An I-Bond is a savings bond that is issued by the United States Treasury Department. It is considered a type of savings account in which an investor buys at a fixed rate for the term of the bond. When the bond reaches maturity, the holder receives both a return of their original investment and interest accrued through the life of the bond. The advantage of I-Bonds over other types of savings accounts is that they offer tax advantages. The interest earned on I-Bonds can earn interest tax free as long as you hold them for the entirety of their term. At any point before then, should you cash in or redeem your investment, you would be taxed on that money at your own individual tax rate.
All I-Bonds have a fixed rate of return that remains constant throughout its term, and are offered in terms as short as six months and as long as 30 years. The further out you purchase your bonds, the higher your rate of return. If you choose to cash them in early, however, you will not only lose all accumulated interest but also forfeit any future interest payments for that period.
