Key takeaways
- I bonds bought from May through October 2026 earn 4.26% for their first six months, including a 0.90% fixed rate.
- You can buy up to $10,000 in electronic I bonds per person each year at TreasuryDirect.
- TIPS are Treasury securities whose principal adjusts with inflation; you can buy them through a brokerage.
When inflation runs high, cash can lose buying power. Series I savings bonds and Treasury Inflation-Protected Securities (TIPS) are designed to keep pace.
How I bonds work
An I bond’s rate has two parts:
- A fixed rate that stays the same for the life of the bond.
- An inflation rate that resets every six months based on the Consumer Price Index.
Bonds issued from May 1 to Oct. 31, 2026, earn a 4.26% annualized rate for their first six months, including a 0.90% fixed rate, according to TreasuryDirect. A new rate is announced on Nov. 1, and it will reflect recent inflation readings.
Key rules
- Purchase limit: $10,000 per person per year in electronic bonds through TreasuryDirect.gov.
- Minimum holding period: 12 months. You can’t cash them in during the first year.
- Early redemption penalty: Cash out before five years and you lose the last three months of interest.
- Taxes: Interest is exempt from state and local income tax. Federal tax can be deferred until you cash in, and may be avoided if used for qualified education expenses.
- Interest compounds semiannually and is added to the bond’s value.
I bonds work well for medium-term savings, or for part of an emergency fund once you have at least a year’s buffer elsewhere.
How TIPS work
TIPS are Treasury securities whose principal value rises with inflation. They pay a fixed interest rate twice a year on the adjusted principal.
- Terms: 5, 10 and 30 years.
- Where to buy: TreasuryDirect at auction, or through a brokerage, including TIPS mutual funds and ETFs.
- No purchase limit like I bonds have.
- Taxes: The inflation adjustment is taxed as income each year even though you don’t receive it until maturity, so TIPS often fit best in an IRA or 401(k).
- Price risk: If you sell before maturity, the price can be higher or lower than you paid.
I bonds vs. TIPS
| Feature | I bonds | TIPS |
|---|---|---|
| Annual limit | $10,000 per person (electronic) | None |
| Where to buy | TreasuryDirect | TreasuryDirect or brokerage |
| Can you lose principal? | No | Yes, if sold before maturity |
| Liquidity | Locked for 12 months | Can sell anytime via brokerage |
| Tax on inflation gains | Deferred until redeemed | Taxed yearly |
Is it worth it right now?
With inflation at 3.7% in September 2026, inflation-linked savings are getting more attention. Compare the current I bond rate with what you can get from high-yield savings or T-bills, and remember that I bonds lock up your money for at least a year.
WalletJolly may earn a commission from links on this page. Rates, prices and rules mentioned are current as of Oct. 28, 2026 and can change. This article is general information, not financial, tax, insurance or legal advice.
