The composite rate, also known as the APR, for I bonds issued from November 2024 through April 2025 is 3.11%. This rate is subject to change and understanding how and when these Apr Resets occur is crucial for maximizing your investment returns. Let’s break down how this rate is calculated and when these APR resets take place.
How the I Bond Composite Rate (APR) is Calculated
The I Bond composite rate consists of two components: a fixed rate and an inflation rate. The fixed rate remains constant for the life of the bond, while the inflation rate is adjusted semi-annually based on changes in the Consumer Price Index (CPI). Here’s the formula and how it applies to the current rate:
| Component | Rate |
|---|---|
| Fixed Rate | 1.20% |
| Semiannual Inflation Rate | 0.95% |
| Composite Rate Formula | [Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)] |
| Calculation | [0.0120 + (2 x 0.0095) + (0.0120 x 0.0095)] |
| Result | 0.031114 |
| Rounded Composite Rate | 3.11% |
When Does the I Bond APR Reset?
While new I Bond rates are announced in May and November, the actual APR reset for your specific bond depends on its issue date. The interest rate on your I Bond changes every six months from the month it was issued.
Here’s a table outlining when the APR resets based on the bond’s issue month:
| Issue Month | APR Reset Dates |
|---|---|
| January | July 1 and January 1 |
| February | August 1 and February 1 |
| March | September 1 and March 1 |
| April | October 1 and April 1 |
| May | November 1 and May 1 |
| June | December 1 and June 1 |
| July | January 1 and July 1 |
| August | February 1 and August 1 |
| September | March 1 and September 1 |
| October | April 1 and October 1 |
| November | May 1 and November 1 |
| December | June 1 and December 1 |
How I Bond Interest and Compounding Works
I Bonds begin accruing interest from the first day of the month they are purchased. Every six months, the accumulated interest is added to the principal, resulting in a new principal value. This new value then becomes the basis for calculating interest for the next six-month period. This process is known as semiannual compounding.
You can find the current value of your I Bonds in your TreasuryDirect account. For paper bonds, use the Savings Bond Calculator available on the TreasuryDirect website. Note that for bonds held less than five years, the displayed value doesn’t include the last three months of earned interest due to the early redemption penalty.
Historical I Bond Rates and Fixed Rate Schedule
The fixed rate and inflation rate components of the composite rate have fluctuated over time. The Treasury Department provides historical rate information in detailed charts and spreadsheets on their website. These resources allow you to track the complete rate history for specific bonds.
The fixed rate, established bi-annually, applies to all bonds issued within the six months following the rate announcement. This fixed rate remains the same for the life of the bond.
The inflation rate, also set twice a year, applies to all outstanding I Bonds for a six-month period. This means all I Bonds, regardless of their issue date, will earn the same inflation rate during a given six-month period. Understanding how these two components interact allows you to anticipate potential APR resets and make informed investment decisions.
Conclusion
Understanding how the APR for I Bonds is calculated and when it resets is essential for managing your savings. The semiannual APR adjustments, based on a fixed rate and an inflation rate, provide a level of protection against inflation and offer a competitive return on your investment. By consulting the resources available on the TreasuryDirect website, you can stay informed about current and historical rates, ensuring you maximize the potential of your I Bonds.
