Nearly risk-free I bonds to deliver a record 9.62% interest for the next six months

I bonds, an inflation-protected and nearly risk-free asset, may now be even more appealing if you're eyeing ways to fight swelling prices.

The US Department of the Treasury said Monday that I bonds are paying the highest yield since 1998.

The Department of Labor reported that the hike was based on the March consumer price index data.

Ken Tumin, founder and editor of DepositAccounts.com, said it was a milestone for I bonds.

I bonds, backed by the U.S. government, don't lose value and earn monthly interest based on two parts, a fixed rate and a variable rate, changing every six months.

The variable rate is 9.62% through October 2022, while the fixed rate is zero.

The I bond is a wonderful place for people to put the money they don’t need right now.

Tumin explained that someone who buys a higher fixed rate bond may beat inflation for at least six months.

The fixed rate peaked at 3.6% for six months in May 2000. There is a history of both rates here.

There are only two ways to purchase these assets: online through TreasuryDirect, limited to $10,000 per calendar year for individuals, or using your federal tax refund to buy an extra $5,000 in paper I bonds. There are redemption details for each one.

You can purchase more I bonds through businesses, trusts or estates. A married couple with separate businesses may each purchase $10,000 per company, plus $10,000 each as individuals, totaling $40,000.

George Gagliardi, founder of Coromandel Wealth Management in Massachusetts, said that one of the drawbacks of I bonds is that you can't redeem them for more than a year. You will lose three months of interest if you cash them in within five years.

I think it's decent, but nothing is free.

Lower future returns are a possibility. You may prefer higher-paying assets elsewhere if the variable portion of I bond rates goes down every six months. If you decide to cash out early, there is a three-month interest penalty.

Christopher Flis said that I bonds may be worth considering for other assets.

He said that the I bond is a great place for people to put money they don't need right now.

According to DepositAccounts, the average savings account yield is under 1% and the most one-year CDs are under 1.5%.

I bonds are not a replacement for long-term funds.