I was talking with a client this week and he mentioned they had recently invested in Treasury I Bonds that are tied to the Consumer Price Index and are earning 7.12 % from November 2021 to April 2022. That rate is the second highest initial rate ever for these treasury bonds based on an article from Forbes.com. A new rate will be set every 6 months based on the bond’s fixed rate which is currently zero and on the CPI which is affected by inflation. This apparently is a safer investment than most as it is based on US Savings Bonds.
How To Purchase Treasury Bonds
According to the Forbes article, you can buy these bonds on the government’s TreasuryDirect.gov website. The minimum treasury bond investment is $25 and the maximum amount if purchased electronically is $10,000 individually or $20,000 for a couple. You can purchase another $5000 in paper I Bonds with your federal tax refund. The bond rate can vary every 6 months but this 7.12% interest rate is better than the .6% to .8% offered by 1 year CD’s and 5 year CD’s paying up to 1.2%.
Treasury Bond Investment – Factors to Consider
A key part of this purchase is that if you redeem the bonds before 5 years, the last three months of interest will be lost. This is the penalty for cashing out early, just as you might experience with a CD. Another important point is the interest may not be taxable when you cash the treasury bonds. This nontaxable benefit will start to phase out if a single taxpayer has modified adjusted gross income of more than $83,200 and at $124,800 for couples.
If you are interested in getting more information about treasury bond investment, I suggest you review the Forbes article on the internet titled “How to Earn 7% on Safe Bonds Your Broker Can’t Sell You” or go to the TreasuryDirect.gov website to learn more and sign up to purchase these bonds.
I am not a financial planner or investment advisor but thought this information might be helpful to my Don Thomas CPA clients. We are available to assist with any accounting or tax service needs.