Series I savings bonds offer high rates of return in order to beat inflation

Michael Finney Image
Sunday, June 19, 2022
Series I bonds offer high rates of return in order to beat inflation
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"Inflation is a thief and it steals people's purchasing power, and it is very difficult to position your assets to protect against inflation," says one financial expert. Here's how you can invest to beat inflation.

SAN FRANCISCO (KGO) -- Whether shopping for new clothes, filling up your tank or buying groceries, inflation is front and center.

San Ramon's Dennis Larson speaks for a lot of us.

"Groceries have gone up there substantially over the last I'd say five, six months; it's just unbelievable," he says. "So it's like, you know, we're spending double that we did it this time last year."

And investing? It is a tough world on Wall Street and Main Street. Respected financial planner Rick Miller holds a Ph.D in economics and founded Sensible Financial Planning.

Here's how he sums up today's financial reality: "Inflation is a thief and it steals people's purchasing power and it is very difficult to position your assets to protect against inflation."

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Difficult -- but he says there are options. He points to I Bonds offered by the federal government.

"They are a very good deal," he says, "especially right now when inflation is high, but I think in general, they are a good deal because they always protect against inflation."

Series I Savings, or "I Bonds," are paying so much right now they sound like a scam. They are sold direct to consumers through the website Treasury Direct, and on this website the good news is actually buried in the small print. Read through a few paragraphs and you'll find the interest rate is now 9.62%.

"I Bonds basically pay an interest rate that is a real interest rate... plus inflation," says Miller. The "I" in the name means "inflation-linked" as a matter of fact.

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The catch? You need to be aware of a few rules:

  • The rate changes every six months
  • Your money must be left there for a while
  • You are restricted on how many you can buy

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Still, for most of us they are a great deal.

"That's right," says Miller, "I would say that if you have cash reserves, and if you can wait a year to have access to those cash reserves, then yes, it's a good idea, and even if you can't set aside $10,000. Maybe you can set aside $100 or $200 or $500, right? You don't have to put $10,000."

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