Series I savings bonds pay a composite rate that combines a fixed rate locked in at purchase with a semiannual inflation adjustment. This calculator computes that composite rate and the redemption value of your bond — including the 3-month interest penalty if you cash out before five years.
Example 1 — A typical composite rate. You buy an I bond with a 1.10% fixed rate while the semiannual inflation rate is 1.45%. Composite = 0.0110 + (2 × 0.0145) + (0.0110 × 0.0145) = 0.0110 + 0.0290 + 0.00016 = 4.03%. That rate applies for six months, then resets with the next inflation figure.
Example 2 — The 3-month penalty bites. You invest $10,000 and cash out after 36 months at a 4.03% composite rate. Interest over three years is about $1,230, but because 36 months is under the five-year mark, Treasury forfeits your last three months of interest — roughly $100. Your redemption value lands near $11,130.
Example 3 — Past five years, no penalty. Hold that same bond for 61 months and the forfeiture disappears entirely. The effective annual return improves by close to a quarter of a percentage point simply by waiting past the five-year threshold.
Example 4 — Deflation protection. In a deflationary six-month period the inflation component can go negative. The composite rate is not allowed to fall below zero, so your bond can never lose principal to deflation — a structural advantage over TIPS, whose principal can adjust downward.
| Feature | Series I Bond | CD | High-Yield Savings | TIPS |
|---|---|---|---|---|
| Rate type | Fixed + inflation | Fixed | Variable | Fixed + inflation |
| Federal tax | Deferred until redemption | Annual on interest | Annual on interest | Annual on inflation accrual |
| State / local tax | Exempt | Taxable | Taxable | Exempt |
| Early withdrawal | 3 months interest penalty <5 yrs | Penalty varies, often 3–12 months | None | Market price risk |
| Purchase limit | $10,000 per person per year | No limit (FDIC insured) | No limit | No limit |
| Deflation protection | Yes — floor at 0% | N/A | APY could drop | Principal can fall |
| Minimum hold | 12 months | Term length | None | Maturity |
You cannot redeem an I bond at all during the first 12 months. Plan your cash needs around that hard lockout.
Each person can buy $10,000 in electronic I bonds per calendar year, plus up to $5,000 more in paper bonds via a tax refund.
The fixed rate is set by the issue date, not the purchase window. Bonds bought in the same six-month window share a fixed rate.
You owe no federal tax until you redeem, so interest compounds untaxed. State and local governments cannot tax the interest at all.
Series I savings bonds are issued by the US Treasury and sold exclusively through TreasuryDirect.gov. What makes them unusual is that they carry two rates at once. The fixed rate is locked in on the issue date and lasts the bond's entire 30-year life. The inflation rate is recalculated every six months on May 1 and November 1 using the change in the Consumer Price Index for All Urban Consumers (CPI-U). The composite rate that results is what your bond actually earns for that six-month period.
Because the inflation component can swing both ways, I bonds behave very differently from a CD. When inflation runs hot, the composite rate can jump above 9% — as it did for bonds issued in May 2022, which carried a 9.62% composite rate. When inflation cools, the inflation component shrinks and the composite rate can fall back near the fixed rate. Deflation is the one scenario where the bond's design shows its value: the composite rate is floored at zero, so a bond can never lose value to negative inflation the way a TIPS principal can.
I bonds suit investors who want an inflation-protected parking place for cash they will not need for at least a year, who value the state-tax exemption, and who have already captured any employer 401(k) match and are looking for the next dollar of tax-advantaged savings. They suit people nervous about rate risk — an I bond has no duration risk, because you redeem at par plus accrued interest rather than at a market price. They are a poor fit for anyone who may need the money inside twelve months, since redemption is simply barred during that window.
The composite rate headline number is frequently quoted out of context. A 9.62% reported rate applied for only six months and then reset; the promotion was not a 30-year guarantee. Always compute the composite rate from its two parts — that is precisely what this calculator does — rather than treating any single announcement as a long-run return. Over a full interest-rate cycle, I bonds typically land somewhere in the range of their fixed rate plus realized inflation, with the fixed rate serving as the floor.
| Term | Value | Notes |
|---|---|---|
| Minimum purchase | $25 | Electronic bonds on TreasuryDirect |
| Annual purchase limit | $10,000 | Per person, per calendar year, electronic |
| Tax-refund paper bonds | Up to $5,000 | Additional, purchased with IRS refund |
| Maturity | 30 years | Earns interest the entire period |
| Minimum holding period | 12 months | No redemption whatsoever |
| Early redemption penalty | 3 months interest | Applies before the 5-year mark |
| Federal tax | Deferred | Owed at redemption or maturity |
| State / local tax | Exempt | All states and localities |
⚠️ Important Note: This calculator produces an educational estimate using the official Treasury composite-rate formula and the inputs you supply. Actual redemption values depend on the exact issue date, the sequence of historical inflation rates, and Treasury's own rounding conventions, which are applied at each six-month accrual. Composite rates reset every May 1 and November 1, so any projection beyond the current period is a forecast, not a guarantee. Federal tax is deferred but not eliminated. This is not tax or investment advice — consult a licensed professional for your situation.
The composite rate equals the fixed rate plus twice the semiannual inflation rate plus the product of the fixed rate and the semiannual inflation rate. The cross-term makes the formula slightly more than simple addition, because the fixed and inflation components compound together rather than simply stacking.
The fixed rate is set when you buy the bond and never changes for its 30-year life. The inflation rate is adjusted every six months based on CPI-U and can move up or down, or even turn negative. Your composite rate combines the two and resets each May 1 and November 1.
Yes. If you redeem an I bond before holding it for five full years, Treasury forfeits the last three months of interest. Redemption is barred entirely during the first twelve months. After sixty months the penalty disappears and you receive the full accrued value.
Not automatically. Interest is exempt from state and local income tax in all states, and federal tax is deferred until you redeem or the bond matures. The one exception is when you use the proceeds for qualified higher education expenses, in which case the federal interest can be excluded entirely subject to income limits.
No, not from deflation. The composite rate is floored at zero, so even if the inflation component turns sharply negative your bond will not lose accrued principal. The only ways the redemption value drops are the three-month early-withdrawal penalty and any federal tax you owe on the interest when you cash out.
It depends on the rate environment and your time horizon. A CD offers a locked rate and no early-withdrawal surprises beyond its own penalty, while an I bond adapts to inflation and is exempt from state tax. If inflation is running above your CD rate the I bond usually wins after tax; if rates have fallen and you can lock a high CD rate, the CD may come out ahead.