I Bonds Now Pay 5.51%—With a Long-Term Perk Savers Haven’t Seen in Decades

Key Takeaways

• I bonds are designed to keep pace with inflation, and new purchases pay an annualized 5.51% for their first six months.

• The new bonds also lock in a 1.40% fixed component, the highest offered in 20 years, for as long as you hold them.

• I bonds can’t be redeemed in their first year, and cashing out before five years costs you three months of interest.

I bonds drew crowds of savers when inflation sent their rates soaring in 2022. Now, a fresh rate increase is giving these government-backed savings bonds another moment in the spotlight.

But while the higher starting rate may grab savers’ attention, the appeal goes beyond what these bonds pay today. For savers looking to keep their money ahead of inflation, the new I bonds offer an advantage that could last for years.

The Bonus Behind These New I Bonds

The U.S. Treasury unveiled a higher I bond rate Friday, with new bonds issued between Nov. 1, 2026, and April 30, 2027, earning an annualized 5.51% for their first six months. That’s up from the 4.26% starting rate offered on the previous batch and is well above today’s best high-yield savings accounts and top CDs.

But there’s more to it than that, since tucked inside that headline rate is a lasting bonus. Every I bond earns interest through two components: a fixed rate permanently assigned when you buy the bond and a variable inflation adjustment. Together, they determine the composite rate your bond pays.

For this new round of I bonds, the fixed rate is 1.40%, up from 0.90% and the highest fixed rate offered since November 2006. That makes it an opportunity savers haven’t had in 20 years: locking in a meaningful boost above inflation that stays with their savings for as long as they hold the bond, potentially up to 30 years.

The composite rate will still rise or fall as the inflation component adjusts twice a year. But whether inflation heats up or cools down, that 1.40% fixed component remains part of the calculation—helping your money build purchasing power instead of simply keeping pace with rising prices.

That’s an advantage even the headline-grabbing I bonds of 2022 didn’t offer. Those bonds started out paying 9.62%, but their fixed rate was zero. As inflation cooled, their payouts fell, with no fixed-rate boost to cushion the decline.

Already Own I Bonds?

Existing I bonds will also receive the new inflation adjustment when their next six-month earning period begins. But they’ll keep the fixed rate assigned when you bought them, so they may earn a different composite rate than the 5.51% offered to new buyers.

What To Know Before Buying I Bonds

The new rate makes I bonds worth a look for savings you won’t need right away. But there’s an important catch: You can’t cash in an I bond for any reason during the first 12 months. That makes them a better fit for money set aside for a future goal than for cash you might need for an unexpected bill.

After that first year, you can redeem your bond whenever you choose, though it will mature after 30 years and earn no more interest. If you choose to redeem an I bond before five years, there is a penalty of your last three months of interest.

What you earn with an I bond over time cannot be predicted since the only known rate is what it will earn in its initial six months. But since each new rate will track inflation, higher inflation rates mean your I bond will earn more, while lower inflation will bring your I bond rate down. Treasury sets new inflation adjustments effective each May 1 and Nov. 1, based on the previous six months of Consumer Price Index (CPI) readings. Your bond’s rate changes every six months from its issue month.

I bonds are purchased through TreasuryDirect.gov, starting with as little as $25. The annual purchase limit is $10,000 per person, so a couple can buy up to $20,000 combined each calendar year.

There’s also a tax benefit: I bond interest is exempt from state and local income taxes. Federal income tax still applies, but you can generally defer it until you redeem the bonds or they mature—giving your savings more time to compound before the tax bill comes due.

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