Finance · 6 min read

I Bonds vs CDs for Inflation

**I Bonds** adjust with CPI (composite rate) and are backed by the U.S. Treasury with annual purchase caps. **CDs** lock a nominal rate—real return falls if inflation rises after purchase.

Inflation CalculatorAll Finance tools

Step by step

1. Check purchase limits

I Bonds cap per SSN per year; CDs scale with bank minimums.

2. Model liquidity

I Bonds: 12-month lock, 3-month interest penalty before 5 years.

3. Tax treatment

Federal tax on I Bond interest; state often exempt; CDs taxed as interest.

I Bonds vs CDs

I Bonds hedge unexpected inflation; CDs hedge rate certainty.

  • I Bonds: CPI-linked; TreasuryDirect; limited liquidity.
  • CDs: Fixed APY; FDIC insured; early withdrawal penalties.

Use our calculators

Primary tool
Inflation Calculator
Related
Compound Interest
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Common mistakes

  • Buying CDs when expecting rising CPI
  • Ignoring I Bond annual cap in allocation

FAQ

Can I lose money in I Bonds?

Composite rate has a floor at 0%—deflation can reduce the variable component.

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