What is an I-Bond?
An I-Bond, or Inflation Indexed Bond, is a long-term U.S. Treasury security with a fixed rate of return. As its name suggests, the I-Bond provides certain insulation from inflation: neither its redeemable value can decline, nor its earnings rate drop below zero. Since you can’t lose money in them, many people are turning to I-Bonds in the wake of watching their retirement funds significantly diminish. Unlike other bonds, I-Bonds can be redeemed any time you want after the first year. However, should you cash out your I-Bond within the first 5 years, you forfeit the most recent 3 months of interest. After this initial 5 year period they are redeemable at your discretion sans penalty on interest. Earnings on I-Bonds are accrued every month and interest is compounded semiannually. Additionally, they are sold at face value and can be purchased electronically for any amount (to the penny) of $25 or more and not exceeding $5,000. Paper I-Bonds are purchased at the following denominations: $5
