I Bond Calculator

An I bond calculator turns two Treasury numbers - the permanent fixed rate and the current semiannual inflation rate - into one composite rate, then grows your purchase month by month. Example: $10,000 at a 1.20% fixed rate and a 1.50% semiannual inflation rate earns a 4.22% composite rate and is worth $10,985.18 if cashed after 30 months, after the three-month penalty.

Three neighboring tools answer different questions. The Compound Interest Calculator handles any account where you choose the rate and compounding frequency, the CD Calculator models a fixed-rate certificate with its own early-withdrawal penalty, and the Bond Yield Calculator prices coupon bonds that trade at a discount or premium. Use this page when the instrument is specifically a Series I savings bond, because only I bonds combine a fixed rate with a resetting inflation rate and carry the 12-month lock plus the three-month penalty.

How the composite rate is built

Every I bond carries two rates at once. The fixed rate is set when the bond is issued and stays with that bond for its entire 30-year life. The inflation rate is reset every six months and applies to every I bond in existence. Treasury combines them with this formula:

Here fixed is the bond's fixed rate as a decimal and semi is the semiannual inflation rate as a decimal. The inflation rate is doubled because it covers only six months, and the small cross-product term exists because the fixed rate also earns on the inflation adjustment. Treasury rounds the answer to the nearest 0.01% and never lets it go below 0%, so a deflationary six-month stretch can zero out your earnings but can never eat into your principal.

The composite rate is an annual rate that is applied as half of it every six months. Because those half-year credits compound, the effective yield is a touch higher than the headline: a 4.22% composite rate works out to about 4.26% per year once compounding is counted. That effective figure is the fair comparison against a savings account or CD quoted as APY.

Worked example: $10,000 held 30 months

Suppose you buy $10,000 of I bonds with a 1.20% fixed rate while the semiannual inflation rate is 1.50%, and you hold for 30 months before cashing.

1. Composite rate: 0.0120 + (2 × 0.0150) + (0.0120 × 0.0150) = 0.0120 + 0.0300 + 0.00018 = 0.04218, rounded to 4.22%.
2. Monthly growth factor: interest compounds semiannually, so each month multiplies the balance by (1 + 0.0422 ÷ 2) raised to the power 1/6, about 1.0034861.
3. Accrued value at month 30: $10,000 × 1.0034861³⁰ = $11,100.47.
4. Three-month penalty: because 30 months is under five years, you are paid the value at month 27 instead: $10,000 × 1.0034861²⁷ = $10,985.18.
5. Penalty and net interest: the penalty is $11,100.47 − $10,985.18 = $115.29, leaving $985.18 of interest you keep.
6. Effective annual return: ($10,985.18 ÷ $10,000) raised to the power 12/30, minus 1, comes to about 3.83% per year - noticeably below the 4.22% headline because of the penalty.

That last line is the whole point of running the numbers: a short hold at a good composite rate can deliver a mediocre real-world return once three months of interest are handed back.

Composite rate for common fixed and inflation combinations

The table below applies the composite formula to a grid of fixed rates and semiannual inflation rates. Read down to your bond's fixed rate and across to the current semiannual inflation rate. All values are rounded to 0.01% exactly as Treasury does.

These are illustrative combinations, not current rates. Two things stand out: the inflation half of the rate moves the composite twice as fast as the fixed half, and a higher fixed rate is permanently valuable because it rides along on top of every future inflation reset.

The 12-month lock and the three-month penalty

I bonds trade liquidity for their inflation protection. For the first 12 months you simply cannot redeem, so money you might need this year does not belong in one. Between month 12 and month 59 you can cash any time, but Treasury pays you the value your bond had three months earlier - the three-month interest penalty. From month 60 onward there is no penalty and the full accrued value is yours.

The table below follows a $10,000 purchase at a 4.22% composite rate and shows what you would actually receive at each stage.

Notice that the penalty is not a flat fee - it grows from $108.29 at month 12 to $122.74 at month 48, because three months of interest on a larger balance is more money. It also never reaches into your principal: the worst case at month 12 still leaves you $318.16 ahead.

What the penalty does to your annual return

The same $10,000 at a 4.22% composite rate, expressed as an effective annual return after the penalty. This is the number to compare with a CD or savings account.

One month of patience is worth a lot at the boundary: month 59 returns 4.04% a year, month 60 returns 4.26%. The penalty is heaviest, in percentage terms, on the shortest holds, which is why the 12-month row lands at 3.18% instead of the 4.26% a full compounding year would otherwise deliver.

How to use this I bond calculator

1. Purchase amount: enter what you bought or plan to buy. Electronic I bonds can be bought in any amount from $25 up to the annual limit, down to the penny.
2. Fixed rate: for a bond you already own, this is the fixed rate that applied in its issue month and it never changes. For a new purchase, use the fixed rate currently posted on TreasuryDirect.
3. Semiannual inflation rate: enter the current six-month inflation rate from TreasuryDirect - the half-year figure, not the doubled annual one. The calculator doubles it for you.
4. Holding period: pick 12, 24, 36, 60 or 120 months with the buttons, or type any number up to 360.

The result updates as you type. Read the redemption value at the top, then check the rate breakdown card for the composite rate and its compounded equivalent, and scroll the six-month schedule to see exactly which period crosses the 12-month lock and the 60-month penalty line.

Who this calculator is for

• Current I bond holders who want to sanity-check the value TreasuryDirect shows, or work out what redeeming today would actually pay.
• Savers deciding between an I bond and a CD, who need the penalty-adjusted return rather than the headline rate.
• People timing a redemption around the 12-month lock or the five-year penalty cliff.
• Emergency-fund planners checking whether money is better placed somewhere reachable within a year.
• Gift and custodial buyers modeling what a bond bought for a child will be worth by a specific birthday.

Second worked example: $5,000 at a lower composite rate

Take $5,000 with a 0.90% fixed rate and a 1.00% semiannual inflation rate. The composite is 0.0090 + 0.0200 + 0.00009 = 0.02909, rounded to 2.91%. Held the minimum 12 months, the bond accrues to $5,146.56, the penalty removes $37.04, and you receive $5,109.52 - $109.52 of interest, an effective 2.19% for the year. Held the full 60 months with no penalty, the same $5,000 becomes $5,777.03, or $777.03 of interest. Same bond, same rate assumption, and the five-year hold keeps roughly seven times the interest of the one-year hold.

Purchase limits and how bonds are bought

Electronic Series I savings bonds are purchased through a TreasuryDirect account and are capped at $10,000 per Social Security Number per calendar year. That limit is per owner, not per household, so two spouses with their own accounts have their own limits, and eligible trusts and business entities carry separate limits of their own. Bonds can be registered with a co-owner or a beneficiary, and can be bought as gifts and held in a gift box until delivered - a delivery counts against the recipient's limit in the year it is delivered. Because purchase channels and limits are set by Treasury and occasionally change, confirm the current rules on TreasuryDirect before building a plan around them.

Taxes on I bond interest

I bond interest is subject to federal income tax but is exempt from state and local income tax, which is a real advantage in a high-tax state compared with a bank CD. You can defer the federal tax until you redeem the bond or until it stops earning at 30 years, or elect to report the interest annually - useful for a child with little other income. Interest used for qualified higher-education expenses may be excludable under the Education Savings Bond Program, subject to income limits and other conditions set out in IRS Publication 550 and Form 8815. This calculator reports pre-tax numbers, so subtract your federal marginal rate when comparing against a tax-advantaged account.

Key I bond terms

• Fixed rate: set at issue, applies for the bond's entire 30-year life, and rides on top of every future inflation adjustment.
• Semiannual inflation rate: the six-month rate Treasury announces on May 1 and November 1; it applies to all I bonds regardless of when they were bought.
• Composite rate: the annualized rate that actually accrues, combining both of the above and floored at 0%.
• Issue month: the month your bond was purchased. It sets your personal six-month rate calendar and your 12-month and 60-month anniversaries.
• Accrued value: the balance including interest earned to date, before any penalty.
• Redemption value: what you would actually be paid - accrued value minus the three-month penalty if you are under five years.
• Final maturity: 30 years after issue, when the bond stops earning interest entirely.

What changes the result the most

• The inflation rate: doubled in the formula, so it drives the composite roughly twice as hard as the fixed rate does.
• The fixed rate: smaller in any single period, but permanent - a bond with a 1.20% fixed rate keeps out-earning a 0.00% bond forever.
• How long you hold: the difference between month 59 and month 60 is worth about 0.22 percentage points a year in the example above.
• Purchase amount: results scale exactly in proportion, so a $2,500 purchase earns a quarter of what the $10,000 rows show.
• Future resets: in reality the composite changes every six months, so a long holding period at one assumed rate is a scenario, not a forecast.

Tips for getting more out of I bonds

• Watch your issue month, not the calendar. Your rate changes at the start of your own six-month period, so a bond issued in March switches in September and March.
• Cash early in a month if you are redeeming. Interest is credited on the first day of each month, so redeeming on the 2nd and the 28th of the same month pays the same amount.
• Let the penalty period run on a low rate. If a new composite rate is unattractive, holding three more months of low interest before redeeming means the penalty consumes cheap months rather than expensive ones.
• Buy near a month's end, redeem near a month's start. A bond bought on the 30th earns the full month's interest, since interest accrues from the first day of the issue month.
• Compare after tax. The state and local tax exemption can make a lower composite rate beat a higher CD rate, especially in high-tax states.

Limitations of this calculator

• It holds the composite rate constant for the whole period. A real bond gets a new inflation component every six months, so treat long holds as a scenario.
• It does not fetch current Treasury rates. You supply them, which keeps the math honest but means an outdated entry produces an outdated answer.
• It ignores federal income tax, which applies to all interest shown here.
• TreasuryDirect applies its own rounding conventions per $25 of face value, so official values can differ from these figures by a few cents.
• It does not model the narrow disaster-area exception that allows redemption inside the first 12 months.
• Interest stops at 30 years; the holding period is capped at 360 months for that reason.

How it compares to related calculators

• For any account where you set the rate and compounding frequency, use the Compound Interest Calculator.
• For a bank certificate with its own term and early-withdrawal penalty, use the CD Calculator.
• For coupon bonds bought at a discount or premium, use the Bond Yield Calculator.
• To convert a nominal rate into a compounded yield, use the APY Calculator.
• To see what inflation does to buying power over the same period, use the Inflation Calculator.
• To size the cash you should keep reachable instead of locked up, use the Emergency Fund Calculator.

Sources

• U.S. Department of the Treasury - TreasuryDirect: Series I savings bonds.
• U.S. Department of the Treasury - TreasuryDirect: I bond interest rates and the composite rate formula.
• Internal Revenue Service - Publication 550, Investment Income and Expenses (savings bond interest and the education exclusion).