Series I Bond

Definition of 'Series I Bond'


A non-marketable, interest-bearing U.S. government savings bond that earns a combined:
1) fixed interest rate; and
2) variable inflation rate (adjusted semiannually).
Series I bonds are meant to give investors a return plus protection on their purchasing power. Additionally, the interest income is only taxable at the federal level, not at the state and local levels. Most Series I bonds are issued electronically, but it is possible to purchase paper certificates with a minimum of $50 using your income tax refund.

Investopedia explains 'Series I Bond'


The two types of interest that a Series I bond earns are 1) an interest rate that is fixed for the life of the bond; and 2) another rate that is adjusted each May and November based on changes in the nonseasonally adjusted consumer price index for all urban consumers (CPI-U). Series I bond interest is compounded every six months.

Series I bonds are considered low risk since they are backed by the full faith and credit of the U.S. government and their redemption value can’t decline. But with this safety comes a low return, comparable to that of a high-interest savings account or certificate of deposit. Corporate and municipal bonds, however, can lose value; with this risk comes a higher return.
 
Series I bonds can be issued in any amount between the minimum and maximum purchase thresholds. The minimum purchase is $25, and the maximum annual purchase is $10,000 per Social Security number. I-bonds can be held for as little as one year or as long as 30 years, but if they are sold after fewer than five years, the holder sacrifices the last three months worth of interest.
 
Sometimes I-bond income is also tax free at the federal level if it is used to pay for higher education. When you sell an I-bond and use the proceeds to pay for qualified higher education expenses at an eligible institution in the same calendar year, the interest is exempt from federal income tax.



comments powered by Disqus
Hot Definitions
  1. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  2. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  3. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  4. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  5. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
  6. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
Trading Center