Can someone explain I bonds to me?

[Molly]

I went to Treasury Direct.gov and still don't quite understand how I Bonds work. Can someone explain to me? It sounds like a good place to park some short term savings.

[dado potato]

I rely on expert opinion and analysis written by David Enna "Tipswatch" (published online since 2011).
http://tipswatch.com

Enna explains I Bonds in understandable terms. At the tipswatch website, Molly, I would recommend the section "Q&A on I Bonds". If the Q&A does not tell you everything you want to know, or if something seems unclear, you can use "Responses to Q&A on I Bonds"... located at the bottom of the Q&A. As of this evening there have been 42 responses, asking about a broad range of topics. You could pick a comment that is related in any way to your questions or concerns, click on "Reply", and type your question in your reply.

[rosarugosa]

Molly: I agree that researching from a definitive resource is helpful. I did take some notes when I was researching I bonds last year, so I'm happy to share some of my key takeaways with you:

• The bonds have a fixed rate which stays the same for 30 years, currently zero.
• They have an adjustable rate which is set for 6 months at a time and adjusts in May and Nov. The new rate is announced in Apr and Oct. If you purchase during Apr and Oct, you will know exactly what the rates will be for the first year of your ownership (6 months at the old rate and 6 months at the new rate). The current rate is 9.62%. If you buy today, you will get 6 months at that rate, and then 6 months at the newer, currently unknown rate that will become effective Nov 2022.
• Earnings are exempt from state and local taxes. Federal taxes are due when bond is redeemed.
• You must hold the bond for at least one year. If you hold it for less than 5 years, you forfeit the most recent 3 months of interest.

[Molly]

Thank you all! You are a wealth of information and a wonderful support group!

[beckyliz]

Bonds are basically just loans to the government or a corporation. They promise to pay you a fixed or adjustable rate of interest for a set period of time. At the end of that time period, you get your principal back (watch out for corporates and some municipals, they aren't always backed and can go belly up - hence a higher interest rate). If you keep them to maturity, you get 100% back. If you own a bond that is paying a higher interest rate than current rates, you can sell it at a premium if you need cash.