Should Both You and Your Spouse Invest in I Bonds?

These days, I look like bonds are a pretty good investment.

Any time you invest money, whether it’s crypto you buy through an app or stocks you add to your brokerage account, you bear the risk of loss. In fact, there is generally no such thing as a risk-free investment. But the closest thing to that might be I Bond.

I bonds are government-backed securities whose interest rates are directly linked to inflation. Generally, when you buy a bond issued by a company, you are given a fixed interest rate on your investment that will remain in effect until your bond matures. But in that situation, you run the risk of the issuing company falling on hard times and failing to keep up with its bond payments.

I Bonds are backed by the US government, which makes them more secure. And because the interest rates they pay are tied to inflation, in times when the cost of living is high, ibonds can be a profitable bet.

That is precisely the scenario we are in today. Many consumers have spent the past year racking up credit card debt and dipping into their savings to combat inflation. It’s not good.

but what is A good thing is that you can snag a competitive interest rate on an I bond investment today. And if you are married, you may want to encourage your spouse to do the same.

How do I bond?

When you buy I bonds, you must hold them for a full year before you can sell them, and there is a penalty for selling your bonds before you hold them for five years. There is also a limit on how many I Bonds you can buy in a given year, and that is $10,000 That limit, however, is per individual, not per family. So if you have a spouse, you can each buy $10,000 worth of I bonds in a given year.

Meanwhile, right now, the iBond is paying 6.89% interest until April. From there, rates on those bonds are likely to fluctuate and decline, as inflation declines. So if you want to buy I bonds, you might want to do it sooner rather than later.

Are bonds a good investment for your family?

I Bonds are now grabbing a nice return on the upside for minimal risk. In fact, the biggest risk with I bonds is that they may not pay much interest down the line. But remember, once you’ve held those bonds for five years, you can cash them in without penalty, so that’s something to consider.

If you and your spouse have the money to invest in I bonds this year, it might be a good bet to do so — but only if I bonds are one of several assets you own. Since you must hold these bonds for at least one full year, you should have other assets in your respective portfolios that give you more flexibility if you need cash in a pinch or want money for another investment opportunity. Stocks, for example, can be bought or sold at any time.

You also need to consider whether Ibonds are likely to lend to your long-term financial goals. The future rate that the bond pays may drop from where it is today. That rate can still be competitive, but you can instead generate higher returns by buying shares of different stocks and holding them for many years.

All told, this is the type of conversation you should have with a financial advisor. If not, sit down with your spouse, read the I bonds and review your options together. If you keep your head together, you can come to the right decision.