investment advisers suggest there are several alternatives to potentially earn higher returns than what I bonds currently offer.

The positive news is that inflation has subsided over the past year. However, the downside is the reduction in the variable rate on I bonds acquired during the period when inflation reached a 40-year high.

The I bonds purchased in the summer of 2022, which initially paid a record 9.62% when inflation was surging, are currently offering about a third of that rate.

In the current economic scenario, where inflation is on the decline and interest rates are rising due to the Federal Reserve’s aggressive rate hikes in the past 18 months, investment advisers suggest there are several alternatives to potentially earn higher returns than what I bonds currently offer.

Daniel Milan, an investment adviser and managing partner at Cornerstone Financial Services in Southfield, Michigan, recommends, “You should sell them.”

To put it into perspective, the latest I bonds from Nov. 1 to April 30, 2024, are yielding 5.27%, according to the U.S. Department of Treasury, a decrease from the record yield in the summer of 2022. This may not sound unfavorable, considering that savings, money market funds, short-term Treasuries, and certificates of deposit (CDs) are all hovering near the 5% range.

However, it’s important to note that the 5.27% rate is applicable only for new I bond purchases and doesn’t reflect the earnings on I bonds purchased in the summer of 2022 to receive the record 9.62%.

I bond rates are influenced by both a fixed rate set by the Treasury for the 30-year life of the bond and a variable rate that moves with inflation. I bonds from summer 2022 had a 0% fixed rate and a 9.62% variable rate. The variable rate resets every 6 months and has consistently fallen with inflation, currently standing at 3.97%.

Experts suggest various safe options that can potentially offer better returns than 2022 I bonds. For those who like I bonds, selling the old ones with a 0% fixed rate and purchasing new ones with a 1.30% fixed rate and 3.97% variable rate for an overall rate of 5.27% is an option. Additionally, investments in short-term CDs, online savings accounts, money market funds, or Treasuries may provide similar or higher interest rates. If the Federal Reserve starts cutting rates, experts recommend considering Treasuries, particularly a 10-year bond, which may offer a potential gain in price if rates decrease.

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