Inflation is still looming with high-rates on the road. I bonds or I savings could be desirable now. An I bond or I saving is a saving that has a composite of interest rate. It covers both an adjustable rate and fixed rate related to the Consumer Price Index. It is attractive because it could preserve the buying power of your money. Recently, it pays around 6.89%.
However, it is to note that this rate is in effect for six months only. So by the end of April, the rate would meet another adjustment. Meaning, if the inflation declines, the rate of the I Bond also declines. On the other hand, you should be aware that there are many limitations as well. The limit for yearly investment is $10.000. Plus, it is unredeemable in the first year.
Then, you might lose the previous three months of interest, if you cash out between year two and five. McBride noted that I Bonds are not a replacement for your savings account. However, with I Bond, you can preserve the buying power of your $10.000 investment. But it is only if you do not cash it for a minimum of five years. Thus, it is not nothing. On the other hand, it would be a benefit for those planning for retirement in the next five or ten years. Because it serves as a safe yearly investment. Plus, they could enter whenever they want in the first few years of their retirement.
The plan would be different if you are holding credit card debt. Especially, if you are in a position of expecting a hike in the rate you pay within a few statements. For example, the moment Fed funds rate hikes, many lending rates the banks are charging their customers would follow. On February 1 for instance, the average credit card rate was another record high of 19.95%.