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Series I Bonds: Pros & Cons

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Financial Advisory Services

With fixed-income markets generating lackluster returns so far in 2022, investors have been looking for other ways to generate income in their portfolios. I Bonds, formally known as Series I Savings Bonds, have been one outlet investors have been looking at during this high-inflationary environment. Here’s a quick summary on what you need to know about Series I Bonds.

Series I Bonds are savings bonds issued by the U.S. Treasury department to give investors a modest return while protecting their purchasing power. Series I Bonds earn interest by combining a fixed rate and a variable inflation adjusted rate. The fixed rate of return remains the same throughout the life of the Series I Bond, while the variable rate is calculated twice a year based on changes in the Consumer Price Index. Interest is earned on the bond every month. The interest is compounded twice a year, the interest the bond earned in the previous six months is added to the bond’s principal value; then, interest for the next six months is calculated using this adjusted principal. The interest and principal are paid to you when you cash the bond. Series I Bonds earn interest for 30 years unless you cash them first. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest. (For example, if you cash a Series I Bond after 18 months, you get the first 15 months of interest.)

Series I Bonds are designed to protect the value of your cash from inflation. Since Series I Bonds offer investors a generous, low-risk yield, the Treasury Department limits purchases of Series I Bonds to $10,000 per person annually. Series I Bonds can only be held in paper form, or through the Treasury Department’s website. This means we are not able to implement them into your portfolio here at Jones & Roth.

Are you thinking of investing in Series I Savings Bonds? Here are some pros and cons to consider prior to investing in I Bonds:


  • Series I Bonds are guaranteed by the full faith and credit of the United States Government.
  • Series I Bonds ensure that your savings are protected from inflation.
  • Interest accumulated from Series I Bonds is not subject to State and Local Income Taxes.


  • Series I Bonds are an Illiquid investment. This means you cannot easily access Series I bonds in the event you need cash immediately.
  • Series I Bonds are intended to be held for longer than 5 years. You forego 3 months of interest if you redeem before then.
  • Series I Bonds must be held in a taxable account with the US Treasury Department. They are not eligible to be held in a Traditional or Roth IRA, or any after tax investment accounts.
  • Interest from Series I Bonds are typically subject to Federal Income Tax. 

Please reach out to your Jones & Roth Financial Specialist if you have any questions on how Series I Bonds can affect your personal financial plan. 

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