I-Bonds: A Must-Buy At New 4.26% Rate Or TIPS Instead?

Our long-awaited I-Bond rate projection for May is finally here! What is our May I-Bond rate projection and would we personally buy now or wait? Who might want to consider the upcoming 5-Year TIPS auction instead? Or perhaps nominal Treasuries? And how much higher are the current rates on multi-year guaranteed annuities (MYGAs) vs similar-term Treasuries?

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(Cont.) I-Bonds: A Must-Buy At New 4.26% Rate Or TIPS Instead?

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April versus May I bonds. Or five year tips or treasuries instead. Hello, Diamond Nestec Member Supersavers and Course fans. I hope you're healthy and well. Our long-awaited Ibond projection for May is finally here. So, a little over a week ago, the Bureau of Labor Statistics, the BLS, published the March 2026 Consumer Price Index, or CPI. Over the last 12 months, the all items index increased 3.3% before seasonal adjustment, driven higher primarily by the war in Iran and oil prices. The energy index increased 12.5% for the 12 months ending March, while core inflation, less food and energy, rose 2.6% over the year. So still not quite at the Fed's target rate of 2%, but also not so bad in the grand scheme of things when we think about how far we've come since the post-COVID high of about 9% in June 2022. That said, the only thing we seem to know for certain these days is that everything is uncertain. And if matters in the Middle East drag on longer than expected, there is the possibility that inflation will also remain elevated for longer than expected. So it's no surprise that worries about price increases for everyday living expenses are currently top of mind again for some of our Diamond Nast egg regulars, especially for those who are already in retirement or planning on retiring soon. So with that in mind, here are the three topics that we'll be covering today. 1. What is our May Ibond rate projection? And would we personally buy now or wait? And in this section, we'll also cover the break-even time for those of you in our community who are considering redeeming your older lower fixed rate I bonds to purchase new ones at the current fixed rate of 0.9% before the end of the month. 2. Who might want to consider the upcoming five-year tips auction instead? Or perhaps even nominal treasuries? And for those of you looking for safe and guaranteed but potentially higher yielding alternatives to treasuries, we have section three. How much higher are the current rates on multi-year guaranteed annuities, MIGAs, versus similar term treasuries? Let's dive in now, folks. What is our May Ibond rate projection? And would we personally buy now or wait? Let's begin with the Ibond fixed rate, because that's what many of you have been waiting for. As our Diamond Neste regulars have heard me say often, no one outside the Treasury really knows exactly how they set the IBON fixed rate. For whatever reason, they seem to treat it like a state secret. But based on our analysis dating back over two decades, it appears that since 2015, if we take 65% of the average daily real yield on the five-year tips for the six months prior to the Ibond rate reset date, this, together with a bit of rounding, gets us most of the time almost exactly to the fixed rate that is then announced by the Treasury. TIPS Treasury inflation protected securities are the other type of inflation protected debt that are government issues. As our Diamond Neste regulars and TIPS fans know, the real rates on TIPS that form the basis for our I bond rate are set by the market, by the balance of supply and demand during the regular TIPS auctions. So let's calculate our projected Ibond fixed rate. The average daily real yield on the five-year TIPS from November 1st, 2025 until close of market on Friday, April 17th, 2026 was 1.33%. Multiply this by 65%, and we get to a projected next I bond fixed rate of 0.87%, which we then round up to 0.9%. It seems that all I bond fixed rates are always rounded to the next full 10 basis points. And this 0.9% is the fixed rate that we expect for all I bonds that will be issued on or after May 1st, 2026 through the end of October 2026. This is the same as the current fixed rate of 0.9%, which isn't too bad given that real yields on tips have come down somewhat over the past several months. It clearly helped that this time we expect the Treasury to round up and not to round down. Now let's move on to the projected Ibond inflation rate. Here we have the CPIU all items number from March 2026, 330.213. Divide this by the CPIU all items number at the end of September 2025, the starting point of 324.8. Minus one, and we get to this percentage change in CPIU over the past six months of 1.67%. Multiply this by 2 and we get to an actual annualized Ibond inflation rate of 3.34%, which is higher than the current annualized Ibond inflation rate of 3.12%. And of course, let's not forget about what we at Diamond Nest Egg lovingly refer to as the bump, the inflation adjustment on the fixed rate, which is basically the projected Ibond fixed rate of 0.9% multiplied by the actual Ibond inflation rate of 1.67%, which gives us a projected bump of about 0.02%. So to get to our projected combined Ibon rate for May, let's add together our projected Ibond fix rate of 0.9%, our actual Ibon inflation rate of 3.34%, and our projected Ibon bump of 0.02%. This results in a projected combined Ibon rate for May of 4.26%, which is just slightly higher than the current rate of 4.03%, primarily driven by the higher actual Ibon inflation rate. This table may help with your decision on buying Ibonds now in April versus waiting until May or later. This column shows the month of purchase. This column shows you the fixed rate that you will get. The fixed rate stays the same for 30 years, the full term of the I bond. This column shows you the inflation rate that you will get in the first six months after purchase. And this column shows you the inflation rate that you will get in the second six months after purchase. Remember that this inflation rate changes every six months. This column shows you the total bump on your I bonds in the first 12 months after purchase. Again, the bump is the inflation adjustment on the fixed rate, so it changes with the inflation rate. And this last column shows you the combined or total I bond rate you will get in the first 12 months after purchase. So if you buy in April, you'll get a guaranteed fixed rate of 0.9% for the full 30-year term of the I bond, but a lower inflation rate of 3.12% to start for the first six months. And if you buy anytime from May until the end of October, you get this projected fix rate of also 0.9% for the full 30-year term of the I bond, but a higher inflation rate of 3.34% to start for the first six months. Now, as our VIP investment club members already know, Marcus and I are not buying I bonds at this point in time. Not because we don't like them anymore. We do. I bonds continue to serve a dual purpose in our portfolio as an inflation protected emergency fund as well as inflation protected retirement savings. But we've built up a good enough cushion of I bonds with fixed rates above 0.9% for now, especially given how far away we are from retirement and have decided to redirect the cash we would have otherwise spent on I bonds opportunistically into other areas of the market. That said if we were buying I bonds this year we would buy them before the May Ibond rate reset. Because even though the fixed rates look the same on paper so to speak, regardless of when we buy, remember that this 0.9% here for Ibonds purchased and issued before the end of April is guaranteed while this 0.9% here for Ibonds purchased and issued from May until the end of October is projected. Yes, the 0.9% fixed rate at the next Ibond rate reset is our best estimate based on our analysis of over two decades worth of Ibond data. And we've gotten this right over the past few Ibond rate reset cycles. But who knows right there may be other factors that Treasury Direct considers which we are not aware of that could lead to the actual fixed rate for May through October to be different from what we project here. In addition buying before the May Ibond rate reset also means that at the time of purchase I already know what I will earn on those I bonds in the first year. My inflation rate for the first six months will be 3.12%. My inflation rate for the second six months will be 3.34% the same 3.34% I would get if I were to purchase my I bonds between May and October. Meaning that when I average out these two inflation rates, add on my small bump in the first 12 months of 0.03% and add on my guaranteed fixed rate of 0.9% I know that in the first 12 months I will earn about 4.16% in total on any I bonds that I buy before the May Ibond rate reset. If I buy during the May through October period my Ibond fixed rate may likely be the same. And while I am starting off with a higher inflation rate for the first six months I don't know yet what my inflation rate will be for the second six months meaning that I also don't know what my bump and my total I bond rate for the first 12 months will be. As the old adage goes a bird in the hand is worth two in the bush. And to say it again because apparently the lambers are a repetitive bunch, the new Ibond rates we've discussed today are expected to go into effect for all I bonds issued on May 1st or later. So to still get these numbers here if that's what you want you will need to make your IBOM purchase before April 30th meaning on April 28th or April 29th or possibly earlier if you want to be on the safe side because Treasury Direct needs at least one business day to process I bond purchase orders. If you buy your IBONs on April 30th or later you will get the May Ibond rate. Now if you're still undecided at this point another option to consider is to split up your IBON purchase. For example buy 5000 of your$10,000 annual limit before the end of the month to lock in the current rate and buy another$5,000 after you know what the May Ibond rate will be. Or come join our private VIP investment club and continue the conversations with me, Marcus and our other VIP members and see what others like yourself are doing right now to hedge against inflation and grow their nest egg. Visit our website at www.diamonestic.com and click on this yellow private VIP investment club button to learn more about the latest happenings in our growing member community. I've linked everything below this video for you as well. So I bonds remember that for Ibond purchases regardless of whether you buy at the beginning of the month or the end of the month you will get interest for the entire month that you purchased your I bonds in meaning that even if you buy your I bonds in the last week of April you will get your Ibond interest for the full month of April. And now we'll answer the question for those of you who've asked about what the break-even time might be if you decide to redeem your older lower fixed rate I bonds that you've held for less than five years to purchase new ones at the current fixed rate of 0.9%. For old Ibonds with a 0% fixed rate the break even time is 10 months or in other words it makes sense to redeem and reinvest your old Ibonds with a 0% fixed rate if you're planning on holding them for more than 10 months because you will start earning an extra return on your investment after these 10 months. And by the way you'll have to hold your newly purchased I bonds for more than 10 months anyway because the minimum holding period for newly purchased I bonds is 12 months so you won't be able to redeem them before that. For old Ibonds with a 0.4% fixed rate the break-even time is about 21 months do note that I bond redemptions always consist of principal and the prorated interest amount and in the year of redemption taxes may come due as part of that interest. You cannot choose to withdraw only principal or only accrued interest. It'll always be a prorated mix of the two. For the purposes of our breakeven analysis we assume that the redeemed amount for reinvestment is the net amount after tax. There are a few other assumptions that we've made in our break-even analysis as well as additional considerations to take into account if you're considering redeeming your older, lower fixed rate I bonds that you've held for less than five years to purchase new ones at the current fixed rate of 0.9%. If you want to learn more about these assumptions andor considerations please check out this Ibond breakeven analysis video from last year. Link below in the first pinned comment for your convenience. And don't forget that your usual annual purchase limit of$10,000 per Social Security number or EIN will apply even if you sell old I bonds before there's no special exemption for such an upgrade. So now that we've covered everything I bonds let's move on to the next section of today's discussion for those of you who are contemplating the I bonds versus tips decision. Who might want to consider the upcoming five year tips auction instead or perhaps even nominal treasuries? So the five year tips auction will be taking place this coming week on April 23rd. At the time of this taping on Fidelity's platform the expected coupon is 1.125% and the expected yield is 1.18% for the 5 year tips auction. Please keep in mind that these estimated numbers on Fidelity's platform can and usually do change all the way up to the time of the auction. Now the expected yield at the moment for the 5 year tips auction is a bit lower than the average real yield of 1.4% over the past 12 months but still higher than the five year average real yield of 0.92% and also higher than the current IBOM fixed rate of 0.9%. So if you're comfortable with tips this may be something to take a closer look at. Remember though that whereas I bonds are pretty much straightforward, tips like the annuities that we talk about regularly on this channel can get complex and fast especially if you need or have to sell those tips before maturity. That said for the right investor who's willing to invest a bit of time to understand them they may be worth the effort as tips like annuities offer something that's not easily available from other investments. Bond beginners folks please refer back to these two modules here on tips and I bonds for refresher. For those of you who are not in our bond courses I've linked some of our YouTube videos on tips and I bond basics below this video for you as well. So personally Marcus and I are quite comfortable with tips and if we were making the I bonds versus tips decision today at the time of this taping for a five year time horizon and we could only choose one of them we would probably lean towards the five year tips auction given its higher real yield over the current Ibond fix rate. For those of you who are making the five year tips versus treasury note decision do note that the break-even inflation rate on the five year tips was about 2.6% at the close of market on Friday April 17th this is higher than the average break-even inflation rate of about 2.4% over the past five years which should come as no surprise given that the latest inflation report from the BLS showed annual inflation coming in at 3.3% overall at the end of March and core inflation coming in at 2.6%. So if the five year tips fits your timeline goals and expectations and you want to add some inflation protection because you believe that inflation over the next five years will average more than 2.6% annually for example because you believe that the war in Iran will drag on andor prices will stay elevated and you're comfortable with the complexity overall lower liquidity and tax nuances of TIPS then this may be an auction to consider dollar cost averaging into if on the other hand you believe that inflation over the next five years will average less than 2.6% annually then you may want to skip the five year tips auction this time around and redirect that money towards a five year T-note instead assuming that is the timeline you're working with and it suits your personal situation. As of close of market on Friday April 17th here's where the nominal yield on a five year T-note stands at 3.84%. For VIP Investment Club members we will be posting an update on what all the expected numbers for the five year tips auction look like after the market closes on the evening before the auction. As always we'd love to invite all of you into our growing member community where we have daily discussions and share ideas on what everyone is investing in right now for safety and inflation protection as well as for higher yielding growth visit our website at www.diamonestec.com and click on this yellow private VIP investment club button to learn more. So now that we've covered I bonds and tips let's move on to the next part of today's discussion for those of you who are less concerned about inflation and more focused on safe, predictable and guaranteed nominal yields how much higher are the current rates on multi-year guaranteed annuities versus similar term treasuries for this comparison we'll focus specifically on rates for multi-year guaranteed annuities from an A plus rated insurance company that we work with. A double plus is the best credit rating that an insurance company can get from AM bestings agency that specializes in the insurance industry meaning the lowest risk making the MIGA rates that we're about to cover most comparable to Treasuries in terms of risk return profile. And remember that mygas work essentially like a CD, similar to a bond except that mygas do not pay interest regularly but accumulate it in the myga account and pay out everything together at maturity. Longer term MIGA rates continue to move higher which is consistent with some of the rates on medium and longer term treasuries. So let's begin with some sample rates for mygas. Here you have the investment amount for each investment range from$10,000 all the way up to just under$10 million. And here's the rate for a two year myga three year myga and so on all the way up to seven years. For example if you were to purchase a$10,000 seven year myga at the time of this taping from this A double plus carrier your rate might be 4.5% a$500 seven year myga might earn you 4.6% a$1000 7 year myga might earn you 4.75% which is quite good actually and a$1 million myga might earn you even 4.8% for seven years. And if you have more than the amounts shown here say north of$10 million your rate might go as high as 4.9% with this A double plus insurance carrier this coming week. Do keep in mind that the myga rates in this table are subject to change at any time without prior notice and that your personal rate is not fixed before you sign your annuity contract. For the latest rates whenever you're watching this video and to see if a myga or some other type of annuity may be a good fit for you email us at jenniferdiamondnestic.com so that we can connect you with our trusted annuity specialist. Now let's move on to treasuries there is usually a$1,000 minimum for treasury transactions with most leading brokers like Fidelity, Schwab and Vanguard. Treasuries are more liquid than my gas because you can sell them before maturity on the secondary market at whatever the then prevailing market price may be. Do note that mygas usually only allow you to withdraw some part of your capital per year without penalty for example 10% this liquidity advantage of treasuries over my gas is also one of the main reasons why treasury rates are normally lower than myga rates. As this table shows the rates on treasuries range from as low as 3.71% for two year term up to 4.04% for seven year term. And as our VIP investment club members already know for a two year term you're now a bit better off with the Treasury Than a myga with this top-rated insurance carrier. For anything longer than a two-year term, the myga rates continue to outpace Treasury rates, which is to be expected. Just make sure that you are comfortable with the illiquidity of mygas, their lack of regular interest payments, and the possible early withdrawal penalties before the term ends or before you turn 59.5 prior to diving into any myga investment or any annuity investment for that matter. And of course, while both mygas and treasuries offer safe, guaranteed, and predictable income, neither of the two protects against inflation. That would be a job for I bonds and tips, as we discussed before. Annuities come in many different flavors. So be sure to check out these annuity videos here, all linked below this video if you want a deeper dive into who should buy a myga, some other type of annuity, or no annuity at all. Or email us at jennifer at diamondnestec.com to get connected with our trusted annuity specialist, as I mentioned earlier. Alright, Diamond Nestec members, Super Savers and Course fans, I hope you enjoyed today's video and learned something new. And see again very soon with more brand new wealth building content for your financial journey.