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Investing In Series I Bonds

When it comes to saving for the future, looking into Series I Savings Bonds may be a good option. These bonds offer special tax benefits that can make them a more attractive choice for some savers. Here William Schantz discusses what makes Series I Bonds unique and why you might want to consider investing in them.

How Investing in Series I Bonds work?

Series I bonds are a type of savings bond offered by the U.S. government. They are similar to other types of savings bonds, according to William Schantz, but offer a slightly different set of features and benefits.

One key difference is that Series I bonds earn interest based on both a fixed rate and an adjustable rate. The fixed rate is set when the bond is issued and does not change for the life of the bond. The adjustable rate, on the other hand, changes every six months in response to changes in inflation as measured by the Consumer Price Index (CPI).

Over time, this can result in higher total returns for investors, particularly if inflation rates rise over the life of the bond. However, it also means that there is some degree of risk involved, as investors could potentially earn less than they would with a bond that only has a fixed rate.

Series I bonds are available in both paper and electronic forms. Paper bonds can be purchased through the U.S. Treasury’s website or at select financial institutions, while electronic bonds can only be purchased online.

Investors should keep in mind that Series I bonds have a minimum purchase amount of $25 and a maximum purchase amount of $10,000 per year (per person). They also have a maturity date of 30 years, meaning that investors will not be able to access their money for this length of time.

However, investors can cash in their bonds early if they need to, although they will forfeit three months’ worth of interest if they do so.

Pros and Cons of Investing in Series I Bonds

There are several pros to investing in Series I bonds. One is that they are extremely low-risk; in fact, they are backed by the full faith and credit of the U.S. government. Additionally, Series I bonds offer tax advantages; the interest earned is not subject to state or local taxes, and it is deferred until the bonds are redeemed (cashed in).

However, there are also some cons to investing in Series I bonds, says William Schantz. One is that the interest rates can be quite low, particularly when compared to other investment options. Additionally, Series I bonds have a relatively long maturity date (30 years), which means that investors may not see any return on their investment for several years. Finally, cashing in Series I bonds before they reach maturity will result in a penalty; investors will forfeit three months’ worth of interest.

Overall, Series I bonds can be a good option for those looking for a safe, low-risk investment. However, it is important to keep in mind the potential disadvantages before making a decision.

Concluding Thoughts

Series I bonds are a solid investment for those looking to save for the long term and protect their money from inflation. However, it’s important to understand the risks involved before investing in any type of security. William Schantz recommends speaking with a financial advisor to learn more about whether Series I bonds are right for you.

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