Series I Bonds at 3.98%? Here’s Why Investors Are Jumping In

The U.S. Department of the Treasury announced recently that Series I savings bonds will pay an annual interest rate of 3.98% from May 1 through Oct. 31, 2025.

This rate marks an increase from the 3.11% that took effect Nov. 1, 2024, though it’s still lower than the 4.28% yield available through October 2024.

The new composite rate consists of two components: a fixed rate of 1.10% (down from the previous 1.20%) and a variable inflation-adjusted rate of 2.86%.

This adjustment comes as part of the Treasury’s regular semi-annual rate setting for these inflation-protected securities.

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Understanding how Series I bond rates work

Series I bonds feature a unique two-part rate structure to help savers keep pace with inflation. The Treasury adjusts these rates twice a year — in May and November — creating what’s known as the “composite rate” or “earnings rate.”

The variable portion, which is now 2.86%, is directly tied to inflation data and remains constant for six months from your purchase date, regardless of when the Treasury announces its next rate change.

Meanwhile, the fixed rate portion — now 1.10% — stays with your bond for its entire life. Once you purchase a Series I bond, this fixed component never changes, which is one reason they can be attractive for long-term investors.

The Treasury doesn’t disclose its exact methodology for setting this fixed rate. For those exploring broader inflation-resistant options, open a gold IRA, which has historically been another way to help shield savings from market volatility and rising prices.

What the rate change means for current Series I bond owners

If you already own I Bonds, the timing of rate changes follows a personalized six-month cycle based on when you originally purchased your bonds.

For example, if you bought Series I bonds in March, your initial variable rate would be 1.90%, which would change to the new 2.86% rate in September.

However, your fixed rate would remain locked at 1.20% (assuming that was the fixed rate when you purchased). This adjustment would bring your new composite rate to 4.06%.

Similarly, if you purchased I bonds in September of any year, your rates would update every March 1 and Sept. 1, according to the Treasury’s schedule.

For those managing multiple savings strategies or integrating Series I Bonds into a broader financial plan, SmartAsset offers a free tool to connect with a financial advisor who can help you make informed, long-term decisions.

Historical perspective on Series I bond rates

While the current 3.98% rate represents an improvement over the most recent offering, it’s significantly lower than the record-high yield of 9.62% seen in May 2022 during surging inflation. Since then, as inflation has moderated, I bond rates have gradually decreased.

Despite this lower overall rate, the fixed portion of 1.10% remains relatively attractive compared to some historical periods when it was set at 0%. This higher fixed component makes I bonds worth considering for long-term investors seeking inflation protection in their portfolios.

For those using a high-deductible health plan, contributing to a Lively HSA could also serve as a tax-advantaged way to set aside cash while maintaining flexibility for qualified medical expenses.

For savers weighing whether to purchase I bonds before this rate period ends Oct. 31, the current 3.98% yield offers a competitive return compared to many other low-risk savings options, while providing the unique benefit of inflation protection that few other government-backed securities offer.

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