I-bonds and T-bills:
government savings tools worth knowing.
I-bonds protect against inflationinflationA general increase in prices over time, meaning each dollar buys less than it did before.Full definition. T-bills can beat your high-yield savings account, especially in high-tax states. This page covers how to actually buy them, the limits and lockups, and when they make sense over a HYSA.
I-bonds: buy at TreasuryDirect.gov, $10,000 per person per year, must hold 1 year minimum, lose 3 months of interest if sold in years 1 to 5. Rate adjusts every May and November. T-bills: short-term government bonds, 4-week to 52-week maturities, bought at TreasuryDirect or via brokerage, currently competitive with HYSAs and exempt from state income tax.
I-bonds
US government savings bonds that earn a composite rate: a fixed rate (set at purchase, never changes for that bond) plus an inflation adjustment that recalculates every 6 months based on CPIConsumer Price Index (CPI)The government's measure of how much a typical basket of consumer goods costs over time.Full definition-U verify×DON'T TRUST, VERIFYClaim: I-bond composite rate combines fixed rate (set at purchase) and semiannual inflation rate. Current rates posted each May 1 and November 1.Verify at: TreasuryDirect I-bond rates ↗Rate resets twice per year; buying window matters..
Limits
- $10,000 per person per year via TreasuryDirect
- $5,000 additional via IRS tax refund (if you buy with refund money)
- $10,000 per entity (business, trust) per year
How to buy
Open an account at TreasuryDirect.gov ↗. Link a bank account. Purchase. 1 to 3 business days to clear. The TreasuryDirect interface is dated and clunky. Expected. It is the official government site and it works.
Holding rules
- Minimum hold: 1 year (you cannot sell sooner)
- Sell before 5 years: forfeit the last 3 months of interest
- Hold 5+ years: no early-withdrawal penalty
When they make sense
Emergency fund money you will not need for 12+ months. Inflation-hedgehedgeAn investment made to offset potential losses in another position, like buying gold to protect against currency declines. component of medium-term savings. Ladder purchases across tax years to build a rolling supply. They do not make sense for money you might need within a year, amounts over $10,000 per person per year, or when HYSA yields are higher than the current I-bond composite rate.
T-bills (Treasury bills)
Short-term US government securities. Maturities: 4, 8, 13, 17, 26, 52 weeks. Sold at a discount to face value. You pay less than face. At maturity you receive full face value. The difference is your interest.
Where to buy
Buy direct from government. No fees. Minimum $100. Auction-based: you specify dollar amount and buy at whatever auction rate clears. treasurydirect.gov ↗
Search "T-bill" in fixed income. Buy newly issued or secondary. No commission at Fidelity or Schwab. Easier interface than TreasuryDirect.
Tax treatment
Interest on Treasury securities is exempt from state and local income tax. Federal income tax applies verify×DON'T TRUST, VERIFYClaim: US Treasury interest is exempt from state and local income tax; federal tax applies.Verify at: IRS Topic 403 ↗31 USC 3124 establishes the state tax exemption for federal obligations.. This makes T-bills attractive relative to HYSAs in high-tax states.
5% T-bill, no state tax: full 5% after state. 5% HYSA, 9.3% CA tax: 4.5% after state. In a 0% state (TX, FL, etc.), the two are equivalent. In high-tax states, T-bills win on equal yield.
Related
- TreasuryDirect I-bond rates · treasurydirect.gov
- IRS Topic 403 · irs.gov
- TreasuryDirect.gov
Last updated 2026-04-22. Not financial advice. Rates change. Verify current yields before purchase.