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Where is a good place to invest part of your emergency fund that you won’t need to access for a year? (May 2022) Thumbnail

Where is a good place to invest part of your emergency fund that you won’t need to access for a year? (May 2022)


The answer is Treasury Direct online Series I savings bonds.

 The initial interest rate on new Series I savings bonds is 9.62 percent. 

 You can buy I bonds at that rate through October 2022.

 That rate is applied to the 6 months after the purchase is made.  For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through January 1, 2023.  Interest is compounded semi-annually.

 The interest rate can't go below zero and the redemption value of your I bonds can't decline.

 You can only purchase up to $10,000 per year per person online at Treasury Direct.

 In addition, if you have a trust, you can buy another $10,000 per year under the name of the trust.

 And, if you own a business, your business can buy up to $10,000 per year under the name of the business. If you own multiple business entities, each separate business entity can buy up to $10,000 per calendar year in its own separate account. Because you’re using the business’s cash to buy I Bonds, it doesn’t matter how much revenue the business has in a year as long as the business has that much cash in its bank account.

 Understand the holding period is at least 1 year

 If redeemed before 5 years then there is a 3 month interest penalty. 

 I bonds are state income tax free.

 You have a choice when you must report the interest on your tax form. You can:

  • report the interest every year
  • put off (defer) reporting the interest until you file a federal income tax return for the year in which the first of these events occurs:
    • you cash the bond and receive what the bond is worth, including the interest, or
    • you give up ownership of the bond and the bond is reissued, or
    • the bond stops earning interest because it has reached final maturity.

 If you have any questions please feel free to contact Larry Koeppel via email at larry@digitalwealth.la

Resources:  Series I Bonds 

                    Tax Considerations for I Bonds

                    Want to buy more than $10,000 in nearly risk-free I bonds? Here are a few strategies