Please explain how I Bonds accrue interest

[Anonymous]

I am a complete novice so please only respond if you think you can help me understand. In December 2021, I bought 10K of I Bonds. As of today, April 28th, I have only accrued $60 in interest. My rate is listed as 7.12%. What is going on here?

[Anonymous]

If you redeem before 5 years, they take away last 3 months interest so your balance reflects that. After 5 years, they add back in that 3 months interest.

[Anonymous]

Anonymous wrote:If you redeem before 5 years, they take away last 3 months interest so your balance reflects that. After 5 years, they add back in that 3 months interest.

Correct answer to a different question. LOL.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you redeem before 5 years, they take away last 3 months interest so your balance reflects that. After 5 years, they add back in that 3 months interest.

Correct answer to a different question. LOL.

What do you mean? Why is my answer not responsive?

[Anonymous]

Prior to the 5 year mark, your balance does not include the most recent three months of interest. As to the OP, the balance is only showing the interest that is older than the 3 most recent months.

[Anonymous]

Anonymous wrote:Prior to the 5 year mark, your balance does not include the most recent three months of interest. As to the OP, the balance is only showing the interest that is older than the 3 most recent months.

Using the 7.12% rate, that’s $59.33 per month. Interest is awarded at end of month no matter if you bought at beginning of month or near end. On 4/30, OP should see $118.67 or so. The interest for the last 3 months is not reflected because it hasn’t been 5 years yet. Still don’t know why you are saying I didn’t answer the question.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Prior to the 5 year mark, your balance does not include the most recent three months of interest. As to the OP, the balance is only showing the interest that is older than the 3 most recent months.

Using the 7.12% rate, that’s $59.33 per month. Interest is awarded at end of month no matter if you bought at beginning of month or near end. On 4/30, OP should see $118.67 or so. The interest for the last 3 months is not reflected because it hasn’t been 5 years yet. Still don’t know why you are saying I didn’t answer the question.

I think you answered it...new reader.

[Anonymous]

My math says that is about one month's worth of interest at 7.5%. Am I wrong? I'd like to know too because I'm thinking of buying some myself.

[Anonymous]

OP here - exactly. $60 is one month's interest. I've held the bond for almost 6 months. I Understand you don't get the last 3 months interest until after 5 years. But since I've held it for 6 months, shouldn't I get three month's interest?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Prior to the 5 year mark, your balance does not include the most recent three months of interest. As to the OP, the balance is only showing the interest that is older than the 3 most recent months.

Using the 7.12% rate, that’s $59.33 per month. Interest is awarded at end of month no matter if you bought at beginning of month or near end. On 4/30, OP should see $118.67 or so. The interest for the last 3 months is not reflected because it hasn’t been 5 years yet. Still don’t know why you are saying I didn’t answer the question.

OP here. Shouldn't I at least see more than 1 month of interest though? That's what $60 is - 1 month. I've had it for almost 6 months.

[Anonymous]

You bought in December. Interest accrued on:

12/31
1/31
2/28
3/31

The April interest hasn't accrued yet. The last 3 months don't show on your balance because you haven't held them long enough yet. In 2 days your April interest will be added.

[Anonymous]

Anonymous wrote:You bought in December. Interest accrued on:

12/31
1/31
2/28
3/31

The April interest hasn't accrued yet. The last 3 months don't show on your balance because you haven't held them long enough yet. In 2 days your April interest will be added.

OP here, thanks! OK, so are you saying that for all the months after the initial 3 months, I will see interest accrue? If that is the case, does this mean I don't get the benefit of those three months of interest compounding? If so, that's pretty lame.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You bought in December. Interest accrued on:

12/31
1/31
2/28
3/31

The April interest hasn't accrued yet. The last 3 months don't show on your balance because you haven't held them long enough yet. In 2 days your April interest will be added.

OP here, thanks! OK, so are you saying that for all the months after the initial 3 months, I will see interest accrue? If that is the case, does this mean I don't get the benefit of those three months of interest compounding? If so, that's pretty lame.

Not the initial 3 months, the last 3 months.

[Anonymous]

Anonymous wrote:You bought in December. Interest accrued on:

12/31
1/31
2/28
3/31

The April interest hasn't accrued yet. The last 3 months don't show on your balance because you haven't held them long enough yet. In 2 days your April interest will be added.

OP here. I'm not clear on how long I need to hold the the bonds before I see the last three months of interest added to my balance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You bought in December. Interest accrued on:

12/31
1/31
2/28
3/31

The April interest hasn't accrued yet. The last 3 months don't show on your balance because you haven't held them long enough yet. In 2 days your April interest will be added.

OP here. I'm not clear on how long I need to hold the the bonds before I see the last three months of interest added to my balance.

You are getting the interest and it is accruing. It is just not reflected in your balance until 5 years. If you hold the bonds for say two years and by that time the interest rate goes down to say 3%, you will lose the last 3 months of the new rate (so 3 months). Assuming the current rate is the best it will be, it will be advantageous to hold at least 15 months so that the last 3 months you lose will be at the lower rate (if it indeeds go lower). In any case, you have to hold a minimum of 12 months.