New Variable I-Bonds Rate Expected To Be 3.94% (Possible Fixed Rate Of Up To 1.70% For Total 5.64% Rate) – Doctor Of Credit

We’ve been reporting on the twice-per-year I Bond rate releases. With the September inflation numbers out, we now know that the new rate reset on November 1, 2023 will be 3.94%. That’s for the variable part of the rate which changes twice per year. Per tipswatch, there is a good chance of there being a fixed rate of 1.00% or higher, perhaps as much as 1.70%.

What this means: If you already own I Bonds and keep them, you’ll get just 3.94% interest rate for the six month period of November 2023 through May 2024. If you buy new I Bonds (or I Bond gift box) between November 2023 and May 2024, you’ll get 3.94% plus the fixed rate for these six months. And in future months/years you’ll get the fixed rate added to the variable rate.

To illustrate, let’s say that the upcoming fixed rate ends up being 1.50%. If  you buy anytime from November 2023 through May 2024, you’ll get 5.44% interest rate for six months. Even more importantly, you’ll get the 1.50% fixed rate added to all future I Bond rates on these funds which were invested from November 2023 through May 2024. For example, suppose in the year 2030 we have another crazy 9.62% I Bonds interest rate, you’ll get 11.12% (on the funds invested from November 2023 through May 2024) while everyone else is getting 9.62%. Or if we have a low inflationary cycle and the I Bond rate is .50%, you’ll get 2.00%.

For comparison sake, the current rate which runs May through October 2023 is a 3.40% variable rate and a fixed rate of .90% for a total rate of 4.30%. And so someone who wants these for the long haul would want to hold of buying until after November 1st and lock in the next fixed rate which is likely to be higher than the current fixed rate.

In the short term, the fixed rate bumps up the six-month holding interest rate. Longer term, the fixed rate gives an opportunity to lock money in for up to 30 years and with the guarantee to earn interest at the rate of inflation plus  the fixed rate (1.50% in our example) added on top. That could be interesting for long term investors, especially if the fixed rate ends up being at the higher end of estimates.

Personally, I’ll likely wait until April 2024 before deciding whether to lock funds in as a long term play. For now, even at the higher end estimates, the combined variable+fixed rate won’t be much different than what I’m getting from other bank account or bond  funds (for me it’s VUSXX and VMFXX).  And so I can punt the decision into the future and see then if I have funds that I’m interested in locking up long term. (Do note that by buying the bonds later you are starting your 12-month and 5-year clocks later.) Remember, you can lock in much more than the $10,000 annual limit by using Gift Box and other strategies.

I’ll update this or do another post when we have the final rate, just putting this out now as a headsup for planning purposes.

Related Posts:

See our post on When To Sell Off Our I-Bonds here. You can see all of our posts on I Bonds at this link. As a refresher, here’s a recap of previous I Bond rates: