Q. Is now a good time to buy I-bonds? How do they work and who might it be right for?
— Investor
A. Series I savings bonds earn interest based on combining a fixed rate and an inflation rate.
And with more talk of rising inflation, I-bonds deserve a closer look.
There is a fixed rate-of-return component as well as a component that adjusts with inflation, said Ken Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.
The inflation component is based on the Consumer Price Index For All Urban Consumers (CPI-U), which measures the changes of prices of goods and services bought by urban consumers.
“As inflation goes higher, the bonds will increase payments based on the CPI-U reading,” Van Leeuwen said. “I-bonds are typically used as long-term holdings and come due in 30 years from issue, but you can redeem them after 12 months of purchase.”
He said now could be a good time to buy because there is an expectation that inflation will rise.
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
