If there’s one investment everyone should have right now, it’s a series I bond, according to personal finance expert Suze Orman.
The variable interest rate of the bond is based on inflation, which means that the asset currently has a high yield. The Consumer Price Index rose 8.6% in May, the highest rate since 1981. The I bond annualized rate is a record 9.62% through October 2022.
“This is a fabulous investment,” said Orman, who began investing in I bonds in 2001.
Backed by the US government, the bond does not lose value. Your variable rate is set each May and November. It also has a fixed rate currently at 0%.
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Before you start investing, here’s what the experts want you to know
You can only buy them directly from the US Department of the Treasury website at TreasuryDirect.gov. Available amounts start at $25 and you can invest up to $10,000 each year, though there are some exceptions, like being able to get up to $5,000 in paper I bonds as part of your federal tax refund.
If you want to buy paper bonds instead of electronic ones, you can buy between $50 and $1,000 annually.
You can’t cash the bond for one year, and if you cash one before five years, you’ll lose the previous three months of interest.
While the best thing to do is hold the bond for five years or more, if you don’t think you’ll be able to do it, don’t let that stop you from buying, said Orman, host of the “Women and Money” podcast.
A good bet from the age of inflation, if you can afford it
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“Given that inflation is probably here to stay for some time, even with a three-month interest penalty in years two through five … it’s still worth it, believe it or not,” Orman said.
In addition to making smart investments, also consider your current financial situation and whether or not you can continue to cover your expenses, Orman said.
“People really need to look: what do they want to do versus what they need to do? What do they want to buy versus what they need to buy?” Orman said.
“If you’re now fighting for where every penny is coming out, you’re going in, you’re in a situation where you need to cut back.”
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