I-Bonds: 6 Things to Know Before Purchasing Them

You may have heard by now that I-Bond interest is at a record high. These government-backed bonds have two portions of interest: a fixed rate, and an inflation-linked rate that is adjusted every 6 months.

Here are six other things you need to know about I-Bonds before purchasing them.

• I-Bonds can't be cashed in for the first 12 months you own them, so don't go throwing every dime of emergency money into them

• You can't use IRA or Roth IRA funds to purchase them (unless you first take a distribution from that IRA or Roth IRA, and use the after-tax proceeds to make the purchase)

• The interest you receive is subject to federal income tax, but not state and local income tax.

• You'll receive a 1099-INT when you cash in your bond, but you can report your interest as-earned annually, potentially reducing your future tax burden. When you eventually do cash in your bond, you'll still receive a 1099-INT, but you can let the IRS know that you've already reported interest in previous years (see IRS publication 550.)

• The minimum annual purchase amount is $25 per person, and the maximum annual purchase is $10,000 per person.

• Lastly, these are backed by the full faith and credit of the United States government. From a credit rating stand point, this makes them as secure of an investment as you can possibly find.

Purchase your I-Bonds directly by setting up an account on www.treasurydirect.gov. Once your account is set up, you can also check the value of and/or redeem any other U.S. savings bond you already own.

Do I-Bonds make sense for your investment portfolio? Drop us an e-mail at hello@providersandfamilies.com, or schedule a time to chat with us.