As I detailed in an earlier post (http://www.lifeinvestmentseverything.blogspot.com/2012/03/if-you-want-to-earn-3-risk-free-on-your.html), I bonds offered through www.treasurydirect.gov offer a tax deferred yield that beats the pants off why you can earn on a 1 year CD. With the release of the March consumer price index (CPI) data this morning (http://www.bloomberg.com/news/2012-04-13/consumer-prices-in-u-s-increased-at-a-slower-pace-in-march.html), we now know that the CPI rose 2.7% over the last twelve months. Newsflash: inflation is way above currently available CD rates (about1%), even before taxes. Because I bonds pay interest currently equal to the CPI, you can buy up to $10,000 per person (husband, wife, kids, etc.) in these bonds annually and shift low yielding savings to more generous I bond rates. In addition to keeping up with inflation automatically, I bonds are tax deferred until you cash them in. For more details, read my earlier post linked above. But if you want to grab a 2.7% yield over the next year, don't procrastinate. You only have until the end of April to lock in this yield. If you wait until May you will get a bit over 2% for the first six months and an as yet undetermined rate (possibly as low as zero) the next 6 months.
As always, do your own due diligence, consult your advisor, and be careful. Please do not consider the above as investment advice. Note that I bonds cannot be surrendered before 1 year and carry a penalty of 3 months' interest if you surrender them before 5 years have passed.
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