New Interest Rate for I Bonds - I Bonds Explained for May 2022

What is the new interest rate for I-bonds as of May 2022?
Will Inflation I-Bonds really give me a 10% return on my investment risk-free?
When is the best time to buy I-Bonds?
What the heck are I-Bonds again?

Hey folks, if you don't yet have I-bonds, well, this is financial advice, get yourself some I-Bonds. I-Bonds give you interest in correlation to the rate of inflation and as you know we've had some peak inflation numbers in the prior year! You can check out my last video on I-Bonds where I cover the basics of I-bonds including a step by step tutorial on how to buy these I bonds, because that's how awesome I am: https://youtu.be/BeO255rw9nM

Now, if you bought I-bonds between November 2021, and April 2022, you are entitled to receive a 7.12% interest for the 6 first months that you hold your bonds. The latter 6 months interest rate is determined as we approach May 2022 which is when that interest rate is adjusted to match inflation.

Now if you're watching this video early, this might not yet be on the treasury direct website BUT, in light of the most recent inflation reading released in the 2nd week of April, the I-bond interest rate starting in May of 2022 should be just about 9.62%. I’ll get into how to calculate that in just a second but do me a solid and hit that like button and maybe even think about subscribing if you appreciate videos like this.

Now, if this information isn’t yet available on the treasury direct website, how can we determine the I-Bonds interest rate. Well, know that the I-Bonds interest rate uses a rocket scientist calculation consisting of a fixed and variable interest rate. The fixed will likely be 0. As for the variable, well that's linked directly to inflation. The March 2022 CPI-U was 287.504, while back in September of 2021, 6 months ago, CPI-U was 274.310. CPI-U, as the bureau of labor statistics puts it, is “a monthly measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services”. If you divide the March CPI number by the September one, you can calculate the Semi-Annual, or the 6 month inflation rate change to be 1.0481, or (4.81%) higher. So to annualize this, double this number and you get the new I-Bond Variable interest rate of 9.62%.

So moral of the story is, if you're watching this video in April 2022 before May 2022, you should absolutely buy your I-Bonds as soon as possible, because you know for a fact that you'll lock in 7.12% for the first 6 months, and probably 9.62% for the following 6 months after that. If you instead wait to buy I-Bonds on or after May 2022, then while you will lock in 9.62% interest for the first 6 months, who knows what the next interest rate will be for the later 6 months, right, it could be higher, it could be lower, who knows. I hope that makes it clear, you basically have the opportunity to lock in, on average, a guaranteed 8.37% return over a 12 month holding period if you buy your I-Bonds before May of 2022. If you missed the boat, then fine, you can still lock in 9.62% for 6 months, and that'll just average down once the next interest rate is determined, likely in November of 2022.
#ibonds #investing #inflation

Видео New Interest Rate for I Bonds - I Bonds Explained for May 2022 канала Mr. Money Mindset