The Ignorant Use of Treasury I Bonds

Treasury I bonds offer fixed return plus inflation adjustment. Their maturities are for 5, 10 and 30 years. However, despite all the hullabaloo about them, you can buy only $5,000 a year per social security number.

Inflation adjustments are made twice a year for interest rate changes in the Urban Consumer Price Index The interest accrues until the bond is redeemed. But taxes are imputed by Uncle Sam on a current basis, not when the bonds mature.Therefore, I Bonds should be better held in tax-deferred accounts; inflation adjustments are also taxed.

I say the use of Treasury I Bonds is ignorant because conventional bonds offer inflation protection PROVIDED you employ duration principles. The media, however, does a poor job of reporting duration education. (See the Earl J Weinreb NewsHole® comments.)