How to Buy I Bonds: Step-by-Step Instructions

After inflation hit a 40-year high in 2022, Series I savings bonds — better known as “I-Bonds” — came back into the limelight. In their latest version, I Bonds pay an annualized rate of 9.62%. Given persistent inflation, they will continue to pay competitive interest rates for the foreseeable future.

This article tells you where and how to buy I Bonds and answers a number of frequently asked questions.

How to Buy I Bonds

The most common way to buy I Bonds is to visit TreasuryDirect, the government website that facilitates the purchase of government bonds. You don’t have to worry about paying any fees or commissions for buying the bonds.

It’s possible to buy I-Bonds through a salary savings plan or with your IRS-issued tax refund, but these are much rarer methods.

The instructions below describe how to buy I Bonds for yourself:

1. Navigate to the TreasuryDirect website at treasurydirect.gov.
2. Click on “Open Account”.
3. Complete an electronic account application. Have important information ready, e.g. B. Your social security number.
4. Wait for account approval. Some individuals may be required to authenticate their account by submitting a paper application with a Medallion Guarantee, a stamp available from many major financial institutions. If you have to go through this additional step, you should expect a delay of several weeks.
5. Once your account has been approved, log into your new account.
6. On one of the tabs on your screen’s banner, click BuyDirect.
7. Select “Series I” under savings bonds.
8. Enter the purchase amount and link to a source of money. Remember, you can only buy Series I savings bonds worth $10,000 per Social Security number per year.
9. Complete your purchase.

As interest accrues on your bonds, you can track any changes in value simply by logging into your TreasuryDirect account or linking it to a financial account aggregator.

FAQs on buying I Bonds

If you have any questions about the details surrounding I Bonds, here are some of the most frequently asked questions:

Can I buy I Bonds with my tax refund?

Yes. When it’s time to file your annual tax return and you’re due a state refund, you can fill out IRS Form 8888 to purchase paper I-Bonds. You can use your tax refund to buy up to $5,000 worth of paper savings bonds, a lower maximum than if you bought them electronically. If you later decide to convert your paper Ibonds to an electronic format, you can do so through the TreasuryDirect website.

How to buy an I Bond for a child?

Because you must be 18 to purchase Series I or Series EE bonds, adults must purchase bonds on behalf of their children if they want their children to own them. How to buy bonds for a minor child:

1. Sign in to your TreasuryDirect account.
2. Navigate to the ManageDirect tab at the top of the screen.
3. In the Manage My Linked Accounts section, click Set Up Linked Minor Account.
4. Enter your minor child’s personal information, including their social security number.
5. Wait for the minor’s account to be approved. it can happen instantly.
6. Navigate to the My Account tab again.
7. Under Linked Account Information, click your child’s newly created account. This will functionally change the account used to your minor’s account.
8. Navigate to the BuyDirect tab and select Series I Bonds.
9. Enter the amount you want to buy and complete your purchase.

The balance of the Bonds you purchase for your minor child will appear on the My Account tab under Linked Account Information once the purchase is complete.

How to buy an I Bond as a gift?

The process is quite similar to buying a gift for a minor, but it’s important to confirm that the gift recipient also has a TreasuryDirect account.

1. Navigate to the BuyDirect tab and select Series I Bonds.
2. Select gift recipient registration from the drop-down list at the top of the page. If you have never created a registration for the recipient, click Add New Registration.
3. If you’re adding a new registration, make sure it says “This is a gift.”
4. Return to the shopping page and name the newly created registration Savings Bond Recipient.
5. Buy the amount of I Bonds you want, up to $10,000.
6. Complete the purchase and print a gift certificate for your records.

Note that the bonds will be delivered to your “gift box” and you will need to electronically deliver the bond to the recipient’s account. This is a popular method of purchasing bonds when the recipient is the buyer’s spouse.

Can you buy I Bonds in an IRA?

Unfortunately, you cannot purchase I Bonds in your Individual Retirement Account (IRA) or other tax-advantaged account. You must use available cash or your tax refund to purchase I Bonds.

Remember, the balance of your I Bond allocation remains in your TreasuryDirect account. You must hold the bonds for at least one year and lose the last three months’ interest if you redeem the bonds within five years of purchase.

How to Buy Paper I Bonds?

The only way to buy Series I paper bonds is with a tax refund.

However, there is no guarantee that you will actually receive a refund as you may owe the IRS at tax time. If you have a balance, you cannot buy Paper I Bonds.

If you have a refund, you can buy up to $5,000 worth of Paper I Bonds. You don’t have to use your entire refund to buy bonds, but you have the option to do so.

Indicate on IRS Form 8888 that you want to use part or all of the refund to purchase paper bonds. Attach the form to your annual tax return. The bonds should be with you shortly.

How to buy more than 1,000 I Bonds?

There is nothing special about the number 1,000 here. If you want to own 1,000 I-Bonds in $25 increments, you must buy them over a three-year period because of the $10,000 purchase limit.

For example, you could buy 400 I-Bonds in year one, 400 in year two, and 200 in year three. The point is, you couldn’t buy 1,000 I-Bonds at once.

If you immediately (albeit indirectly) wanted to own more I Bonds, you might consider one of the following options:

• Buying bonds for your spouse.
• Purchase bonds for your minor child or children.
• Buying bonds for a trust with a separate tax ID.

I Bonds are a great investment for extra money that you don’t want to risk in the stock or bond markets. With inflation skyrocketing in 2022, I Bonds offer a much higher yield than a traditional checking or savings account as interest rates have risen in recent months. But there is a limit to the number of I Bonds you can buy in a year.

The overview of I Bonds

I Bonds can make sense as an addition to an already diversified portfolio. They had fallen out of favor over the past few decades, but with the unceremonial return of inflation in 2022, there was renewed interest in I-Bonds, especially given the current stock market downturn.

Look out for I Bonds for capital stability, reduced risk and protection against inflation.