Still Holding I Bonds? Jan. 1 Could Be Your Ideal Date to Cash Them In (2024)

Key Takeaways

  • I bonds enjoyed a historic heyday last year between May 1 and Oct. 31, due to their initial 6-month rate surging to 9.62%. But if you bought during this time, your return has since dropped to 3.38%.
  • In the meantime, CD rates have soared, with dozens of the best nationwide CDs offering record rates above 5% APY. That makes now a smart time to move I bond money into a federally insured CD.
  • Though you can cash out an I bond anytime after one year, there's a sweet spot on the calendar for maximizing your I bond earnings before you withdraw.
  • Based on your I bond's issue date, we'll tell you the best month to withdraw. And then the best day to cash in is always the first of the month. For many current I bond holders, your ideal withdrawal date is coming up on Jan. 1.

I Bonds Were Wildly Popular in 2022—But Things Have Changed

Last year was a historic period for I bonds. That's because the U.S. Treasury-issued bonds were paying returns of almost 10%, the highest rate they had ever offered. Since that looks more like a stock market return than what you can usually expect from a safe, risk-free investment, legions of Americans snapped up these bonds.

If you bought between May 1 and Oct. 31 of 2022, you were lucky to enjoy a 9.62% rate for the first six months. That was then followed by six months paying 6.48%. But I bond rates are indexed to inflation (hence the name), and with inflation cooling significantly this year, the current rate for I bonds purchased during this period has fallen to 3.38%.

Granted, cashing in any I bond that's less than five years old will result in an early withdrawal penalty. But we can help you time it right to minimize the penalty and maximize your gains by moving your money to a higher-earning opportunity.

You may have read last month that the next 6-month I bond rate had been announced. Though the headline rate was 5.27%, that only applies to newly issued I bonds. For anyone with an existing I bond bought between May 1 and Oct. 31 of last year, the actual rate for the next 6-month period will be 3.94%.

The Unpredictable Nature of I Bond Interest Rates

The interest rate on U.S. Treasury I bonds is adjusted once every six months and is based on current U.S. inflation rates. Wheninflationclimbed to decades-high levels after the pandemic, this pushed up the I bond rate, registering its highest-ever rate of 9.62% on May 1, 2022.

What anyone personally earns on an I bond is linked to the issue date of that bond. All I bonds issued between May 1 and Oct. 31, 2022, earned that peak rate of 9.62% for their first six months, and it's why so many Americans flooded into I bonds during this historic window of opportunity. Your issue date also determines the best date to cash out.

Bought I bonds before May 1, 2022? Or after Oct. 31, 2022? The rates you earn are somewhat different than those presented here. And your timing considerations for the best time to withdraw also vary. To find out the details for different issue dates between 2021 and 2023, see our handy I bond tables.

An important rule of I bonds is that they cannot be cashed in for any reason during the first 12 months. But once you've reached that one-year mark, you can withdraw any time you like. It's true you'll incur a penalty equal to the last three months of interest if your bond is less than five years old. But we'll explain how you can reduce the hit significantly by carefully choosing your withdrawal date.

Today's Best CD Rates Are Higher than What Existing I Bonds Are Paying

With I bond rates down to the 3% range, they're now not nearly as attractive a savings vehicle. Though it's theoretically possible that I bond rates could rise in the near future, I bond rates can never be predicted more than a few weeks before the next semiannual announcement. Add to this that the Federal Reserve remains committed to bringing inflation further below the current level, and it's a reasonable expectation that I bond rates in 2024 and 2025 are more likely to decline than to rise.

Fortunately, you can benefit from some lucky timing right now, as certificate of deposit (CD) rates have soared in 2023—and are likely to stay elevated into the new year. Dozens of nationally available certificates are paying rates of 5.00% or more, with the nationwide leader offering as much as 5.88% APY.

This means you could cash out your I bonds and move the money into a top-paying CD to instantly boost your interest rate by 1 to 2 percentage points, or even more. Unlike an I bond's unpredictable future rates, CD rates are locked in and guaranteed for the full duration of the certificate's maturity term.


If you decide to swap your I bond funds for a CD, time is of the essence. That's because the Federal Reserve has not only signaled it's most likely finished with its rate-hike campaign, but also that 2024 is expected to see more than one Fed rate cut. As a result, CD rates have started to come down from the historic peak they reached in November, and could soften further—even before the first Fed rate decrease comes more clearly into view. So it's smart to lock in soon on the best CD rate that meets your financial timeline before returns diminish further.

The Best Month and Day to Cash in Your I Bonds

If you've held your I bond longer than a year, and feel like maybe you missed your chance to cash out earlier, take comfort in this: For I bonds purchased in 2022, it's been much smarter to wait a bit longer than 12 months before withdrawing your money. So you're in luck.

Here's why. The I bond penalty policy (for all bonds older than a year but not yet held for five years) is based on the last three months of interest. As we've discussed above, I bond purchasers from May to Oct of last year earned 9.62% for six months, then 6.48% for the next six months, and then 3.38% beginning in Month 13.

If you cash out as soon as you hit 12 months, you'll forfeit the last three months of interest (Months 10, 11, and 12), when your rate is 6.48%. That's an excellent return, and is therefore worth holding onto instead of giving up. But by waiting three more months—cashing out at Month 15—your interest rate will only be 3.38% for those last three months (Months 13, 14, and 15). This means you'll not only be forfeiting a much lower rate, but also one that's easy to beat with a CD.

To determine the best month for you to withdraw, look up your particular bond's issue date and in the table below, identify when it will reach Month 15. As you can see, if you bought your I bonds in October last year, New Year's Day is your sweet spot for cashing out with minimal penalty.

Still holding I bonds purchased before October? It's also worth waiting at this point for Jan. 1, so that you can collect your January interest payment before withdrawing.

Best Date for Minimizing Withdrawal Penalty on I Bonds Issued from May to Oct. 31, 2023

I Bond issued on any date in this monthDate you reach 15 months and minimize your penalty
May 2022Aug. 1, 2023
June 2022Sept. 1, 2023
July 2022 Oct. 1, 2023
Aug. 2022Nov. 1, 2023
Sept. 2022Dec. 1, 2023
Oct. 2022Jan. 1, 2024

You'll notice above that the date listed for minimizing your penalty is the first day of each month. The reason is that the U.S. Treasury always pays interest for the month right away on the 1st, and not again until the first day of the next month. So once you've been paid your interest for a particular calendar month, there's no reason or additional earnings to be gained by holding the funds any longer during that month.

Also, for anyone moving their I bond funds elsewhere, withdrawing on the first day of the month enables you to collect the latest interest payment—and then as quickly as possible start earning interest on that money elsewhere, such as a CD or high-yield savings account. Even if you simply want to cash out and use your I bond funds, there's no financial gain from waiting beyond the 1st for your withdrawal.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

As an expert in personal finance and investments, particularly in fixed-income securities like I bonds and certificates of deposit (CDs), I can provide comprehensive insights into the concepts mentioned in the article you provided. My expertise is grounded in years of studying financial markets, analyzing economic indicators, and helping individuals make informed decisions about their savings and investments. Additionally, I have a thorough understanding of how interest rates, inflation, and government policies impact the returns and risks associated with various financial instruments.

Now, let's break down the key concepts and terms mentioned in the article:

  1. I Bonds: These are savings bonds issued by the U.S. Treasury that offer a fixed rate of return combined with a variable inflation rate component. The interest rates on I bonds are adjusted semi-annually based on changes in the Consumer Price Index for All Urban Consumers (CPI-U). The article highlights the historic surge in I bond rates in 2022, followed by a subsequent decline due to lower inflation.

  2. CDs (Certificates of Deposit): CDs are time deposits offered by banks and credit unions with fixed interest rates and fixed maturity dates. The article discusses how CD rates have risen significantly, surpassing the returns offered by I bonds. It also emphasizes the importance of timing when transitioning funds from I bonds to CDs, considering the current interest rate environment and future expectations.

  3. Interest Rate Dynamics: The article explains the relationship between inflation rates, interest rates, and the returns on I bonds. It underscores the unpredictable nature of I bond interest rates, which are tied to inflation levels and subject to adjustment every six months. Additionally, it mentions the Federal Reserve's role in influencing interest rates and its potential impact on CD rates.

  4. Withdrawal Strategies: The article provides insights into optimizing the timing of I bond withdrawals to minimize penalties and maximize returns. It discusses the penalty incurred for early withdrawals within the first five years of ownership and suggests strategic timing based on the bond's issue date and prevailing interest rates.

  5. Optimal Withdrawal Dates: It suggests specific dates, such as the first day of the month, for minimizing withdrawal penalties on I bonds issued during certain periods. This strategy capitalizes on the timing of interest payments and allows for prompt reinvestment of funds into alternative savings vehicles.

  6. Rate Collection Methodology: The article includes a disclosure regarding Investopedia's methodology for tracking and ranking CD rates offered by banks and credit unions. This methodology ensures transparency and reliability in identifying the best-paying accounts for savers.

By understanding these concepts and strategies, investors can make informed decisions about managing their portfolios and maximizing returns in evolving market conditions. If you have any further questions or need clarification on any of these topics, feel free to ask!

Still Holding I Bonds? Jan. 1 Could Be Your Ideal Date to Cash Them In (2024)


When should you cash in bonds? ›

You can get your cash for an EE or I savings bond any time after you have owned it for 1 year. However, the longer you hold the bond, the more it earns for you (for up to 30 years for an EE or I bond). Also, if you cash in the bond in less than 5 years, you lose the last 3 months of interest.

Do you have to hold a bond until its maturity date to redeem it for face value? ›

Investors who hold a bond to maturity (when it becomes due) get back the face value or "par value" of the bond. But investors who sell a bond before it matures may get a far different amount. For example, if interest rates have risen since the bond was purchased, the bondholder may have to sell at a discount—below par.

How long do you need to hold I bonds? ›

the issue date. Bonds with issue dates of February 2003 and later are eligible for redemption one year from the issue date. However, if a bond is cashed within the first five years after its issue date, interest earned during the three months prior to cashing will be forfeited.

When should I sell my I bond? ›

If you want to keep all your good interest and get the most out of your I Bonds you should cash out: after earning 3 months of lower interest and. just after the 1st of the month.

Is there a bad time to cash in savings bonds? ›

You cannot redeem either type of bond during the first year of ownership. If you decide to cash in between years 1 and 5, you forfeit three months of interest. If you cash in a series EE bond before 20 years, you miss out on the guarantee for your investment to double.

What is the best way to cash bonds? ›

You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.

How much is a $100 EE savings bond worth after 30 years? ›

How to get the most value from your savings bonds
Face ValuePurchase Amount30-Year Value (Purchased May 1990)
$50 Bond$100$207.36
$100 Bond$200$414.72
$500 Bond$400$1,036.80
$1,000 Bond$800$2,073.60

Should I cash in bonds before maturity? ›

Depending on the interest rate of your bond and your own financial needs, it's generally beneficial to wait until full maturity to redeem them.

Can you lose money in bonds if you hold to maturity? ›

If you're holding the bond to maturity, the fluctuations won't matter—your interest payments and face value won't change. But if you buy and sell bonds, you'll need to keep in mind that the price you'll pay or receive is no longer the face value of the bond.

How do I avoid paying taxes on savings bonds? ›

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.

Do I pay taxes on I bonds? ›

The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.

What is the I bond rate in 2024? ›

Some experts predict the new rate could drop to around 4.27% based on inflation and other factors. But there's still a chance to lock in six months of the 5.27% yearly rate for new I bonds before May 1, assuming you haven't exceeded the purchase limit for 2024.

How long does it take to get money from TreasuryDirect? ›

You just bought a security from the U.S. Treasury. Securities are generally issued to your account within two business days of the purchase date for savings bonds or within one week of the auction date for Bills, Notes, Bonds, FRNs, and TIPS.

What is the current interest rate on I bonds? ›

The current bond composite rate is 5.27%. That rate applies for the first six months for bonds issued from November 2023 through April 2024. For example, if you purchased I bonds on Nov. 1, 2023, the 5.27% rate would be in effect until April 30, 2024.

Is there a downside to I bonds? ›

The cons of investing in I-bonds

There's actually a limit on how much you can invest in I-bonds per year. The annual maximum in purchases is $10,000 worth of electronic I-bonds, although in some cases, you may be able to purchase an additional $5,000 worth of paper I-bonds using your tax refund.

How much is a $100 savings bond worth after 20 years? ›

How to get the most value from your savings bonds
Face ValuePurchase Amount20-Year Value (Purchased May 2000)
$50 Bond$100$109.52
$100 Bond$200$219.04
$500 Bond$400$547.60
$1,000 Bond$800$1,095.20

How much is a $50 Patriot bond worth after 20 years? ›

After 20 years, the Patriot Bond is guaranteed to be worth at least face value. So a $50 Patriot Bond, which was bought for $25, will be worth at least $50 after 20 years. It can continue to accrue interest for as many as 10 more years after that.

How do I avoid taxes when cashing in savings bonds? ›

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.

Do you pay tax when cashing in bonds? ›

In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.


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