Do I bonds start gaining interest only after 3 months of purchase?

Submitted by dune7red4 t3_z8s8oi in personalfinance

Do I bonds start gaining interest only after 3 months of purchase? It doesn't immediately gain interests the next month after purchase?

And then it takes away another 3 months of interest if cashed in before 5 years?

First 3 months no interest, next 6 months gains interest, last 3 months lost interest?

So if you plan to only do about a year of I bonds, buy in Jan 2023 and sell in Jan 2024, you only get a total of 6 months interest?

Thanks.

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93195 t1_iyczhm5 wrote

Interest starts right away, but won’t show in TreasuryDirect until after three months have passed, since TreasuryDirect shows the current redemption value, including the most recent 3 month interest penalty that applies until 5 years old.

So if you buy in January 2023 and sell in January 2024, you get the interest for January 2023 through September 2023, with October through December being forfeited.

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Werewolfdad t1_iycy3tn wrote

The value of the of ibonds always reflects the three month penalty until you've held it for 5 years.

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dune7red4 OP t1_iyd0xff wrote

So the 3 month penalty is front loaded? Is this the correct term?

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Cruian t1_iyd2cke wrote

The 3 month penalty is the most recent 3 months. The website shows the value with the penalty until the penalty disappears, when you'll see 4 months of interest added (the newest + the 3 that were locked up in the penalty).

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wanttostayhidden t1_iycy4s8 wrote

You only lose the last 3 months of interest if you hold the I bond for less than 5 years. If you buy in Jan 2023 and sell in Jan 2024, you will get 9 months of interest. You don't start gaining interest in the first 3 months because it is accounting for losing the last 3 months of interest.

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dune7red4 OP t1_iyd13be wrote

So any profits I see on my I bond page has taken into account this 3 month penalty?

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Miserable-Shake4052 t1_iyd1f7t wrote

Yes, it is stated as "current value," as in the value if you sold them today. They are still accruing interest monthly.

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