Quote:
Originally Posted by rmd2
Does anyone know the answer to this question?
If I buy a US Treasury I Bond will the interest rate ever vary during the term I have the Bond? I Bonds are made up of a fixed interest rate and a variable interest rate based on inflation. If I already have an I Bond and the inflation goes down will the interest rate on the I Bond I already have also go down or does it stay the same for the full term of the bond?
Also are there any costs like buy, sell or manage etc associated with having I Bonds?
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The interest rate is fixed, but the bonds principal increases based on an inflation index. When the principal increases, it is considered taxable income during the year, causing you to have to pay taxes even though no cash flow is generated from the principal accrual portion of the bonds taxable income. The easiest way to invest in them is through a dedicated I bond mutual fund with the likes of Vanguard of Fidelity.