When inflation peaked above 9% in 2022, Series I savings bonds became an overnight sensation, with the Treasury's website crashing as investors scrambled to lock in yields that briefly topped 9.62%. Now, with inflation cooling and the composite rate settling at 4.03%, the question facing savers is whether I bonds still merit attention—or whether high-yield savings accounts and CDs offer a better deal.

The answer, as with most financial decisions, depends on your timeline, tax situation, and what you're ultimately trying to achieve.

Understanding the Current I Bond Rate

I bonds issued from November 2025 through April 2026 carry a composite rate of 4.03%, which breaks down into two components:

  • Fixed rate: 0.90% — This rate is locked for the life of the bond and represents the "real" return above inflation
  • Inflation rate: 1.56% (semiannual) — This adjusts every six months based on the Consumer Price Index

The fixed rate is particularly noteworthy. At 0.90%, it's the highest fixed rate offered on I bonds since November 2007, when it reached 1.20%. This means that even if inflation drops significantly in future years, your I bond will continue earning at least 0.90% above whatever the inflation rate happens to be.

I Bonds vs. High-Yield Savings Accounts

The most common comparison is between I bonds and high-yield savings accounts, which are currently offering rates around 4.0% to 4.5% at top online banks. Here's how they stack up:

Advantages of High-Yield Savings:

  • Complete liquidity—withdraw anytime with no penalty
  • FDIC insurance up to $250,000
  • Easy to open and manage
  • No purchase limits

Advantages of I Bonds:

  • Interest is exempt from state and local income taxes
  • Federal taxes can be deferred until redemption
  • Fixed rate component locks in a guaranteed real return
  • Backed by the full faith and credit of the U.S. government
  • Can be tax-free if used for qualified education expenses

The Tax Advantage Calculation

For residents of high-tax states like California or New York, the state tax exemption on I bond interest can add meaningful value. Consider a California resident in the 9.3% state bracket:

  • A 4.5% high-yield savings rate effectively becomes 4.08% after state taxes
  • The 4.03% I bond rate remains 4.03% since it's state-tax-exempt

The gap narrows considerably—and in some scenarios, particularly for those who can defer federal taxes for years or use the proceeds for education, I bonds may actually deliver superior after-tax returns.

The Liquidity Trade-Off

I bonds come with significant restrictions that don't apply to savings accounts:

  • 12-month lockup: You cannot redeem I bonds for the first year after purchase
  • Early redemption penalty: Cashing in before five years forfeits the last three months of interest
  • Annual purchase limit: Maximum of $10,000 per person per calendar year (plus an additional $5,000 through tax refunds)

For emergency funds or money you might need within a year, high-yield savings accounts are the clear choice. But for medium-term savings earmarked for a specific goal three or more years away, I bonds become more competitive.

When I Bonds Make Sense

Consider I bonds if:

  • You live in a high-tax state and want to shelter interest from state taxes
  • You have a savings goal 3-5+ years away and want inflation protection
  • You're saving for education and may qualify for complete tax exemption
  • You want to lock in the 0.90% fixed rate as inflation insurance
  • You're comfortable with the $10,000 annual purchase limit

"I bonds won't make you rich, but they're a solid tool for the portion of your portfolio where you prioritize capital preservation over growth. The current fixed rate makes them more attractive than they've been in almost two decades."

— Ken Tumin, Founder, DepositAccounts.com

How to Buy I Bonds

I bonds can only be purchased through TreasuryDirect.gov, the U.S. Treasury's online portal. The process is straightforward but requires setting up an account with identity verification. Electronic I bonds have a minimum purchase of $25 and can be bought in any amount up to the $10,000 annual limit.

Paper I bonds are still available but only through federal tax refunds, up to $5,000 annually. This means a household could potentially purchase $30,000 in I bonds per year: $10,000 electronic per person, plus $5,000 paper through the tax refund.

Looking Ahead

The next I bond rate adjustment comes in May 2026, when the Treasury will announce new rates based on the latest inflation data. If inflation continues moderating, the composite rate could decline—but that 0.90% fixed rate will remain locked for any bonds purchased before April 30, 2026.

For savers seeking a balance between safety, inflation protection, and tax efficiency, I bonds remain a useful—if unglamorous—tool. They're not the screaming bargain they were when rates topped 9%, but at 4.03% with a healthy fixed component, they've earned their place in a diversified savings strategy.