been reporting on the twice-per-year I Bond rate releases. The new rate has been announced: the new rate reset on November 1, 2023 will be 3.97%. That’s for the variable part of the rate which changes twice per year. Additionally, the fixed rate is 1.30%. Total rate is 5.27%.
What this means: If you already own I Bonds and keep them, you’ll get just 3.97% interest rate for the six month period of November 2023 through April 2024. (The exception to that would be if you get a fixed rate from a previous buy in which case it would be higher.) If you buy new I Bonds (or I Bond gift box) between November 2023 and April 2024, you’ll get 5.27% for the first six months. (That’s 3.97% + 1.30%.) After the six months is over, you’ll get 1.30% added to any future variable rate.
For example, suppose in the year 2030 we have another crazy 9.62% I Bonds interest rate, you’ll get 10.92% (on the funds invested from November 2023 through April 2024) while everyone else is getting 9.62%. Or if we have a low inflationary cycle and the I Bond rate is .50%, you’ll get 1.80% while everyone else is getting .50%.
For comparison sake, the current rate which runs May through October 2023 is a 3.40% variable rate and a fixed rate of .90% for a total rate of 4.30%.
In the short term, the fixed rate bumps up the six-month holding interest rate from 3.97% to 5.27%. Longer term, the fixed rate gives an opportunity to lock money in for up to 30 years, with the guarantee to earn interest at the rate of inflation plus 1.30% added on top. Some people always like having I Bonds as part of a long term investing portfolio as part of the “safe” portion of their investments; the added 1.30% long term rate added on top makes it even more enticing.
Personally, I’ll wait until April 2024 before deciding whether to lock funds in as a long term play. For now, the I Bond rate is similar to what I’m getting from other bank account and bond funds (for me it’s VUSXX and VMFXX). And so I can punt the decision into the future and see then if I have funds that I’m interested in locking up long term. (Do note that by buying the bonds later you are starting your 12-month and 5-year clocks later.)
For those with existing I Bonds, we wrote a concise guide on when to sell them off in this post. Even those who want to hold onto I Bonds long term might want to sell off the I Bonds they have and then re-buy with the new 1.30% fixed rate for the long term advantage. Just bear in mind, we are limited to investing just $10,000 per calendar year in I Bonds. However, you can do much more than the $10,000 annual limit by using the Gift Box option along with other strategies we’ve discussed in this article.
- May 2021 through October 2021 – 3.54%
- November 2021 through April 2022 – 7.12%
- May 2022 through October 2022 – 9.62%
- November 2022 through April 2023 – 6.48% (6.89%)
- May 2023 through October 2023 – 3.40% (4.30%)