There’s a rush to buy I-bonds to lock in a high yield, but there may be an even better deal next week

It’s hard to imagine that there could be a better deal for parking up to $10,000 in savings than Series I bonds, at this very moment. The 9.62% yield is top-notch, and you can count the hours before it goes away.

That’s why there’s a mad rush crashing the TreasuryDirect.gov website, the only venue for buying the government-issued savings bonds. But before you dive in, there are a few things to know.

The most important: It might take patience. The TreasuryDirect website says: “We are currently experiencing unprecedented requests for new accounts and purchases of I Bonds. Due to these volumes, we cannot guarantee customers will be able to complete a purchase by the Oct. 28 deadline for the current rate.”

The data page for the Treasury had been noting a drop-off in sales for October up to this point, with only $703 million, compared with the previous six months. The peak was in May, with a record of nearly $5 billion in sales.

Given that the TreasuryDirect website has a history of being clunky and there’s been a recent redesign, any amount of traffic could be crashing servers. Or all the hype over the last days of the super-high rate could be persuading a great number of last-minute shoppers.

Those rushing to buy should be aware of a few caveats about buying I-bonds in the next two days.

You’re locked in for at least a year, and your combined rate for that period will be around 8%, considering that the rate available on Nov. 1 will likely be 6.48% based on analysis of inflation data.

After the lock-in period, you may want to hang on a little longer to capture the best rates, so you might want to only invest money that you don’t need to access for 15 months or longer. That’s because if you cash out I-bonds after a year but before five years, you lose the last three months of interest. Dave Enna, founder of TipsWatch.com, a website that tracks inflation-protected securities, suggests waiting at last three months past the highest market rate to capture the maximum yield.

Other investments may compete with I-bond rates soon, and can be easier to manage and more liquid. The Federal Reserve is expected to raise interest rates again at its Nov. 2 meeting, and perhaps again in December. That will push up rates for other investment products, like Treasury bills and CDs,
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3.948%

which are already in the 4% range for a shorter duration than the I-bond lock-in. TIPS, which are also adjusted for inflation, currently have a higher real yield approaching 2%. In contrast, I-bonds still have a 0% fixed yield.

If the I-bond real yield goes above zero starting in November — or even six months later — that could make them a good long-term deal compared with the current offering. The 9.62% rate is surely enticing, but it’s only for six months. I-bonds are made up of a combination of the fixed rate and the inflation-adjusted component. So if you were planning to hold I-bonds for some time, having the higher fixed rate would be a boon in future years when inflation will presumably be lower.

You don’t have to buy $10,000 all at once. Yotta, a fintech banking platform that offers a pass-through interface to the TreasuryDirect website, says it has sold $15 million in I-bonds so far, but 44% of those users bought less than $1,000. Only 27% did the full $10,000 amount allowed, says Adam Moelis, Yotta’s co-founder.

If you’re among those who already maxed out their individual allotment of $10,000, you’ll have to wait until Jan. 1, 2023, to buy more for yourself. You’ll get six months of the rate that starts in November, and then the next announced rate after that. If you want to buy more than that, you can gift up to $10,000 per person and start the clock ticking on the rate, even if you don’t deliver the gift, says Harry Sit, who runs The Finance Buff blog. The TreasuryDirect website has a “Gift Box” where your gift purchases sit until you deliver them. Note that to receive the gift, the recipient must have an account and must not have exceeded their $10,000 cap for the year. Husbands and wives can gift to each other.

One final note: Don’t forget you have I-bonds. Since you have to buy I-bonds in an individual account, you have to make sure you always integrate your holdings into your overall financial plan. Be sure to name a beneficiary and update your loved ones about the account information, should something happen to you. It’s all part of planning for the future. “That’s a problem with the elderly,” says Enna. “They might forget, and if they don’t tell anyone, you’d never know. I have 94-year-old mother-in-law who owns I-bonds and has used them for many years. We know her log in, we know what’s there and how to disperse it when she dies.”

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