Retirement Investor

October 2021 Will Probably Be the Best Month Ever in History to Buy I Bonds


Looking for better interest on the money you have piling up? You’re not alone! Read on to learn why October 2021 is likely the best month ever to buy U.S. Series I Savings bonds (I bonds) and how it can help your savings goals.

Many people are rightly concerned about future inflation, as well as the low interest rates on bank-type interest rate accounts. With the Federal Reserve and Congress using aggressive fiscal and monetary policy to try to pump the stock market and keep the economy afloat, many people are afraid their savings will be decimated by a combo of low interest rates and high inflation.

What should an investor, or their advisor, do? Buy I bonds!

Why? Because you’ll get a 12-month inflation-adjusted rate that will probably exceed 5% for the next year! But move now because October 2021 is likely to be the best month EVER to buy I bonds!

I Bond Basics

What is an I bond you ask? An I bond is a U.S. Government Savings bond that carries a fixed interest rate, plus an additional inflation adjuster, so that you get an inflation-adjusted real rate of return. In a world of inflation worries and few inflation-adjusted investments, the I bond is a great place to look for savers.

Now, what are the downsides to an I bond?

  • You have to hold them for 12 months minimum. You can’t cash out before then.
  • If you cash out between the end of year one and the end of year five, you lose your prior three months interest as a penalty.
  • You can only buy $10,000 per person, per year, and you have to do it at
  • The fixed interest rate has been 0.00% since May 2020 and its highly likely to renew at 0.00% in November 2021

So why would anyone buy I bonds at a 0.00% fixed interest rate?

Because the inflation adjustment you are getting in October 2021 (+1.77%) combined with the inflation adjustment you’ll get when your I bond renews between November ’21 and April ’22 (tracking at +3.28%) gives you a 12-month inflation-adjusted rate of 5%+!

I Bond Inflation Calculations

Let’s look at how that inflation adjuster is set and used. Every May and November the U.S. Treasury releases the factor, and it’s based on the change of inflation called CPI-U over the preceding six-month period.  For May 2021, the rate (1.77%) was based on the change from September 2020 (CPI-U at 260.280) to March 2021 (264.877).  When you buy I bonds from May ’21 to October ’21 you will get an inflation adjustment each month, based on that 1.77% rate for the next six months.

If you started with $100, you’ll end up with $101.77 six months later.  Then your inflation adjustment will be based on the new six-month rate. The U.S. Treasury won’t release the rate until November, but they tell you exactly how it’s calculated, and that data was released by the Bureau of Labor Statistics a few weeks earlier.

The November rate will be based on the change from March (264.877) to September. The August CPI-U number was 273.567, which, if it stays the same (most people agree it will be higher) then the November rate would be announced at 3.28%.  Your October $100 I bond purchase would be worth $101.77 after six months, and then for the next six months you would earn interest at 3.28% (likely higher) and at the end of 12 months have $105.10. A 12-month rate above 5%!

I Bond Alternatives

What are equivalent savings vehicles paying right now? According to and Federal Reserve Data (9/22/2021) you can get a:

  • 12-month CD for a top rate of 0.60%-0.70%, and average of 0.14%
  • Money market for a top rate of 0.55%, and average of 0.08%
  • Savings account for a top rate of 0.55%, and average of 0.06%
  • 12-month Treasury of 0.07%

Now, you might be thinking, “what about that penalty?” If you absolutely don’t like your renewal rate 12 months from now and need to cash out that bond as soon as you can, your October 2021 I bond could still give you 3.41% after the penalty. That’s almost 3 full percentage points above the best alternative out there – the 12-month top CD rate of 0.70%.

You also may be wondering how October’s rate will be the best in history? Let’s compare it to the 1-year Treasury bill because a U.S. Government I Bond you hold for 12 months has the same default risk as a 1-year Treasury bill.

There have only been five times in the history of the I bond (since starting September 1998) that the 12-month rate has been greater than it is right now. October 2005 & October 2008 saw rates of 5.51% and 5.31% respectively. April 2000, October 2000 and April 2001 saw 12-month rates of 7.37%, 7.11% and 6.30%, respectively. (I Bond history & Treasury history)

Compare those to the 12-month Treasury bond rates of the time and you’ll see three times the I-Bonds were ahead by about 1%, once when it was ahead by 2.35%, and the outlier of October 2008, when the I-Bonds won by about 4%.

Now we are facing an arbitrage advantage in October 2021 of just over 5%, beating the previous best of 4% that took place 13 years ago, and crushing all other previous periods.

You might also be wondering, “why not wait until November and start out with the likely 6%+ effective interest?” Feel free to do that but know that you have no assurance that the renewal rate six months down the road will be anywhere close to that number. Buying an I Bond in October gives you the opportunity to move into a 12-plus month interest account while knowing exactly how much interest you’ll get over those 12 months.

David Enna, author of suggests being even more strategic, “You can buy an I Bond near the last day of the month and get credit for a full month’s interest, so you can effectively cut the one-year holding period to 11 months and a day, but realistically, if you buy in October, you’ll probably want to extend the holding period to 14-15 months. If you lose the prior three months of interest by cashing in early you’d want to hold onto the high interest for that full six-month renewal period and wait for a full three months of lower interest before cashing in.”

Take Action

When you get your bank statement and need a microscope to find the pennies of interest you are getting, think through how much you can commit to a 12-month guaranteed investment that pays over 5%. Zvi Bodie likes to call I bonds “America’s Best Kept Investing Secret.” Let’s fight the low interest rates that we are getting right now, buy some I bonds, and tell everyone else we know about this incredible opportunity. To buy your I Bonds, go to

Jeremy Keil, CFP, CFA

Jeremy Keil, CFP®, CFA is a retirement-focused financial planner with Keil Financial Partners, and host of the Retirement Revealed blog and podcast.

This material is provided for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The views and strategies described may not be suitable for all investors. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. Please notify us if there have been any changes to your financial situation or your investment objectives, or if you would like to place or modify any reasonable restrictions on the management of your account.

Advisory Persons of Thrivent provide advisory services under a practice name or “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies.

  • 1

Leave a Comment

Your email address will not be published. Required fields are marked *