It depends. U.S. Savings Bonds do not all perform the same and have different rules and regulations based on the series (EE or I) and the issue date. Bonds with a fixed rate of interest for the life of the bond will not improve even though rates may increase. Bonds offering a combination of a fixed rate (which remains the same for the life of the bond), along with a variable rate that can, and usually does, change every six months will likely see an increase.
Keep in mind, the savings bond interest rates announced by the Treasury every May 1 and November 1 apply only to new bonds purchased during the next six months. That rate does not necessarily apply to older bonds.
Confused? A complimentary savings bond calculator and Savings Bond Inventory Report will indicate exact interest rate performance for each paper savings bond.
Savings Bonds Interest Rates 101:
Savings Bond interest rates are closely tied to the Treasury market-based securities. If market rates go up, savings bond rates will usually follow. The recent U.S. financial market interest rate increases (along with the CPI-U) will likely improve the overall interest rate performance for many savings bonds – old and new – that are not earning a fixed rate of interest.
Series EE Savings Bonds
EE Bonds issued since 2005 will earn a fixed rate of interest, which will remain the same for the first 20 years of the bonds life. After the first 20 years, that rate may change and bond owners will be notified before the rate changes.
EE bonds purchased from May 2018 through October 2018 will earn a fixed rate of interest of 0.10% (for the next 20 years).
The recent savings bond rate increases will not affect EE (electronic) bonds that were purchased since 2005. A disadvantage of owning EE bonds with fixed interest rates is that if there is a period of higher interest rates, unfortunately, interest rates won’t go upon on those bonds.
Older Series E or EE Bonds
Various interest rates, formulae, rules and regulations for paper bonds have been implemented since savings bonds were issued in 1935 to make them attractive to investors. You might need a PHD in finance to try to figure it all out. Click here for detailed information on E, EE bond rules, rates and formulae based on issue dates.
Series I Savings Bonds
The interest rate on Series I Savings Bonds is a combination of a fixed rate (currently set at .30%), which remains the same for the life of the bond, along with an inflation rate (2.22%), which can and usually does change every six months. NEW I Bonds purchased May 2018 through October 2018 will earn 2.52% for the next six months.
The inflation rate announced every six months (each May and November) is based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.
Those holding older bonds should keep in mind the inflation rates (announced every 6 months) are combined with all the prior years interest rates to create the new overall yield. Since current interest rates are on the rise, it is likely that that saving bond rates will also increase.
To eliminate guesswork or confusion, use an online bond calculator to easily determine the interest rates for every (paper) savings bond you own.
Attractive I Bond Rates
Some older I bonds were purchased with a very attractive fixed interest rate portion that provides high interest rate performance. For example, a Series I Bond purchased in May 2000, is currently earning an impressive 6.12%.
Savings Bonds Never Lose Money
Even in times of deflation savings bonds may not earn any interest for a specific period however, they will never actually lose money or decrease in value. U.S. Savings Bonds are guaranteed and backed by the full faith and credit of the U.S. government.
To receive monthly savings bond statements delivered via email that will help eliminate confusion, and deliver current interest rate performance for any paper savings bonds, use an online bond management service.
Economists expect overall interest rates to continue to rise. Savings bond rates will likely follow. Always check interest rate performance on all bonds especially if you plan to redeem any of them. You should redeem the worst performing bonds first and hold onto the better performers. SavingsBonds.com’s Cash-In Report can help with this process.
SavingsBonds.com’s complimentary calculator provides cash in values, interest rates and a personalized, printable, color-coded, Savings Bond Inventory Report along with a “What This Means To You” explanation. For ongoing savings bond management & updated bond values via unique monthly e-Bond Statements, try a free 14-day trial of the SavingsBonds.com Membership Advantages which includes a helpful Cash-In-Report.© and optional Bond Tips.
By: Jackie Brahney, Marketing Director, SavingsBonds.com email@example.com www.SavingsBonds.com