GLOSSARY · BUDGETING, SPENDING & SAVING

I bond (Series I savings bond)

A U.S. savings bond whose rate combines a fixed rate set at purchase with an inflation rate reset every six months, so its value keeps pace with consumer prices. It cannot be cashed in the first 12 months, loses the last three months of interest if cashed within five years, and has a yearly purchase limit. Interest is free of state tax and federal tax is deferred until the bond is cashed.

Also called: I bonds, Series I bond, inflation bond, Series I savings bond
FORMULA
Composite rate = fixed rate + 2 × semiannual inflation rate + fixed rate × semiannual inflation rate
COMPUTE IT WITH YOUR NUMBERS
Real (inflation-adjusted) return →What am I earning after inflation?HYSA vs T-bill vs CD vs MMF after tax →After federal and state tax, where should my cash sit?
LEARN IT PROPERLY
CHAPTER · INCOME FUNDAMENTALS · FOUNDATIONSLow-Risk Places to Keep CashCHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSHow Bonds Work
RELATED TERMS
Real returnTreasury bill
SOURCES
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