I Bond Return Calculator

I Bond Return Formula:

\[ \text{Return} = \frac{V - P}{P} \] \[ \text{where } V = P \times \left(1 + \frac{\text{fixed} + 2 \times \text{inflation} + \text{fixed} \times \text{inflation}}{2}\right)^{2 \times y} \]

Purchase Amount (P):

USD

Fixed Annual Rate:

decimal

Semiannual Inflation Rate:

decimal

Years Held:

years

Return:

Current Value (V):

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1. What is the I Bond Return Calculator?

The I Bond Return Calculator calculates the total return on Series I savings bonds based on the fixed rate, semiannual inflation rate, purchase amount, and holding period. I bonds are U.S. government savings bonds that protect against inflation.

2. How Does the Calculator Work?

The calculator uses the I bond return formula:

\[ \text{Return} = \frac{V - P}{P} \] \[ \text{where } V = P \times \left(1 + \frac{\text{fixed} + 2 \times \text{inflation} + \text{fixed} \times \text{inflation}}{2}\right)^{2 \times y} \]

Where:

$ P $ — Purchase amount (USD)
$ V $ — Current value (USD)
$ \text{fixed} $ — Fixed annual rate (decimal)
$ \text{inflation} $ — Semiannual inflation rate (decimal)
$ y $ — Years held (years)

Explanation: The formula combines the fixed rate with twice the semiannual inflation rate to calculate the composite rate, compounded semiannually over the holding period.

3. Importance of I Bond Return Calculation

Details: Calculating I bond returns helps investors understand the real return on their investment after accounting for inflation, making informed decisions about savings and retirement planning.

4. Using the Calculator

Tips: Enter the purchase amount in USD, fixed annual rate and inflation rate as decimals (e.g., 0.025 for 2.5%), and years held. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What are I bonds?
A: I bonds are U.S. Treasury savings bonds that earn a combined fixed rate and inflation-adjusted rate, providing protection against inflation.

Q2: How often do inflation rates change?
A: Inflation rates for I bonds are adjusted every six months, in May and November, based on the Consumer Price Index.

Q3: What is the minimum holding period for I bonds?
A: I bonds must be held for at least one year, and there's a penalty of three months' interest if redeemed within five years.

Q4: Are I bonds taxable?
A: I bond interest is subject to federal income tax but exempt from state and local income taxes. Tax can be deferred until redemption.

Q5: What are the purchase limits for I bonds?
A: The annual purchase limit is $10,000 per Social Security number for electronic bonds, plus up to $5,000 in paper bonds via tax refund.