Series I Bond Growth Projector
The fixed rate component of your specific I Bond at purchase.
Your estimated average annual inflation for the projection period.
Projected I Bond Value
'; resultHTML += 'Projected Bond Value: $' + projectedValue.toFixed(2) + "; resultHTML += 'Total Interest Earned: $' + totalInterestEarned.toFixed(2) + "; resultHTML += 'Effective Annual Growth Rate: ' + (effectiveAnnualGrowthRate * 100).toFixed(2) + '%'; if (projectionYears < 5) { resultHTML += 'Note: If redeemed before 5 years, you will forfeit the last three months of interest.'; } document.getElementById('result').innerHTML = resultHTML; }Understanding Series I Bonds and Their Growth
Series I Savings Bonds, often simply called I Bonds, are a popular low-risk savings product offered by the U.S. Treasury. They are designed to protect your investment from inflation, making them an attractive option for long-term savings goals.
How Series I Bonds Work
The interest rate on an I Bond is a combination of two rates:
- Fixed Rate: This rate is set when you purchase the bond and remains the same for the life of the bond (up to 30 years). It can be 0% or a positive rate, depending on market conditions at the time of purchase.
- Inflation Rate (Variable Rate): This rate is announced twice a year (on May 1st and November 1st) and is based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). This component adjusts every six months.
These two rates combine to form the bond's composite rate. The formula for the annualized composite rate is: Fixed Rate + (2 × Semiannual Inflation Rate) + (Fixed Rate × Semiannual Inflation Rate). Interest is compounded semiannually, meaning interest earned is added to the bond's principal, and future interest is calculated on the new, higher value.
About This Series I Bond Growth Projector
This calculator helps you project the potential growth of your Series I Bond over a specified period. Unlike a tool that calculates the exact historical value (which would require a database of past inflation rates), this projector allows you to input your bond's specific fixed rate and an assumed average annual inflation rate for the future. This provides a valuable estimate of how your investment might perform under your chosen assumptions.
Inputs Explained:
- Initial Bond Value ($): Enter the face value or initial purchase amount of your I Bond.
- Bond Fixed Rate (%): Input the fixed rate component of your I Bond. This rate is determined at the time of purchase and can be found on your TreasuryDirect account or purchase confirmation.
- Assumed Annual Inflation Rate (%): Provide your best estimate for the average annual inflation rate you expect over your projection period. This rate is crucial as it directly impacts the variable component of your bond's interest.
- Projection Period (Years): Specify how many years you wish to project the bond's growth.
Outputs Explained:
- Projected Bond Value: The estimated total value of your I Bond at the end of the projection period.
- Total Interest Earned: The total amount of interest accumulated over the projection period.
- Effective Annual Growth Rate: The average annual percentage return your bond is estimated to achieve over the projection period, considering the semiannual compounding.
Important Considerations for I Bonds:
- Minimum Holding Period: You must hold an I Bond for at least one year before you can redeem it.
- Interest Forfeiture: If you redeem your I Bond before five years, you will forfeit the last three months of interest. This calculator provides a note if your projection period falls within this window.
- Taxation: Interest earned on I Bonds is exempt from state and local income taxes. Federal income tax can be deferred until you redeem the bond or it matures (up to 30 years).
- Purchase Limits: There are annual purchase limits for I Bonds (e.g., $10,000 electronically per person per calendar year, plus an additional $5,000 with your federal tax refund).
Example Calculation:
Let's say you purchased an I Bond with an initial value of $1,000, a fixed rate of 0.90%, and you want to project its value over 5 years assuming an average annual inflation rate of 3.0%.
- Initial Bond Value: $1,000
- Bond Fixed Rate: 0.90%
- Assumed Annual Inflation Rate: 3.0%
- Projection Period: 5 Years
Using the calculator, you would find:
- Projected Bond Value: Approximately $1,216.90
- Total Interest Earned: Approximately $216.90
- Effective Annual Growth Rate: Approximately 4.00%
This example demonstrates how the combination of the fixed rate and inflation rate can lead to significant growth over time, protecting your purchasing power.