TIPS vs I Bonds
TIPS and Series I savings bonds both protect against inflation, but they are bought, priced and redeemed differently. Start with three questions. When do you need the money? How much do you want to invest? Do you need regular cash payments?
The practical differences
| Question | Individual TIPS | Series I savings bonds |
|---|---|---|
| Purchase route | Treasury auction through TreasuryDirect or a broker, or the secondary market through a broker | TreasuryDirect only, electronic only since January 1, 2025 |
| Minimum | $100 at auction, in $100 increments | $25, then any amount to the penny |
| Purchase limit | Up to $10 million per auction for a noncompetitive bid | $10,000 per calendar year per Social Security number or EIN |
| Term | 5, 10 or 30 years | Earns interest for up to 30 years |
| Interest cash flow | Coupons paid every six months | Interest added to the bond monthly, compounded semiannually, paid only at redemption |
| Access | Can be sold at any time at the market price. A TreasuryDirect holding must first be held 45 days and transferred to a broker. | Cannot be cashed in the first 12 months. Cashing before five years forfeits the last three months of interest. |
| Price risk | Market price moves with real yields | None. Redemption value never falls. |
| Inflation mechanism | Principal adjusted daily by the CPI-U index ratio | Composite rate that combines a fixed rate with an inflation rate reset every six months |
| Federal tax | Coupons and annual principal increases taxed each year | Can be deferred until redemption or final maturity |
| State and local tax | Exempt | Exempt |
Terms checked October 8, 2026 against TreasuryDirect TIPS, TreasuryDirect I Bonds, TreasuryDirect's sale rules and IRS Publication 550. Check current eligibility and limits before purchasing.
How the I Bond rate works
Each I Bond earns a composite rate built from two parts. The fixed rate is set when you buy and lasts for the life of the bond. The inflation rate resets every six months based on changes in CPI-U. Treasury announces both on May 1 and November 1. The formula, from TreasuryDirect's rate page, is:
Composite rate = fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate)
For bonds issued May 1 to October 31, 2026, the fixed rate is 0.90% and the semiannual inflation rate is 1.67%. That gives 0.0090 + 0.0334 + 0.00015, or 4.26%. If deflation would push the composite below zero, Treasury sets it at zero. The redemption value cannot go down.
I Bond fixed rates versus TIPS real yields
The I Bond fixed rate is the part of the return above inflation. The closest TIPS comparison is the real yield. The table sets each recent I Bond fixed rate beside the 5-year and 10-year TIPS real yields on the last trading day before it took effect.
| I Bonds issued from | Fixed rate | Composite rate | 5-year TIPS real yield | 10-year TIPS real yield |
|---|---|---|---|---|
| November 2021 | 0.00% | 7.12% | −1.71% | −0.96% |
| May 2022 | 0.00% | 9.62% | −0.38% | 0.01% |
| November 2022 | 0.40% | 6.89% | 1.60% | 1.58% |
| May 2023 | 0.90% | 4.30% | 1.31% | 1.26% |
| November 2023 | 1.30% | 5.27% | 2.42% | 2.46% |
| May 2024 | 1.30% | 4.28% | 2.29% | 2.28% |
| November 2024 | 1.20% | 3.11% | 1.77% | 1.95% |
| May 2025 | 1.10% | 3.98% | 1.43% | 1.94% |
| November 2025 | 0.90% | 4.03% | 1.31% | 1.81% |
| May 2026 | 0.90% | 4.26% | 1.35% | 1.94% |
Fixed and semiannual inflation rates from TreasuryDirect. Composite rates calculated with Treasury's formula. Real yields from FRED DFII5, DFII10 and Treasury par curves, via this site's yield history.
Two patterns stand out. In late 2021 and early 2022, TIPS real yields were negative while the I Bond fixed rate was zero. I Bonds offered the better real rate, and the high composite rates drew wide attention. From November 2022 on, TIPS real yields have been above the I Bond fixed rate in every period shown, by 0.3 to 1.2 points at 5 years. On October 7, 2026, the 5-year TIPS real yield was 2.66% and the 10-year was 2.92%.
The comparison is not exact. An I Bond's fixed rate applies for up to 30 years and comes with no price risk. A TIPS real yield is locked only if you hold to maturity. The I Bond also lets you redeem at full value after five years, which has option value when rates rise.
Do not compare headline rates
An I Bond's composite rate includes current inflation and applies for six months. A TIPS quote is a real yield that excludes inflation. A 4.26% composite rate and a 2.66% real yield are not on the same basis. Compare the I Bond fixed rate with the TIPS real yield, and remember both then add inflation.
Also note the timing. A bond issued in November 2021 earned 7.12% for its first six months and then 9.62% for the next six. After that, its rate followed later inflation resets with a fixed rate of zero. The headline rate in the month you buy says little about the return over several years.
How much each can hold
The $10,000 annual limit shapes the choice for larger sums. A couple can buy $20,000 a year in their own names. At that pace, building $400,000 of inflation-protected savings would take a couple 20 years. A TIPS ladder of that size can be bought on the secondary market in a few days. The ladder cost examples show typical sizes.
For smaller amounts with no need for income, the I Bond limit may not matter. For matched future cash flows, TIPS can be chosen by maturity date, subject to actual availability and missing years.
Two cash-flow examples
If you need money in six months, a new I Bond does not work, because it cannot be cashed for 12 months. A TIPS can be sold, but that brings market-price risk. Liquidity is not the same as price certainty.
If you plan to cash an I Bond after three years, you give up three months of interest. At a 4.26% composite rate, that is roughly 1% of the bond's value. Holding past five years removes the penalty.
Tax timing changes the comparison
I Bond owners using the cash method can postpone reporting interest until they cash the bond or it matures. They can instead choose to report it each year, but must then use that method for all their savings bonds. The rules are in IRS Publication 550. Interest used for qualified higher-education expenses may be excludable under the Education Savings Bond Program.
Taxable TIPS holdings report coupons and annual principal increases each year, even though the principal is not paid until maturity. Both are exempt from state and local income tax. See TIPS phantom income. In a tax-deferred retirement account, the TIPS timing problem disappears.
Where each belongs in your research
For smaller purchases with no need for current income, check current I Bond terms and the 12-month lockup. For matched future spending, look at individual TIPS ladders and the ladder calculator. For an ongoing fund allocation, compare funds and individual bonds. What are TIPS covers TIPS mechanics in more depth.
Series I savings bonds are not the same product as the iShares iBonds ETF family. Similar names do not imply the same issuer, protection or redemption rules.
Frequently asked questions
Are I Bonds better than TIPS?
It depends on the rates and your needs. Compare the I Bond fixed rate with the TIPS real yield for a similar holding period. Since November 2022, TIPS real yields have been higher than the I Bond fixed rate in every period shown here. I Bonds have no price risk and allow tax deferral, but they are capped at $10,000 a year and locked for 12 months.
Can I lose money on I Bonds?
No. The composite rate cannot fall below zero and the redemption value does not go down. Cashing before five years costs the last three months of interest, which reduces the gain but does not reduce the amount you paid.
Can I buy more than $10,000 of I Bonds a year?
Each Social Security number or EIN can buy up to $10,000 in electronic I Bonds per calendar year. Paper I Bonds have not been available since January 1, 2025.
Do TIPS or I Bonds pay monthly income?
Neither pays monthly. TIPS pay coupons every six months. I Bonds pay nothing until you cash them.
How are I Bonds and TIPS taxed?
Both are subject to federal income tax and exempt from state and local income tax. I Bond interest can be deferred until redemption. TIPS coupons and principal increases are taxed each year in a taxable account.
