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It may be time to look at the I-bond, a savings bond that protects you from inflation


With inflation at historic highs, it's perhaps time for a long ignored investment option to shine, the I bond. It's a U.S. Treasury savings bond whose interest payments are linked to inflation. Wailin Wong and Darian Woods from our daily economics podcast The Indicator explain some of the fine print.

DARIAN WOODS, BYLINE: Before we get to I bonds, let's talk about the plain old U.S. savings bond. It's been around since the Great Depression, and it's one of the safest, kind of most dull investments that there are.

WAILIN WONG, BYLINE: Right now, the interest rate on a series EE U.S. savings bond - that's like the traditional plainest vanilla savings bond - is 0.1%.

WOODS: And I bonds are savings bonds but with a twist. Their interest rate is tied to the consumer price index. So when inflation goes up, so does the interest rate.

ZVI BODIE: When I bonds came out, I felt, oh, finally.

WONG: Zvi Bodie is a professor emeritus at Boston University. He's a financial economist who has been obsessed with inflation hedging strategy since the 1970s. And he sees I bonds as a government program that serves the public interest. Basically, the U.S. Treasury is covering the cost of inflation for regular folks. So the U.S. Treasury introduced I bonds in 1998. And that year, Zvi goes to a bank to buy the maximum amount of I bonds for him, his wife and their two daughters.

BODIE: And I said, I want to buy I bond. And they said, what are you talking about? They didn't have a clue. And I said, I know that you have them because the Treasury distributed them. So they had to go down into the basement. And they came back, and they said, you know what? You're right. We have them.

WOODS: There you go. Zvi was spreading the word to the banks about their own product. And it does seem like I bonds have just been under-appreciated from the beginning, which kind of makes sense. Like, inflation was just 1.6% in 1998. So holding on to your purchasing power maybe wasn't the first thing you're thinking about when you were putting away savings.

WONG: Yeah. And today is, of course, a very different story. With inflation helping to set the I bonds interest rate, for the last six months, it was just over 7%. The new rate came out on Monday and it's now over 9%. Now, there are some caveats to I bonds. No. 1, I bonds protect you from inflation. They don't beat inflation. And No. 2, you're not going to get rich quick off I bonds. There's this $10,000 cap or calendar year, and the earliest you can redeem an I bond is one year. But for Zvi, it's been worth it. He estimates he has more than half a million dollars of I bonds in his portfolio today.

WOODS: And now people are finally paying attention to this thing he's been talking about since 1998.

BODIE: You know, what it takes is a bout of inflation. And then all of a sudden, everybody, their interest perks up.

WONG: Well, not quite everybody.

BODIE: Here's the shocker, Wailin. It's 23 years later. I have an accountant who does my taxes. OK? So I said to my accountant, I'd like to, you know, buy I bonds. He said, what? What are those?

WOODS: The work of marketing this continues for Zvi.

WONG: A lonely road.

WOODS: Darian Woods.

WONG: Wailin Wong, NPR News. Transcript provided by NPR, Copyright NPR.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Darian Woods is a reporter and producer for The Indicator from Planet Money. He blends economics, journalism, and an ear for audio to tell stories that explain the global economy. He's reported on the time the world got together and solved a climate crisis, vaccine intellectual property explained through cake baking, and how Kit Kat bars reveal hidden economic forces.