Series I Savings Bonds: A Complete Guide for Retirees

A Series I savings bond — commonly called an I bond — is a non-marketable U.S. government savings bond issued by the Bureau of the Fiscal Service. I bonds are designed to protect purchasing power: their interest rate is tied to inflation, their principal cannot decline, and they carry the full faith and credit of the United States.

How the Composite Rate Works

The interest rate on an I bond — the composite rate — is built from two components:

1. The fixed rate. Set at the time of purchase and remains constant for the entire 30-year life of the bond. Every investor who buys during the same six-month window receives the same fixed rate.

2. The inflation rate. Adjusted every six months based on changes in the Consumer Price Index for All Urban Consumers (CPI-U). The Treasury sets a new inflation rate every May 1 and November 1.

The composite rate formula: fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate)

Interest accrues monthly and compounds semiannually.

Current Rates: May 2025 Announcement

On May 1, 2025, the Bureau of the Fiscal Service announced rates for I bonds issued May 1 – October 31, 2025:

• §Fixed rate: 1.10%
• §Annualized inflation rate: 2.86%
• §Composite rate: 3.98% for the first six months after issue

The 1.10% fixed rate applies for the full 30-year life of any bond purchased during this window.

The $10,000 Annual Purchase Limit

The annual purchase limit for electronic I bonds is $10,000 per person, per calendar year (per Social Security Number). A married couple each holding a separate TreasuryDirect account may purchase a combined $20,000 per year. I bonds may also be purchased as gifts for others, each recipient's SSN carrying its own $10,000 limit.

As of January 1, 2025, the previous option to purchase an additional $5,000 in paper I bonds using a federal tax refund was discontinued. All new I bond purchases are now electronic only.

The 12-Month Lockup and 5-Year Penalty Window

Minimum holding period — 12 months. You cannot redeem an I bond until you have held it for at least 12 months. There are no exceptions.

Early redemption penalty — before 5 years. If you redeem before five full years, you forfeit the last three months of interest earned. After five full years, you may redeem at any time with no penalty.

I bonds reach final maturity — and stop earning interest — at 30 years from the issue date.

How to Buy at TreasuryDirect.gov

I bonds are purchased exclusively through TreasuryDirect.gov. They cannot be purchased through a brokerage or bank.

1. 01Create an account at TreasuryDirect.gov — you need your Social Security Number, a U.S. address, and a linked U.S. bank account
2. 02Select BuyDirect and choose Series I savings bonds
3. 03Enter an amount between $25 and $10,000

Proceeds from redemptions are deposited directly to your linked bank account.

Federal Tax Treatment

I bond interest is subject to federal income tax only — fully exempt from state and local income taxes.

Deferral (default). Most owners defer all interest reporting until the bond is redeemed, matures at 30 years, or is transferred. Interest is reported on IRS Form 1099-INT in the year of those events. This allows decades of compound growth without annual tax friction.

Annual reporting. Alternatively, owners may elect to report interest as it accrues each year. This election, once made, applies to all savings bonds the owner holds and all future bonds purchased.

Education interest exclusion. Under IRC Section 135, interest on I bonds redeemed to pay qualified higher education expenses may be excludable from federal income — subject to income limits. Details are in IRS Form 8815.

Full information is available at TreasuryDirect.gov.

Educational purposes only. Not financial, tax, or legal advice.