I Bonds: Here’s How to Buy More Than $10,000


With a yield of 9.62% over the next six months – and a yield of 6.48% for the six months after that – I Bonds may be one of the best investment deals out there right now.

Unfortunately, the maximum you can buy each year is $10,000.

Or is it?

Here’s a strategy that could potentially allow you to safely get these attractive yields on much more than $10,000.

I Bonds: How They Work

I Bonds are government savings bonds that pay an interest rate that’s linked to inflation. Twice a year, the bonds’ interest rate resets based on updated inflation numbers. As you can imagine, I Bond yields are very attractive right now, given the nosebleed inflation numbers we’ve seen lately.

At the time of this writing, I Bonds are yielding 9.62%! That’s certainly beat the S&P 500 so far this year. Not to mention, they’re guaranteed by the U.S. Treasury.

While the interest is subject to federal income tax, it’s exempt from state and local taxes. So, the tax-effective yield gets even better, especially if you live in a state with high income tax rates.

To purchase I Bonds, simply visit treasurydirect.gov, open an account, and purchase the bonds. While it may not be the snazziest website, it’s a fairly straightforward process.

Unfortunately, I Bonds do come with a few rules. First, you’re required to hold them for at least 12 months before you can cash them out. You’re also penalized if you sell within five years of purchasing them. If you do so, you’ll lose the last three month’s interest payments.

And the big limitation that’s prevented many folks from parking all their cash in I Bonds this year: you’re limited to a maximum of $10,000 per year.

Or are you?

Gifting I Bonds: How to Maximize Your Purchase

While you may be limited to a maximum purchase amount of $10,000 per year for yourself, there’s no limit to the amount you can purchase for someone else as a gift.

Let’s say you buy $10,000 of I Bonds in 2022. There’s nothing stopping you from buying $10,000 for your spouse as a gift in 2022. Even if your spouse has purchased the maximum amount, the Treasury simply holds this gift in his or her name until there’s a year when they’re able to apply it toward their annual purchase amount.

Of course, the opposite is true. Your spouse can buy any amount of I Bonds as a gift for you that you can access in future years.

So, if neither of you purchases any I Bonds in 2023, this $10,000 I Bonds gift would be applied to your annual allotments for that year.

Here’s what really makes this strategy appealing: the yield on the I Bonds that you and your spouse give each other is based on when they were purchased. So, you can lock in these high rates on the gift purchases.

While you’re at it, why not give each other another $10,000 in I Bonds that you can cash out in 2024? Since it’s the end of the year, we’re only looking at a 15-month holding period to make that happen.

That’s three years’ worth of I Bond purchases between the two of you – a total of $60,000. And since there’s no gift tax between spouses, you don’t even have to worry about filing a gift tax return or going over the annual gift tax exclusion amount.

I Bonds Gifting Strategy: October 2022

If you move before November 1st, you can still buy I Bonds that will yield 9.62% for the next six months. I Bond yields are expected to reset to 6.48% in the spring of 2023.

If you plan to hold your I Bond purchases until March of 2024, even with losing the last 3 months’ interest payments for cashing them out before the five-year mark, the effective yield ends up being 6.44%.

That may be the best deal you can get from assets that are as risk-free as they come.

The big drawback to this I Bond purchase strategy is still the 12-month minimum hold period. However, if you’re looking for somewhere to park cash and you’re okay with being illiquid for a while, it’s a strategy worth looking into.

If you need help with retirement planning tactics like these, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.

As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.

Prana Wealth Management LLC (“Prana Wealth”) is a registered investment advisor offering advisory services in the State of Georgia and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Prana Wealth in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant to an applicable state exemption.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Prana Wealth, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
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